Business growth Flashcards
How can a business grow
Brand loyalty
Merger
Takeover
Increased advertising
Opening new stores
Diversifcation
Economies of scale
What are the two types of growth
Inorganic: external growth
merger and takeover
Organic: When a firm grows by investing in themselves
Franchising, opening new stores
What are the two types of companies in private sector
LTD: more secretive
PLC: information is more put there where can see profits
Both can have shareholders
What is vertical integration
What are the two types
ADV AND DISADV
When a firm buys another firm in the same industry but different stage of production
Forward and Backwards
ADV: Reduce costs
Increased supernormal profits
Increased efficiency
Economies of Scale
Disadvantages: Risk of failure
More investment needed
Could create communication issues
Employees may not be applicable
What is Vertical Forward integration
Buying another firm which is closer to the consumer
e.g Raw materials buys manufacturing
What is Vertical Backwards Integration
Buying another firm further away from supplier
e.g Retail buys the distribution and makes it their own
What is Horizontal Integration
What are the ADV and DISADV
Acquiring a business at the same stage of the supply chain
e.g Volkswagen buying Porsche
ADV: Greater supernormal profits
Employees could work in that company
More concentration Ratio
Economies of scale
Diversification
DISADV: Costly to buy the other one
Monopolies
High prices possibly
Reduce flexibility
What are the three types of integration
Conglomerate
Horizontal
Vertical
What is Conglomerate integration
ADV and DISADV
Where the acquisition has no clear connection to the business buying it
e.g Samsung buying Everland (Chinese Waterpark)
ADV: Economies of scale
If one fails, less likely others will
Increased brand awareness
More supernormal profits
DISADV: Communication issues
Lack of experience in this field
Management complexity
What Is economies of scale
Decreasing costs to increase output of production
What is Synergy
The creation of a whole is greater than the sample sum of its parts
working together
