Growth Flashcards
what are reasons to achieve growth
increase sales
increase profits
increase market share - market leader
what are the methods of growth
internal growth
horizontal integration
vertical integration
lateral growth
conglomerate growth
diversification
what is internal growth
when a business grows naturally. can be done through opening new outlets, increasing sales/profits or introducing new products
what are the advantages of internal growth
less risky than taking over another business
can be financed through internal sources
build on existing strengths such as brands and customer relations
what are the disadvantages of internal growth
slower method of growth
limited by size of existing market
what is horizontal integration growth
when two business combine, that were operating in the same stage of production, in the same secetor
what are the advantages of horizontal integration growth
eliminates competitors
increase market share
achieve greater economies of scale
what are the disadvantages of horizontal integration growth
large firms created can dominate a market
when competitors eliminated, business gets more opportunities to exploit customers
can under cut competitors and push smaller more vulnerable businesses out the market
what is vertical integration growth
when a business takes over another at an earlier, or later stage of production, whilst still in the same sector
what are the advantages of vertical integration growth
eliminates the middlemen and his profit
gives the business greater economies of scale
secures a source of supply
what are the disadvantages of vertical integration growth
expansion may require extensive staff training
increased risk of failure if one part of the business does not perform as expected
what is lateral integration growth
when a business moves into a different market but within a related industry (hair dresser merging with beauty therapist)
what are the advantages of lateral integration growth
experience and knowledge can be gained from acquired business
targets new markets which increases customer base
what are the disadvantages of lateral integration growth
entering new markets may affect core activities and expertise need to be shared
may not have knowledge required to successfully run the new business
what is diversification growth
when a business moves into new markets that are different from their core business
what is conglomerate integration
when a business merges with another, in a completely different market
what are ways of funding growth
retained profits
divestment
disintegration/demerger
asset stripping
buy in
buy out
outsourcing
what are retained profits
when the business uses its own finances to fund growth
what is divestment
when the business sells of two or more of its subsidiary companies
what is disintegration/demerger
when two businesses that had previously merged decide to separate and operate on their own
what is asset stripping
when a business sells off some of its own assets in order to obtain funds for growth
what is buy in
when a group of managers from outside the business make an offer to buy the business in order to take control and run it themselves
what is buy out
when a group of managers from inside the business combine forces and make an offer to buy the business
what is outsourcing
when a business uses the services of another company or specialist to carry out a piece of work for them
what are ways to achieve growth
merger
takeovers
franchising
multinational
product development/advertising
what is a merger
when two businesses agree to join forces in order to become one larger business
what is a takeover
when a larger business takes over a smaller one
what is franchising
when a business grows by offering individuals to become franchisees
what is a multinational
when a business opens branches across the world
what is product development/advertising
developing new products
investing in advertising to make more people aware of produdcts
