Growth Flashcards
Competitive advantage
Increase turnover and profits
Economies of Scale
Average cost per unit falls
Organic growth
Internal
Growing naturally overtime
Increases size to satisfy increase in demand
External growth
Inorganic
Merging or taking over another business
Objectives of growth
Economies of scale
Increased profitability
Increased market share
Corporate Branding
Attaches a perception and promise to the goods and services associated with the brand
Eg quality customer service and corporate culture
Organic growth
Gradual growth with their own resources
Examples of organic growth
Franchising
Release new products
Advantages of organic growth
Less risky then inorganic growth
Less likely to experience diseconomies of scale
Retain control
Disadvantages of organic growth
Slow pace of growth
Rivals may grow faster
Merger
2 or more firms agree to become intergrated to form under joint ownership
Takeover
When a firm agrees to become intergrated and becomes the owner
Can be achieved by buying 51% of shares
Horizontal integration
2 firms at the same stage within a process intergrate
Vertical integration
2 firms at a different stage within a process integrate
Pro of horizontal interference
Increase market power
Build economies of scale
Build synergies
Synergies
Share expertise, resources and capabilities
Cons of horizontal integration
Cultural and intergration challenges
Increase complexity and financial risks
Pros of conglomerate integration
Diversification
Increase revenue
Economies of scale
Cons of conglomerate intergrarion
Lack of experience
Management issues
Loss of efficiency
Pros of vertical intergration
Greater control and independence
Cost savings
Better marketing and market control
Cons of vertical intergration
Many resources needed
Loose flexibility
Focus on their main goals
