Firm growth and Mergers

Question 1

Why do firms grow?

Answer 1

Achieve objectives including increasing revenue, profits and market share

Question 2

Internal expansion

Answer 2

The purchasing of new capital and assets using profits or shareholder investments
Lower risk but slower

Question 3

Extrenal expansion

Answer 3

Firms integrate through mergers or acquisitions for faster but more risky growth

Question 4

Vertical intergration

Answer 4

When Firms merge at different stages of production

Question 5

Forward vertical intergration

Answer 5

When a firm merges with another closer to the consumer

Question 6

Backwards vertical intergration

Answer 6

When a firm acquires another closer to supply

Question 7

Horizontal intergration

Answer 7

When firms merge at the same stage of production

Question 8

Conglomerate intergration

Answer 8

When a firm buys into operating in a completely new market

Question 9

4 Benefits of mergers

Answer 9

EOS
Synergy (Pharmaceuticals)
Rationalism
R+D

Question 10

4 costs of mergers

Answer 10

DOS
Rationalism causing job losses
Reduced consumer choice
Monopoly/ Monopsony power