Business Growth Flashcards
What is business growth?
The point at which a business needs to expand to gain more profit
What are the objectives of growth?
- To gain EOS
- Increased market power
- Increased market share and brand recognition
- Increased profitability
What are the problems arising from growth?
- Diseconomies
- Internal communication
- Overtrading
What are the tactical reasons for mergers and takeovers?
- Attempt to ensure increased market share
- Access to technology, staff or intellectual property
What are the strategic reasons for mergers and takeovers?
- Access to new markets
- Improved distribution networks 3. Improved brand awareness
What is a merger?
A merger is a legal deal to bring two businesses together under one board of directors
What is a takeover?
When a larger business buys another smaller business
What is the primary sector?
Businesses that are involved in digging fishing, Mining to remove products from the planet at source.
What is the secondary sector?
Businesses that turn the raw materials into products
What is the tertiary sector?
Businesses that sell goods to the customers
What is horizontal integration?
Businesses operating in the same sector merge or takeover another business
What is vertical integration?
When a business merges or takeover with a business from another sector or part of the supply chain
What are the financial risks of mergers and takeovers?
- original purchase cost
- cost of change into a new business
- redundancies of duplicate staff
What are the financial rewards of mergers and takeovers?
- increased revenue
- economies of scale
What are the short term problems with rapid growth?
- outgrow their premises
- morale dropping caused by extra work
- shortage of cash
What are the problems with mergers and acquisitions?
- Clash of cultures
- Possible communications problems
- Most fail
- Diseconomies of Scale
What is Organic growth?
The process of business growth which comes from within the business as opposed to mergers and takeovers
What is inorganic growth?
Growth in a business through a merger, takeover or a joint venture
What are the methods of organic growth?
- New product launches
- Opening new stores or branches
- Expanding into foreign markets
- Expansion of the workforces
What are the advantages of organic growth?
• This avoids all the risks and pitfalls of merging with another business
• Cheaper than merging
• Retains the company culture
• Can be planned for unlike a takeover
• Higher production means EOS and lower average costs
What are the disadvantages of organic growth?
- long time to see ROI
- hard to enter markets in other countries
What is a small business?
Business with fewer than 250 employees
What are the reasons for a business staying small?
- flexibility in responding customer needs
- better customer service
- E-commerce
