business growth

Question 1

4 reasons for growth

Answer 1

to achieve economies of scale
aims for greater market share
increased brand recognition
increased profitability and better returns for shareholders

Question 2

2 problems of growth

Answer 2

diseconomies of scale

overtrading

Question 3

3 reasons why diseconomies of scale can occur

Answer 3

poor communication between departments
poor employee motivation
poor managerial coordination

Question 4

4 reasons for merger or takeover

Answer 4

• technological change
• synergy
• diversification
• access to wider distribution

Question 5

2 types of takeovers

Answer 5

friendly and hostile

Question 6

horizontal integration is

Answer 6

same stage of production and sector

e.g. coke and pepsi

Question 7

vertical integration is

Answer 7

same market, different level of production

e.g. film studios buy a chain of cinemas

Question 8

forwards integration is

Answer 8

closer to consumer

Question 9

backwards integration is

Answer 9

closer to supplier

Question 10

3 risks of merging or takeover

Answer 10

• redundancy of workers
• clash of culture
• huge cost of buying a new business

Question 11

3 rewards of merging or takeover

Answer 11

• addition of new skills
• reduce competition
• spreads risk

Question 12

4 ways of organic growth

Answer 12

• may increase existing production
• develop and launch new products
• train employees for new skills
• open new business locations

Question 13

3 positives of organic growth

Answer 13

• brand and customer loyalty
• less risky
• sustainable and manageble

Question 14

3 reasons for staying small

Answer 14

• customer service excellence
• flexibility to respond to customer needs
• product differentiation and unique selling points