3.1.2 Business Growth

Question 1

What is organic growth?

Answer 1

When a business growths within its own business ops rather than using M&A
Think internal

Question 2

What are some methods of organic growth (3)

Answer 2

• Increasing existing production capacity via investment in new capital inputs
• Development of new products and sales channels
• Finding new markets such as exporting into growing countries

Question 3

What are the advantages of organic growth

Answer 3

• Less risk than external growth
• Can be financed through internal profits
• Builds on a businesses existing strengths

Question 4

What are the disadvantages of organic growth

Answer 4

• Growth depends on the overall growth of the market
• Hard to build market share if there is already one leader
• May be slow growth and shareholders may want a faster rate of growth
• If the business uses franchises this may be hard to use

Question 5

What is forward intergration

Answer 5

Acquiring a business up the supply chain
eg manufacturer buys a distributor

Question 6

What is backwards integration

Answer 6

Acquiring a business down the supply chain
eg retailer buys wholesaler

Question 7

What is horizontal integration

Answer 7

Buying a firm in the same stage of the supply chain
eg a supplier buying a competitor

Question 8

What is conglomerate integration

Answer 8

Merger between two firms which are totally unrelated

Question 9

What are the adv of vertical int

Answer 9

1- Control of the supply chain. reducing cost per unit
2- Improved access to raw materials whereas as rivals may have to wait longer and pay more
3

Question 10

What is the main disadvantage with vertical int