3.2 Flashcards
what are the two ways a business can grow?
- organically
- externally
what are the objectives of growth?
- synergies
- the experience curve
- economies of scale
- economies of scope
what is economies of scale?
the advantages to a business of being bigger
what are the 3 types of internal economies of scale?
- technical
- purchasing
- managerial
what is meant by ‘diseconomies of scale’?
the disadvantages to a business when increasing the scale of its operations
what are the 3 diseconomies of scale?
- communication
- coordination and control
- alienation
what is overtrading?
when a business expands too rapidly resulting in it operating at a level beyond its resources leading to potential liquidity problems
what is ‘organic growth’?
when a business expands in size by opening new stores, branches, functions or plants
what is ‘inorganic growth’?
when a business expands in size by either merging with or taking over another business
what is ‘integration’?
the bringing together of two or more businesses
what is a ‘merger’?
when two or more businesses agree to become integrated to form one business under joint ownership
what is a ‘takeover’?
when one business gains control over another and becomes the owner
external growth through mergers and takeovers can take through what 3 forms?
- horizontal
- vertical
- conglomerate
what is meant by ‘horizontal’?
2 businesses at the same stage within a process integrate
what is meant by ‘vertical’?
2 businesses at different stages within a process integrate
