Business Growth Flashcards
What other word is used for a ‘Takeover’?
Acquisition
Define Organic Growth
Business grows naturally by selling more products
Define Inorganic Growth
Business grows by merger or takeover (forceful)
Advantages of External Growth
Growth is quicker,
Eliminate competition,
More ideas through combining teams
Disadvantages of External Growth
Slower decision making,
Communication more difficult,
Increased costs
Define Diversification
A business joins an external business in a different market
Define Forward Vertical Intergration
A business joins with its distributors/the next stage of production
Define Backwards Vertical Intergration
A business joins with its suppliers/previous stage of production. Gain raw materials
Define Horizontal Intergration
A business joins a business at the same stage of product process
What is a Primary sector?
This sector produces or extracts raw materials.
What is a Secondary sector?
This sector makes or manufactures goods with the raw materials.
What is a Tertiary sector
This sector provides services. This includes estate agents, hairdressers and restaurants.
What happens in Economies of Scale?
As a business grows, it can experience
economies of scale. This is when the average unit cost of a product falls.
Formula for Unit costs…
Unit costs = total costs ÷ output.
How do businesses buy Economies of Scale?
As a business gets bigger, it is able to buy in bulk. They will be given bulk-buy discounts
which will reduce the unit cost of each product.
