Business Growth

Question 1

List two ways businesses can grow

Answer 1

1. external/ inorganic growth

2. internal/ organic growth

Question 2

internal [organic] growth

Answer 2

a business can expand through investing in its existing product range, opening more outlets and developing new products.

Question 3

external [inorganic] growth

Answer 3

a business expands through the use of mergers and takeovers/acquisitions [integration]

Question 4

methods of internal growth

Answer 4

1. horizontal integration
2. vertical integration [backward and forward]
3. conglomerate

Question 5

horizontal integration

Answer 5

horizontal integration is when a firm merges / acquires [takes over] another firm in the same industry.

Question 6

vertical integration

Answer 6

vertical integration is when a firm merges / acquires another firm in the same industry but on different levels of production. there are two forms of vertical integration.

1. vertical forward integration: when a business merges / acquires another business, which brings it nearer to the consumers.
2. vertical backward integration: when a business merges/ acquires another business, which brings it closer to raw materials.

Question 7

conglomerate

Answer 7

this form of internal growth occurs when a business merges/acquires another business in a different industry and on different levels of production.

Question 8

benefits of horizontal integration

Answer 8

1. to reduce the competitors in an industry
2. to enjoy economies of scale
3. to increase market share

Question 9

economies of scale

Answer 9

lowering costs as the business expand

Question 10

benefits of backward vertical integration

Answer 10

1. prevents suppliers from supplying other businesses
2. controlled cost of raw materials
3. constant supply of raw materials
4. profit from private sector business is absorbed by manufacturer

Question 11

benefits of forward vertical integration

Answer 11

1. assured outlet for products
2. profits raised by retailers is taken by the manufacturer.
3. market research on customer is transferred directly to the manufacturer. i.e consumer interests, opinions on the quality of products.