3.1.2 Flashcards
What is organic growth?
When a business re invests into itself to create more output and drive sales.
What is Forward Vertical Integration?
Integrating with another firm which is further forward in the supply chain of the same production process.
What is inorganic growth?
When a business grows by merging or taking over another firm.
What is Backward Vertical Integration
Integrating with another firm which is further backwards in the supply chain of the same production process.
What is horizontal integration?
Integrating with a firm which is in the same stage in the production process.
What is conglomerate intergration?
Integrating with a firm in an entirely different industry.
2 pros of Organic Growth
Less risky, due to finance by profits and expertise
Avoids diseconomies of scale
2 Cons of Organic Growth
Slow growth
Access to limited finance
3 Pros of Backwards Verticle
Reduces intermediary costs
Greater control of supply chain, restricting rivals
Controls quality
2 Cons of Backward Vertical
Little expertise
Diseconomies of scale, due to unnecessary duplication of managerial roles.
Horizontal Integration 3 Pros
Rapid increase in Market Share
Economies of scale
Existing knowledge of industry
Horizontal integration 2 cons
Diseconomies of scale
Culture clash
Conglomerate integration 2 cons
Possible lack of expertise
Worker dissatisfaction due to take over will lower productivity
2 Pros of Conglomerate integration
Reduces risk of business failure
New growth opportunites
Why might the size of the market effect business growth?
Not enough demand to buy all of the products.
