3.2.2 Mergers and takeovers

Question 1

Why may a business do a merger or takeover?

Answer 1

• Exploit synergies (2+2=5)
• Enter foreign markets
• Quick and easy way to expand the business

Question 2

What is horizontal integration?

Answer 2

Where two businesses that are similar and at the same stage of production join together.

Question 3

What is vertical integration?

Answer 3

When businesses’ in different stages of production join together.

Question 4

What is forward vertical integration?

Answer 4

Where a business joins with another that is in the next stage of production.

Question 5

What is backwards vertical integration?

Answer 5

Where a business joins with another that is in the previous stage of production.

Question 6

What is organic and inorganic growth?

Answer 6

Organic- Where a business grows naturally using its own resources

Inorganic- Where two or more businesses join together to create a larger one.

Question 7

what are the pros and cons of organic growth?

Answer 7

Pros:
- Less risky
- A business will retain more control
- Cheaper

Cons:
- Pace maybe too slow for stakeholders
- Can’t utilise resources from other businesses
- slow growth may make businesses fall behind competitors.

Question 8

How might a business do organic growth?

Answer 8

• Increase product range
• Open more branches
• Increase staff