buisness growth

Question 1

methods of growing a buisness internally:

Answer 1

• increasing market share
• developing new products
• gaining new customers

Question 2

what is external growth?

Answer 2

usually involves a merger ( 2 buisnesses merging)

or takeover (existing buisness expands by buying more than half the shares of another buisness)

Question 3

What is internal growth?

Answer 3

when a buisness decides to expand on its own

Question 4

some examples of external growth are:

Answer 4

• horizontal takeover
• Backward vertical takeover
• forward vertical takeover
• diversifacation

Question 5

What is a horizontal takeover?

Answer 5

to takeover/merge with a company in the same line of buisness (e.g one supermarket joins another)

Question 6

Why could a horizontal takeover be good?

Answer 6

• one less competitor in the market
• less need to advertise (lower costs)

-May be able to get discounts from suppliers (from buying in bulk)

Question 7

What is a backward vertical takeover?

Answer 7

to takeover/merge with a company which can supply you with goods
(e.g a crisp manufactorer takes over a potato farm)

Question 8

What is good about backward vertical takeover?

Answer 8

• take control over own supply chain to ensure good quality , prices and prompt deliveries

Question 9

What is a forward vertical takeover?

Answer 9

to takeover/merge with a company that will sell your goods (e.g a brewery takes over a pub)

Question 10

What is good about a forward vertical takeover?

Answer 10

a guaranteed market for sales.

Question 11

what is diversifacation?

Answer 11

to takeover/merge with a company in a unrelated industry
(e.g a car manufacturer takes over a fashion brand)

Question 12

What is good about diversifacation?

Answer 12

if one market fails then you have another buisnes to fall back on.

Question 13

What does the term “economies of scale” mean?

Answer 13

refers to the reduction of unit costs that occurs as a business grows in size ( simply: the benefits a business gets by growing larger)

Question 14

What is purchasing economies?

Answer 14

buying materials in bulks hence getting discounts from suppliers as it is cheaper per item when in bulk

Question 15

What does the term financial economies mean?

Answer 15

when large businessess are likely to find it easier to borrow money at lower interest rates because they have a track record of paying creditors back

Question 16

What does the term technical economies mean?

Answer 16

when businesess can afford technology that will allow them to reduce unit costs in the longterm

Question 17

What are the different types of economies of scale?

Answer 17

• purchasing economies
• marketing economies
• financial economies
• technical economies