1.2 Business Growth Flashcards
Types of business growth?
- Organic growth
- Horizontal integration
- Forwards vertical integration
- Backwards vertical integration
- Conglomerate integration
How can organic growth be achieved?
1) Increase production capacity
2) New products
3) Exporting to new markets
Benefits of organic growth?
1) Less risk
2) Build on existing strengths
3) Use of retained profits
Drawbacks of organic growth?
1) Dependent on market growth
2) Slower growth
3) Hard to build market share (if already a leader)
Examples of horizontal integration?
1) Facebook takeover of Instagram
2) Google acquisition of YouTube
Advantages of horizontal integration?
1) Internal economies of scale
2) Reduced competition
3) Diversification
Drawbacks of horizontal integration?
1) Diseconomies of scale
2) Scrutiny of authorities (e.g. Sainsburys & Asda)
3) Reduced flexibility
Example of forwards vertical integration?
Booker bought Budgens and Londis
Examples of backwards vertical integration?
1) IKEA bought Baltic forests
2) Tesla controls 80% of supply chain
Advantages of vertical integration?
1) Control of supply
2) Remove competition supply
3) Improved access of raw materials
Drawbacks of vertical integration?
1) Less chances for economies of scale
2) Diseconomies of scale
Examples of conglomerates?
1) Samsung
2) General Electric
Drawbacks of inorganic growth?
1) Reliance on loans
2) Over-paying
3) Dependent on market growth
4) Clash of business cultures
What are joint ventures?
When businesses join to pursue a common goal but remain legally separate
E.G. Google + NASA = Google Earth
Constraints on business growth?
1) Regulation (CMA)
2) Competition
3) Limited access to loans since GFC
4) Market size
