business-growth 1.7

Diversification

Allows a business to enter a different market to spread risks.

Effect of a takeover on stakeholders

Includes loss of jobs, new skills needed, higher incomes, relocation, and needing to re-apply for jobs.

Economies of scale

Cost advantages reaped by companies when production becomes efficient.

Shareholder effect of takeover

Can lead to higher dividends, increased market share, or a fall in share value due to errors.

How can business size be measured?

By the value of sales, value of the business, and number of employees.

External Growth

Increasing the size of a business by acquiring other businesses.

Merger

When two or more businesses join together to form a new one.

Takeover (Acquisition)

When one business gains control of another.

Advantages of external growth

Faster growth, access to new markets, increased market power.

Disadvantages of takeover

Difficult integration of different businesses, potential for layoffs.

Internal (Organic) Growth

Growth through increasing sales, revenue, and workforce.

Advantages of internal growth

Less risk, financed through retained profits, builds on existing strengths.

Disadvantages of internal growth

Can take a long time, growth dependent on overall market.

Reasons for business growth

Increase market share, sales, economies of scale, competitive advantage.

Types of Integration

Conglomerate, Horizontal, Vertical Backwards, and Vertical Forwards.

Conglomerate Integration

Occurs when a business joins with another in a different type of production.

Horizontal Integration

Merging or buying businesses producing similar products.

Backward Vertical Integration

When suppliers are taken over by the business.

Forward Vertical Integration

When a business takes over another to control distribution.

Benefits of owning different production stages

Control over production quality, sales, and profits.

Internal Economies of Scale

Cost reductions as a result of the business being large.

Advantages of Large Businesses

Lower costs, better negotiation power, marketing advantages.

Franchise

The right for one business to sell goods/services using another's name.

Franchisor

The business that allows a franchisee to sell goods using its name.

Advantages of franchising

Quicker market expansion, less financial risk, franchisee responsibility.

Disadvantages of franchising (franchisor's view)

Less control, costs of training and advertising.

Franchisee

A business that pays royalties to sell under another company's name.

Advantages for franchisee

Established brand name, training, advertising support.

Disadvantages for franchisee

Initial costs, monthly fees, limited operational freedom.

Own shops vs franchising benefits

Control over sales, maximizing profits, customer feedback.

Own shops vs franchising problems

Higher costs, fewer customers, and staff training issues.

Measuring business success

Profits, increase in sales, number of customers, and customer feedback.

Increasing market share indicates

Greater customer satisfaction and business performance.

Low staff turnover indicates

Employer loyalty and job satisfaction.

If business goal is sales, measure

Leads and conversions.

If business goal is awareness, measure

Social shares and Google ranking.

Business Partnership Success

Evaluating success through objective measurement.