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Higher Business > Growth > Flashcards

Growth Flashcards

1
Q

why do business want to grow?

A
  • AVOID BEING A TAKEOVER TARGET
  • RECUCE THE RISK OF FAILURE
  • BECOME THE MARKET LEADER AND DOMINATE THE MARKET
  • INCREASE SALES AND PROFITS
  • GAIN A BETTER REPUTATION IN THE MARKET PLACE
  • REMOVE COMPETITOR
  • ABLE TO BENEFIT FROM THE ECONOMIES OF SCALE
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2
Q

what is internal method of growth?

A

growth from within the business without getting involved in another company

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3
Q

what are the internal methods of growth?

A
  • LAUNCHING NEW PRODUCTS
  • EXPANDING INTO NEW GEOGRAPHICAL MARKETS
  • SELLING TO OUTLETS - allowing other stores to sell your product
  • HIRING NEW STAFF - new ideas
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4
Q

what is external methods of growth?

A

growth from outside the business either by merger or takeover.

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5
Q

what are the external methods of growth?

A
  1. TAKEOVER OF COMPETITOR
  2. MERGER WITH COMPETITOR
  3. ACQUIRING A SUPPLIER OR MAJOR CUSTOMER IN THE SUPPLY CHAIN
  4. JOINT PROJECT OVERSEA
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6
Q

what are less common internal methods of growth are there?

A

DIVERSIFYING - launching new products into new markets.
OPEN NEW BRANCHES - more locations operating.
INTRODUCING E COMMERCE - allows the business to be shopped 24/7 by a global market.

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7
Q

in what 5 days can external growth occur?

A
  1. HORIZONTAL INTEGRATION
  2. FORWARD VERTICAL INTEGRATION
  3. BACKWARDS VERTICAL INTEGRATION
  4. LATERAL INTEGRATION
  5. CONGLOMERATE INTEGRATION
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8
Q

what is the order of the supply chain?

A

primary - secondary - tertiary - quaternary

raw materials - manufacturing - distribution - retail

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9
Q

what is horizontal integration?

A

this is a method of growth occurs when 2 business from the same sector of industry become 1 business by takeover or merger.

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10
Q

what is the advantages of horizontal integration?

A
  1. THE NEW BUSINESS CAN DOMINATE THE MARKET AS COMPETITION IS REDUCED.
  2. THE NEW BUSINESS CAN BENEFIT FROM ECONOMIES OF SCALE AS IT IS LARGER.
  3. DUE RO REDUCED COMPETITION, THE NEW BUSINESS CAN RAISE PRICES = more profit
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11
Q

what are the disadvantages of horizontal integration?

A
  1. QUALITY MAY SUFFER DUE TO LACK OF COMPETITION AS BUSINESS FEEL THUE CAN NOW ‘CUT CORNERS’
  2. CUSTOMERS MAY HAVE TO OAY HIGHER PRICES FOR THE SAME GOODS.
  3. THIS IS MAY BREACH EU COMPETITION RULES
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12
Q

what is forward vertical integration?

A

vertical integration involves a takeover or merger of business from different sectors of industry but are usually related to one another.
forward vertical integration is when a business takes over or mergers with the business in the next sector of industry.

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13
Q

what are the advantages of forward vertical integration?

A
  1. BUSINESS CAN CONTROL HOW THE FINISHED PRODUCT IS SOLD. i.e. prices
  2. CAN INCREASE PROFITS BY CUTTING OUT THE ‘MIDDLEMAN’ AS WITHOUT THE INTEGRATION THE MANUFACTURER WILL USUALLY INCREASE THE RPICE BEFORE SELLING TO THE SHOP
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14
Q

what are the disadvantages are of forward vertical integration?

A
  1. COMPANY MAY NOT MANAGE THE NEW BUSINESS ACTIVITIES EFFECTIVELY.
  2. WITH YHE FOCUS BEING ON THE NEW ACTIVITIES THIS CAN HAVE A NEGATIVE IMPACT ON CORE ACTIVITIES.
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15
Q

what is backward vertical integration?

A

this is when a business takes over or mergers with a business in an earlier sector of industry. in other words, they take over their supplier.

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16
Q

what are the backward vertical integration advantages?

A
  1. GUARANTEED STOCK WILL BE AVAILABLE ON TIME.
  2. NO NEED TO PAY SUPPLIERS MARKED UP PRICES.
  3. QUALITY OF SUPPLIES CAN BE CLOSELY MONITORED.
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17
Q

what are the backward vertical integration disadvantages?

A
  1. IF THE NEW ACTIVITIES ARE NOT MANAGED EFFECTIVELY THIS CAN PEAD TO HIGHER COSTS.
  2. MAY BE DUPLICATION OF STAFF WHICH CAN LEAD TO REDUNDANCIES.
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18
Q

what is lateral integration?

A

this is when a business takes over and mergers with a business that is in the same sector of industry but does not provide the exact same product. the 2 businesses are not in direct competition with one another.

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19
Q

what are the advantages of lateral integration?

A
  1. THE BUSINESS CAN TARGET NEW MARKETS AND INCREASE THEIR SALES.
  2. NEW PRODUCTS CAN COMPLEMENT EXISTING ONES.
20
Q

what are the disadvantages of lateral integration?

A
  1. THE LACK OF KNOWLEDGE OF A NEW MARKET AND NEW PRODUCTS MAY AFFECT PERFORMANCE.
21
Q

what is conglomerate integration?

A

this is when business in completely different markets join. their products are unrelated.

