1.4 Methods of Growth

Question 1

WAYS ACHIEVE INTERNAL (5)

Answer 1

OPEN NEW OUTLETS, INCEASE SALES, INCREASING PROFIT, OPERATING IN MORE MARKETS/CONTRIES, NEW PRODUCTS.

Question 2

ORGANIC GROWTH (DES/EX4)

Answer 2

Business grows naturally. Hiring new staff, new equipment, new outlets, new products.

Question 3

ORGANIC(ADV4/DIS3)

Answer 3

No loss of control from outside, New staff=new skills/qualities, New equipment=increase production, Open new branches=reach new markets. Limited size due to market, Be slow method, restricted by amount finance.

Question 4

EXTERNAL GROWTH (11)

Answer 4

VERTICAL INTEGRATION, HORIZONTAL INTEGRATION, LATERAL, DIVERSIFICATION, CONGLOMERATE, DE-MERGER/DIVESTMENT, DEINTEGRATION, BUY IN, BUYOUT, ASSET STRIPPING, OUTSOURCING.

Question 5

VERTICAL INTEGRATION (DES)

Answer 5

Occurs when firms are at different stages of production merge together, two types: BACKWARD/FORWARD.

Question 6

VERTICAL INEGRATION - BACKWARD (DES/ADV4/DIS1)

Answer 6

The business takes over a company at an earlier stage in production - its supplier/source of goods and materials.// Guarantees the quality of inputs and the supply of stock, Cuts out the middle man leading to increased profits, More limit supplies to competitors, allows bus to control source of goods/materials. New markets affect core activities as resources and expertise need to be shared.

Question 7

VERTICAL INTEGRATION- FORWARD (DES/ADV4/DIS1)

Answer 7

When the business takes over its customers, at a later stage in the production process(customers).// Guarantee’s outlet for it goods, can control marketing mix for product, adds profit of customer to its own, More control over pricing, New markets affect core activities as resources and expertise need to be shared.

Question 8

HORIZONTAL INTEGRATION (DES)

Answer 8

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

Question 9

HORIZONTAL INTEGRATION (ADV3/DIS3)

Answer 9

Removes competition from market, Business may dominate market, will have greater economies of scale by merging functional areas, Loss of jobs/hostility, customer loyalty impacted, Expensive to purchase other businesses.

Question 10

TAKEOVER- (ADV4&DIS3)

Answer 10

Larger-more finically secure, Gets profits from other business, Increase customer base, greater market presence. Requires allocation of Finance&HR resources, Risk harming main business, Takes time to merge two bus systems.

Question 11

LATERAL- (DES)

Answer 11

Similar to Horizontal, business merges with competitors. Also business takes over firm which operates in similar market but not direct comp.

Question 12

DIVERSIFICATION - TYPES

Answer 12

LATERAL, CONGLOMERATE

Question 13

Diversification (DES/ADV/DIS)

Answer 13

When firms move into new markets that are different from their core business.(or takeover/merge).

Question 14

Diversification (ADV4/DIS2)

Answer 14

Reduces risk of business failing, increase profit, gain more customer attraction, be seen as more successful to other businesses. New markets may affect core activities as resources and expertise need to be shared, May not have the knowledge required to successfully run the new business.

Question 15

Conglomerate (DES)

Answer 15

when a business moves into an entirely different market- parent firm with range of businesses/market to increase profit.

Question 16

Conglomerate (ADV4/DIS4)

Answer 16

Targets new market, bus gains assets & customer from new business, experience and knowledge gained, seen as separate division=easy to identify how each division performing. business taking over may not have the management skills or experience to run the acquired business successfully, affect core activities as resources and expertise need to be shared, Parent firm not involved in producing goods and services. Underperforming bus sold off to increase profit & to raise cash investments.

Question 17

DE-MERGER/DIVESTMENT (DES)
FUNDING

Answer 17

Organisations can sell off unwanted subsidiary businesses and divisions to: raise capital for new, Increase efficiency for operations, Remove underperforming parts, removes themselves from bad publicity. Money raised can use to fund growth in the areas they feel will have more success.

Question 18

FUNDING GROWTH - (8)

Answer 18

RETAINED PROFITS, DIVESTMENT, DEINTERGRATION, ASSET STRIPPING, BUY IN, BUY OUT, OUT SOURCING, DEMERGER.

Question 19

RETAINED PROFITS (DES)

Answer 19

can hold back profit each year from its shareholders to reinvest into the business. Does not need to be paid back and prevents any outside influences becoming involved in the business.

Question 20

DINVESTMENT

Answer 20

When a company Sells off an asset to raise finances.

Question 21

DEINTERGRATION

Answer 21

Involves selling off a part of the company that had previously been integrated.

Question 22

ASSET STRIPPING

Answer 22

A company is purchased for the value of its assets, rather than for the value of its operations. Asset Will involve business buying another company and then selling off its assets for profit.

Question 23

BUY IN

Answer 23

Outside management company buys business as believes it can manage it more successfully.

Question 24

BUY OUT

Answer 24

Interested party/buyer taking control of the firm, maybe existing management. Or employees.

Question 25

OUTSOURCING

Answer 25

Operations of business passed/outsourced to specialist who can do better job. - Hires another business to do some work for them. e.g., cleaning or IT operations to smaller, more specialist companies.

Question 26

OUTSOURCING (ADV4/DIS4)

Answer 26

Specialist used to do work, reduces staff/other costs in outsource area, specialist carry out task higher standard, can be provided cheaper as unit costs for special supplier lower, only need to be paid when required. Service can be more expensive as special supplier add own profit to price, bus can lose control over outsource work, communication needs to be clear, bad publicity if staff made redundant.

Question 27

ACHIEVING GROWTH (8)

Answer 27

MEGER, TAKEOVER, AQUSTITION, FRANCHSING, MULTINATIONAL, PRODUCT DEVELOPMENT, ADVERTISING, INCREASING STAFF.

Question 28

BENEFITS OF GROWTH (4)

Answer 28

Influence over market price/are big enough to be price setters, enjoy
economies of scale, charge lower prices, higher profit margin.