1.5 Growth and Evolution (Growth)

Question 1

Internal Growth Methods

Answer 1

Businesses utilising their resources to expand
> Retained profits
> Borrowing
> Selling shares
> Organic growth

Question 2

External Growth Methods

Answer 2

Businesses dealing with other organisations to expand
> Inorganic growth

Question 3

Mergers and Acquisitions

Answer 3

Integration of two or more businesses to form a single company
Types of Integration:
> Horizontal: Firms of same industry (direct competitors)
> Vertical: Firms of different production stages
> Lateral: Firms of different industry, same production stage
> Conglomerate: Expanding operations into unrelated industries

Question 4

Takeovers

Answer 4

When a business buys controlling stake in another business without permission
> Hostile takeover

Question 5

Joint Ventures

Answer 5

When two or more businesses agree to create a new business entity for a finite period of time
> Not a merge, but a new creation

Question 6

Strategic Alliances

Answer 6

When two or more businesses join together without the need to create a new business entity
> Gain of synergies in different strengths of each member

Question 7

Franchising

Answer 7

Selling of franchise rights to franchisee to sell goods and services using the franchisor’s brand
> Franchisees are required to follow practices of the set business model