Firms -unit 3 Flashcards
What is horizontal integration
A merger between two firms at the same stage of production
Eg. Lloyds and Halifax in 2009
What is vertical integration
A merge between firms at different stages of the productive process within the industry
State the difference between forward and backward integration
Forward: next stage of the production process
Backward: previous stage of the production process
What is conglomerate integration
A merge between firms in unrelated industries
Eg. Richard Branson with Virgin
Why do firms grow?
- increase market share
- benefit from greater profits
- increase sales
- increase economies of scale
- gain power
- satisfy managerial ambitions
- gain expertise
Why do firms remain small?
- barriers to entry
- niche market business
- lack of resources
- minimum efficient scale
- lack of resources
- lack of motivation
Why do some firms break up?
They grow too large and experience economies of scale
What barriers to entry prevent firms from growing
Legal barriers to entry
Marketing barriers
Pricing barriers
Technical barriers
How do firms grow?
Gaining market share
Takeovers and mergers
