business growth moved Flashcards
what is vertical growth
merging with a company in the same industry but in different stages of the production stage
Forward vertical growth
merging with a company a step ahead of you in the production stage .
engine manufacturer merging with a car manufacturer
backward vertical integration
merging with a business behind you in the production stage - suppliers
Heinz beans merging with a potato bean farmer
advantages of forward vertical integration
control of the market
can reduce costs - different departments
advantages of backward vertical integration
more control of the supply chain - can help to gain market share –> reduced risk
what are the disadvantages of vertical integration
may not have enough knowledge of the production stage you’re merging with
poor management and communication : x-inefficiency
redundancies
horizontal integration
taking over a business at the same stage of the production process as you
advantages of horizontal integration
reducing competition - increasing market share allowing you to have more control
economies of scale
disadvantages of horizontal growth
competition authority’s - may gain unwanted attention
potentially have diseconomies of scale
different company culture . redundancies to reduce costs
why may a business choose not to grow
operate in a niche market - usp
barriers to entry
costs
why may it be hard for a firm to grow ( 4 reasons)
Small business - hard to raise finance
regulation - red tape - will limit growth ( environment)
objectives - not all business want to grow
operating in a niche market
how may the principle agent problem be a side effect of integration of businesses
day to day tasks will be controlled by managers not shareholders and if they have different interests it could cause inefficiencies .
why may demergers occur
LACK OF SYNERGY - cant work together , neither side is gaining
FOCUS - focus what they’re better at
impacts of a demerger to a business
increased efficiency
lower costs
impacts of a demerger to a consumer
lower prices
better quality - one sole focus
