3.2 Flashcards
business growth definition
the point at which a business needs to expand and seeks options to generate more profit
objectives of growth
- economies of scale
- market share
- market power
- brand recognition
problems arising from growth
- diseconomies of scale
- overtrading
- communication problems
different types of economies of scale
financial - large companies,better interest
managerial - large companies, pay for specialised staff
merger definition
legal deal to bring together two businesses under one board of directors
takeover definition
legal deal where one larger business purchases a smaller one
horizontal integration
merging with a business at the same level of the supply chain (Christmas tree wholesaler purchases another Christmas tree wholesaler)
vertical integration
e.g. becoming a retailer / supplier from the wholesaler
+ reduces overall costs
conglomerate
taking over an unused business in a different market
+ spreads risk
+ creates new opportunities
risks of inorganic growth
industry regulators (CMA)
resistance from employees
financial strain
problems with rapid growth
- lower quality of product
- staff turnover
- diseconomies of scale
- communication - demotivated staff
organic growth definition
inorganic growth definition
organic- the process of growth that comes internally from the business
inorganic - growth outside the business, mergers and takeovers
methods of organic growth
franchising
foreign markets
new product launches
expand workforce
pros and cons of organic growth
pros
1. less risk
2. cheaper
3. diseconomies of scale minimised
cons
1. slower and more limited
2. competition may dominate the market
small business definition
any business with fewer than 250 employees
