b) Advantages and disadvantages

b) advantages and disadvantages of: organic growth, vertical integration, horizontal integration, conglomerate integration

advantages of organic growth

• avoids diseconomies of scale

  • predictable and gradual growth

  • no inefficiencies

• less financial risk

  • growth is built on existing resources and strengths

  • growth is financed by profits rather than loans

disadvantages of organic growth

• slow

  • slower market share growth

  • lack of quick asset gains

• uncertain

  • reliance on current trends and preferences

  • vulnerable to consumer and market changes

advantages of vertical integration

• low cost of production

  • no supplier markups and fees

  • no inefficiencies from divorced goals

• high certainty

  • controlled access to raw materials

  • appropriate product quality

advantages of horizontal integration

• high profits

  • high market share + less competitors

  • enhanced brand power

• higher likelihood of success

  • existing knowledge and expertise

  • new ideas

advantages of conglomerate integration

• diversification

  • profit from high performing industries

  • protection from low performing industries

• high growth

  • more revenue streams

  • product diversification → more customers

disadvantages of inorganic growth

• inefficiencies

  • cultural differences

  • no experience

• high investment

  • high merging price → high investment required to make a profit

  • risk of a low return on investment

• diseconomies of scale

  • restructuring management

  • communication breakdowns