3.1.2 Flashcards
What’s organic growth?
When the firm grows from increasing the factors of production which they have.
What’s backward intergration?
When a firm merges with a firm’s that’s in the stage before them in the production process
What’s forward integration?
When a firm merges with a firm’s that’s in the stage after them in the production process
What’s horizontal integration?
When a firm merges with a firm’s that’s in the same stage them in the production process
What’s conglomerate integration?
Mergers/takeovers of firms which operate in completely different markets.
Name 2 pros of organic growth
- Lower risk
- Sustainable
- Retain control
Name 2 cons of organic growth
- Takes longer
- Limited growth
Name 2 pros of forward/backward integration
- Economies of scale
- Industry technology skills
- Control supply chain
- Improved access to raw materials
Name 2 cons of forward/backward integration
- Experience fewer economies of scale
- Worse communication with a bigger firm
Name 2 pros of horizontal integration
- Internal economies of scale
- Reduces competition
- Cheaper in the long-run
Name 2 cons of horizontal integration
- Reduced flexibility
- Regulation + legislation
- Dis-economies of scale
- May destroy shareholder value
Name 2 pros of conglomerate integration
- Diversification - minimise risk - Amazon Prime/Delivery/Shop
- Expanded customer base
- Increased efficiency
Name 2 cons of conglomerate integration
- Different corporate cultures
- Lack of expertise
- Conflict of objectives
Name 2 constraints of business growth
- Size of the market
- Access to finance
- Owner objectives
- Regulation