22
Q

what are the advantages of conglomerate integration?

A
  1. SPREAD THE RISK - if one product fails then they still have others to generate profit.
  2. IF PRODUCTS ARE SEASONAL, OTHER PRODUCTS CAN BALANCE THIS OUT SO THERE ARE CONSISTENT SALES.
23
Q

what are the disadvantages of conglomerate integration?

A
  1. LACK OF KNOWLEDGE ON NEW MARKET AND PRODUCTS MAY NEGATIVELY EFFECT THE BUSINESS.
  2. THE BUSINESS MAY BECOME TOO LARGE TO MANAGE EFFCIENTLY.
24
Q

fill in the blanks

internal methods of growth have … risk whereas external methods of growth have … risk?

A

internal methods of growth have lower (+) ricks whereas external methods of growth have higher (-) risks.

25
Q

fill in the blanks

internal methods of growth cause … growth whereas external methods of growth cause … growth?

A

internal methods of growth have slower (-) growth whereas external methods of growth have higher (+) growth.

26
Q

fill in the blanks…

internal methods of growth are usually a … option whereas external methods of growth are usually a … option?

A

internal methods of growth are usually a more expensive option whereas external methods of growth are usually a more expensive option.

27
Q

fill in the blanks…

internal methods of growth builds on … whereas methods of growth can …?

A

internal methods of growth builds on existing activities (+) whereas external methods of growth can transform a business - adopting new methods and systems.

28
Q

what are the other two positive effects of internal growth?

A
  • GOOD IN HIGH MARKET GROWTH (+)

- REWARDS INNOVATION AND BRAND BUILDING (+)

29
Q

what are the other two positive effects of external growth?

A
  • POPULAR IN MATURE OF DECLINING MARKETS

- CAN ACQUIRE MISSING TECHNOLOGY ADN BRANDS (+)

30
Q

what is a takeover?

A

a takeover is a way of achieving growth and is also known as acquisition involve larger business buying a small business.
often comes as a result of the smaller business struggling financially.

31
Q

what is the outcome of achieving growth?

A

the smaller business will take on the name of the larger business or sometimes the bigger business just wants to add another product to their portfolio.

32
Q

what are the advantages of a takeover?

A
  1. BUYING BUSINESS GAINS MARKET SHARES AND CUSTOMERS OF THE SMALLER BUSINESS.
  2. RISK OF FAILURE IS SOREAD AS THERE IS A LARGER PORTFOLIO. .
  3. COMPETITION IS DECREASED
33
Q

what are the disadvantages of takeovers?

A
  1. CAN LEAD TO DUPLICATION ON JOBS WHICH CAN REULT IN REDUNDANCIES.
  2. AS COMPETITION IS REDUCED THIS MEANS HIGHER PRICES CAN BE CHARGED
  3. CAN LOSE LOYAL CUSTOMERS IF THEY ARE NOT KEEN ON THE BUYING IN BUSINESS.
34
Q

what are mergers?

A

a method of growth which involves 2 businesses agreeing to join forces and become 1 organisation. this is often friendlier than a takeover and can result in a new name and logo for the new merger company.

35
Q

what are advantages of mergers?

A
  1. MARKET SHARE AND RESORUCES ARE SHARED.
  2. ECONOMIES OF SCLAE CAN NOW BE ACHIEVED AS A BIGGER BUSINESS.
  3. EACH BUSINES CAN BRING ITS OWN EXPERTISE.
36
Q

what are disadvantages of mergers?

A
  1. CUSTOMER MAY NOT LIKE THE UNFAMILAR LOGO
  2. MARKETING CAMPAIGN USED TO INFOMR CUSTOMERS ABOUT MERGER CAN BE EXPENSIVE
  3. HIGHER PRICES CAN BE CHARGED AS COMPETITION IS LESS.
37
Q

takeovers and mergers can both be used with what?

A

any of the 5 methods of growth e.g. lateral, forward

38
Q

what other way can businesses grow?

A
  • TAKEOVER
  • MERGER
  • FRANCHISING
  • BECOMING A MULTINATIONAL COMPANY
  • INTERNAL GROWTH
39
Q

what are the ways business can fund growth?

A
  • RETAINED PROFIT
  • DIVESTMENT
  • DEINTEGRATION
  • ASSET STRIPPING
  • DEMERGER
  • BUT OUT
  • BUY IN
  • OUTSOURCING
40
Q

retained profits helps a business grow as?

A

it is when some of the profits made by the business are not given to shareholders but instead, they are ‘saved’ by the business in order to fund the project just as growth.

41
Q

divestment helps a business grow as?

A

when a business sells part if the business. this allows them to gain s sum of money while focusing on more profitable brands.

42
Q

deintegration helps a business grow as?

A

when a business sells part of the supply chain it owns.

43
Q

asset striping helps a business grow as?

A

when a business buys over another business with the sole purpose of selling off assets that are more valuable than the business itself.

44
Q

demerger helps a business grow as?

A

when 1 business splits itself into separate components. all components are still owned by the same organisation but they’re managed independently.

45
Q

buy out helps a business grow as?

A

when the management of the business buys the company they work for. the management team will feel that they have new ideas and industry knowledge to improve the business.

46
Q

buy in helps a business grow as?

A

when the management of another company (usually a competitor) takes over the business. the management team will fell that they have ideas and knowledge to improve the business.

47
Q

outsourcing helps a business grow as?

A

when an organisation employs an outside business to carry put certain activities e.g. marketing. this outside business will usually be a specialist. can allow on core activities.

Higher Business (44 decks)

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