Growth Flashcards
what is integration?
when two businesses become one
what are the two type of integration called?
takeover and merger
what is a takeover?
when one large business buys a smaller one
name two advantages of a takeover?
- larger business gains market share
* competition is reduced meaning increased sales
name two disadvantages of a takeover?
- bad for customers as less competition means higher prices
* change of name can put off loyal customers
what is a merger?
when two business join forces
name two advantages of a merger?
- market share is shared
* business bring different areas of expertise
name two disadvantages of a merger?
- customers may dislike new changes like logo and name
* less competition means higher prices for customers
what is horizontal integration?
when two businesses from the same sector become one
name two advantages of horizontal integration?
- new larger business can dominate market
* due to reduced competition the new larger business can raise prices
name two disadvantages of horizontal integration?
- quality may suffer due to lack of competition
* customers man need to pay higher prices for the same goods
what is forward vertical integration?
when business takes over or merges with a business in a larger sector of industry
name two advantages of forward vertical integration?
- the business can control supply of their products and could decide to not supply to competition
- can increase profits by ‘cutting out the middle man’
what is backward vertical integration?
when business takes over or mergers with a business n an earlier sector of industry
name two advantages of backward vertical integration?
- guaranteed and timely supply of stock
* quality of supplies can be strictly controlled
name two disadvantages of forward and backward vertical integration?
- company may be incapable of managing new activities efficiently meaning higher costs
- focusing on new activities can adversely affect care activities
what is conglomerate integration?
businesses in different markets join together
name two advantages of conglomerate integration?
- the business can spread risk
* the business is larger therefore more financially secure
name two disadvantages conglomerate integration?
- one business may take on with another business in the market that they know nothing about which may cause failure
- business may become too large and inefficient to manage
what is outsourcing?
when organisations arranges for another organisation to carry out certain activities fro them
name two advantages of outsourcing?
- the business is able to use the service when it is required, so saving costs on staff and machinery
- less labour and equipment is required so save costs
name two disadvantages of outsourcing?
- business has less control over work so quality may fall
* communication between the business needs to be very clear to make sure exact specifications are met
what is a de-merger?
when single business splits into tow or more separate components
name two advantages of a de-merger?
- each new component has the best chance to operate efficiently
- each new component can concentrate on its own core activities and grow as a result
name two disadvantages of a de-merger?
•customers may be put off by the de-merger and abandon the business
altogether
•the financial costs are very high
