Business Growth 3.1.2 Flashcards
Define organic growth
When a firm grows by investing in itself to increase output
Define inorganic growth
When a firm grows by acquiring or merging with another firm
What are the 4 types of inorganic growth
Backward Vertical integration
Forward Vertical integration
Horizontal integration
Conglomerate integration
Define vertical integration
When a firm integration with another firm at a different stage of the same production process
Define backwards vertical integration
When a firm integrates with another firm who is further away from the consumer in the same production process
Define forwards vertical integration
When a firm integrates with another firm who is closer to the consumer in the same production process
Define horizontal integration
When a firm integrates with another firm at the same stage of the production process
Define conglomerate integration
When 2 firms in unrelated industries integrate
Pros of organic growth
Keep ownership and control
Job creation
No Debt
Cons of organic growth
Limited growth
Costly
Slower growth
Pros of vertical integration
Control of supply chain
Reduce middleman costs
Cons of vertical integration
Regulation
Cost from diseconomies of scale and acquisitions
Lack of expertise
Pros of Horizontal integration
Internal economies of scale
Reduced competition
Cons of Horizontal integration
Internal diseconomies of scale
Job losses
Brand dilution
Pros of Conglomerate integration
Internal economies of scale
Increased brand awareness
Knowledge transfers
