3.1 Business growth

Question 1

Vertical Integration

Answer 1

Firms at different stages of production merge. Forward vertical integration is when a firm buys someone who is in the next sector (closer to the consumer. Backward vertical integration is when a firm buys one in the sector before it.

Question 2

Horizontal Integration

Answer 2

When firms merge at the same stage of production.

Question 3

Conglomerate Integration

Answer 3

When firms in completely unrelated businesses come together in mergers.

Question 4

Organic growth

Answer 4

When firms expand using their retained profits.

Question 5

Principal- agent problem

Answer 5

When agents in a business act in their own interest, not necessarily in line with senior managers and shareholders.

Question 6

Demerger

Answer 6

The separation of a large company into two or more smaller firms.

Question 7

Private sector firm

Answer 7

Output-producing organisation which is privately owned by shareholders or individuals. Usually exists to make profits for the owner.

Question 8

Public sector firm

Answer 8

Output-producing organisations which is owned by the Government or the state, often tax-payer funded. Usually exists to serve social goals instead of profit-making. Example: the BBC.