1.6 Business Growth Flashcards
What is organic / internal growth?
When a business grows naturally by selling more.
What is external growth?
Growth of a business by a takeover or a merger.
What is a merger?
Two or more firms join to create a new business.
What is a takover?
When one business buys another business.
Advantages of external growth…
Cost savings (eg. Through redundancies)
New customers and sales.
More market share.
Quicker than organic growth.
Disadvantages of external growth…
Slower decision making
Communication more difficult
Employees may become demotivated
Types of mergers and takeovers…
Horizontal
Backwards vertical growth
Forwards vertical growth
Diversification
Horizontal growth is..
A business merged with another business at the same stage of the production process
Backwards vertical growth is…
A Business joins with its suppliers/ previous stage of the production process
Forwards vertical growth is…
A bussiness joins with its distributors/ the next stage of the production
Diversification is…
A bussiness joins with a business in a different market.
