3.2 Business growth Flashcards
1
Q
what is organic growth?
A
- internal, through expanding
- e.g. market penetration, product development, market development
2
Q
what is inorganic growth?
A
- external, sudden and can bring significant change
- e.g. merges, takeovers, joint ventures
3
Q
what are objectives of growth?
A
- synergies(bring businesses together)
- Economies of scope(wide variety of products in different markets)
- the experience curve
- economies of scale
4
Q
what is diseconomies of scale?
A
- unit costs rise as a business expands
5
Q
what problems might a business face with growth?
A
- communication problems
- control: slows decision making
- flexibility: to adapt to change
- motivation
6
Q
what is overtrading?
A
- when a business grows to fast and overstretch their financial resources, such as cash
7
Q
what is a merger?
A
- two businesses come together in a joint venture for mutual benefit
8
Q
what is a takeover?
A
- may be hostile or voluntary, one business will acquire another along with its assets
9
Q
what are the types of growth?
A
- backwards vertical
- horizontal
- conglomerate
- forwards vertical
10
Q
what is backwards vertical growth?
A
- taking over a customer such as a retailer
11
Q
what is backwards vertical growth?
A
- taking over a supplier
12
Q
what is horizontal growth?
A
- merging with a business at the same level of the supply chain
13
Q
what is conglomerate growth?
A
- taking over an unused business in a different market
14
Q
what are rewards for inorganic growth?
A
- speedy growth
- higher remuneration for senior staff
- rewards for previous owner
- greater profitability if successful
15
Q
risks of inorganic growth?
A
- regulatory intervention
- resistance
- financial strain
