Business Growth & Objectives

Question 1

Give 3 reasons why a firm would want to grow

Answer 1

1. Gain monopoly power / market share
2. Make more money
3. Greater Secuirty

Question 2

Give 3 reasons why a firm would want to remain small

Answer 2

1. Keep business costs low
2. Concerntrate on niche markets
3. Keep busniess manageable and control

Question 3

Give 2 advatanges of organic growth

Answer 3

1.Firms are able to keep control of their businesses
2. Cheaper alternative to merger (they’re time consuming and expensive , also known for share prices dropping as side effect)

Question 4

Give 2 disadvantages of organic growth

Answer 4

1.Sometimes another firm has a market or an asset which the company would be
unable to gain through organic growth. For example, integration would allow a
European company to expand into the Asian market which it has no expertise in.
2. Organic Growth may be too slow for firms trying to sales maximize

Question 5

Give 2 advantages of Vertical integration

Answer 5

1. Potential for Increased profit
2. backwards integration ensures control of supply quality and delivery time

Question 6

Give a disadvantage of Vertical integration

Answer 6

1. Firms have no expertise in the industry they take over

Question 7

Give 2 advantages of Horizontal integration

Answer 7

1. Reduces competition and increases market share
2. Firms already have expertise in the market making merger more likely to be successful

Question 8

Give 2 disadvantages of Horziontal integration

Answer 8

1. Increases likelyness of regulatory scurtiny
2. Risk of diseconomies of scale
3. Risk of reducing share value as synergies may not occur

Question 9

Give 3 reasons for a demerger

Answer 9

1. Lack of synergy
   2.Value of share price
2. Avoid Competition market authority

Question 10

Give 3 impacts of a demeger
( pros and cons on economics agents)

Answer 10

1. Workers could see job promotion or loss
2. Busniesses couls become more efficient but may lose economies of scale
3. Consumers see better products and cheaper prices but loss of economies of scale may lead to higher price and loss of range of products

Question 11

Give 2 reasons why a firms would want to sales maximise

Answer 11

1. Greater security (larger size firms have greater survival in their market)
2. Growth in size leads to more market share
   (Sales maximising tends to be a short term strategy, firms often aim for profit max in the long run)