Higher business - Growth

What is a growth method / why would businesses want to use them? (4)

A method that makes businesses:

• Larger

• Take advantage of economies

• Have more power

• Make more profit

What are the TWO different types of growth methods?

internal & External

What are some INTERNAL methods of growth? (6)

• Organic

• Diversification

• Increasing advertising

• Increasing staffing

• Opening new branches

• Becoming a multinational company

What are some ADVANTAGES of all INTERNAL growth methods? (5)

• more control as there are no outsiders

• New staff means new ideas

• New equipment increases production capability

• Opening new branches means entering a new market

• Less risk involved

What are some DISADVANTAGES of all INTERNAL growth methods? (3)

• Long process due to organisations involved

• Limited by the size of the market

• Restricted by the amount of finance available

What are some EXTERNAL methods of growth? (6)

• Horizontal integration

• Vertical integration (forwards & backwards)

• Lateral integration

• Conglomerate

• Out sourcing

• Franchising

What is diversification?

When firms move into new markets that are different from their core business

What are some ADVANTAGES of diversification? (2)

• Spreads risk to different markets which reduces risk of failure

• Targets new markets which increases customer base

What are some DISADVANTAGES of diversification? (3)

• Entering new markets may affect core activities (what they already do)

• May not have the required knowledge to successfully run the new business

• Costly to research and advertise in new markets

What is ORGANIC growth?

When a business expands using its own resources, without merging or taking over another company

What is HORIZONTAL intergration?

When two companies at the same stage of the production process merge or take over each other

What is FORWARDS vertical integration?

When a business take over a company at a later stage in the production process

What is BACKWARDS vertical integration?

When a business takes over another company at an earlier stage in the production process

What is LATERAL growth?

When a business moves into a different market but within a related industry

What is conglomerate integration?

When a business moves into an entirely different market through another company

What is merging between two businesses?

When two companies decide to join together

What is Acquisition?

a corporate transaction when one company purchases a portion or all od another company’s shares or assets

Why would a business want to use acquisition?

Because they are typically made in order to take control of, and build on the target company’s strengths to then take advantage of their weaknesses

What is a take over?

When a company who is typically larger than another buys out a rival

What is franchising?

A business agreement that allows the use of an established business (brand) name and to sell their products or services

What is outsourcing?

When an organisation contracts another to do work for them