1.6 Business Growth Flashcards
Purpose of growth (5p)
Increase profit and publicity
Larger share of the market
Eliminate competitors
Attract shareholders
Establish global presence
How do you know a business is surviving? (5p)
Profit
Positive reviews
Recruiting regularly
Constantly sold out
Variety of products
Types of growth (2p)
Internal/organic growth
External/ inorganic growth
Internal growth
When the business only uses the recourses it has to grow a business
Methods of internal growth (4p)
-Increasing existing production capacity through investment in new capital and technology
-Development and launching of new products
-Growing a customer base
-Finding new markets
Difference between pace of internal and external growth
Internal is usually slower as it takes a lot of time and money for it to happen
External growth
Working with or buying other businesses
Types of external growth (3p)
Takeover
Merger
Joint venture
Takeover
-When a business is bought/acquired
- This can be hostile or friendly
Merger
-When two businesses join to become one new business
- Usually, under a new name and can often involve job loss
Joint venture
-When two businesses decide to work together as it It benefits both business
- However, they remaining two separate firms
Merger benefits (4p)
- Savings
- Increased market shares
- Ready made customers
- Reduced competition
Merger drawbacks (2p)
- Staff redundancy
- Consumers have less choice
Takeover benefits (4p)
-Save the business if it is failing
- Business already has customers
- Quick
- Employees keep their job
Takeover drawbacks (4p)
- can be expensive
- take on the businesses debt
- Stakeholders don’t like new owner (if hostile)
- culture clashes
Benefits of new products (organic growth)(3p)
Provides more options
More likely for a customer to find what they want
This increases revenue
Benefit of entering new markets (organic)
Can open up business to new customers
Risks of business entering new markets (organic) (2p)
- Difference of laws, language
- You have to change to meet local tastes and religious beliefs
Backwards vertical integration
Taking control of another business earlier in the supply chain than you are
Eg cider factory taking over an apple farm
Forward vertical integration
Taking control of another business at a later stage than you are in the supply chain
Eg. An apple farm buying s cider factory
Horizontal integration
A taking control of a business at the same stage in the supply chain
Eg an apple farm buying a potato farm
