3.9.1- Assessing a change in Scale Flashcards
Forms of growth
Organic
External
differences between organic and external
organic=slower
external=immediate (higher risk)
why is growth important?
shows progress
financial benefits
bargaining power
opportunities
benefits of growth
eos
synergy
experience curve
economies of scope
types of eos
purchasing
technological
managerial
financial
marketing
main benefit of eos
more efficient lower unit costs
problems of growth
diseconomies of scale
overtrading
diseconomies of scale
communication
control/coordination problems
motivation issues
what does overtrading lead to
cash flow problems of rapid growth
4 methods of growth
merger
takeover
venture
franchise
advantages of selling a franchise
- quick growth finance
- franchisee motivated
disadvantages of selling a franchise
-lose complete control
-dont gain all profits
advantages of buying a franchise
- no need for innovation
-provides training/support
disadvantages of buying a franchise
-not complete independence
-dont gain all profits
4 types of integration
-forward vertical
-backward vertical
-horizontal
-conglomerate
forward vertical integration
further up supply chain
backward vertical integration
earlier in the supply chain
horizontal
same stage of supply chain
conglomerate
no connection
retrenchment
reducing costs
reasons of retrenchment
-out of touch w customer
-failed merger/takeover
-changing markets
-economic downturn
-urgent need to cut costs
examples of retrenchment
-Tesco bought paperchase
-failed merger Asda +Sainsbury’s
organic growth methods
-new product launch
-opening new stores
-expanding into foreign markets
-expansion of wporkforce
external diseconomies of scale
price of land, labour rises, traffic congestion
Joint venture
business sharing information and resources but remaining seperate identity
advantages and disadvatages of JV
A: acess to resouces, shared risk, new opportunities
D: 40% fail, culture clash, high risk
example of JV
Hotel Chocolat- in Japan JV with Tokyo firm after covid
advantages of inorganic growth
-rapid expansion
-saves setting up costs
-spread risk
-acquire brand image
-fill gap in product portfolio
-compete
disadvantages of inorganic growth
-corporate culture clashes
-lack of synergy
-expensive dis eso
-communication problems
example of merger
orange +T mobile= EE
example of takeover
-Kraft bought cadbury shares
-Morrisons takeover safeway
