Business Growth Flashcards
1
Q
What are the businesses objectives for growth?
A
- Achieve economies of scale
- increase market power over customers and suppliers
- increase market share and brand recognition
- increase profitability
2
Q
What are the problems that arise from growth?
A
- diseconomies of scale
- internal communication
- over trading
3
Q
What are the reasons for mergers and takeovers?
A
- strategic reasons (new markets, distribution networks, brand awareness)
- tactical strategies (market share, new technology)
4
Q
What is a merger?
A
Where 2 or more firms agree to form a new company
5
Q
Whats a takeover?
A
The purchase of one company by another
6
Q
What is horizontal integration?
A
Takeover - similar stage of production and industry
7
Q
What is vertical integration?
A
Takeover - different stage of production and same industry
8
Q
What is organic growth?
A
When a business expands its own operations rather than relying on take-overs and mergers.
9
Q
What is a joint venture?
A
When businesses join together to pursue a common product (legally separate)
10
Q
What are the financial risks and rewards of organic growth?
A
- Job losses
- Integration costs
- Regulatory intervention : CMA
- Fast growth
- Profitable
- drains resources
- loss of control
- clash of cultures
11
Q
Why might a business want to stay small?
A
- Flexible
- innovation
- lifestyle of enterprises
- avoid diseconomies of scale
- take advantage of low price elasticity of demand and high income elasticity of demand - specialist ‘niche’ goods
