Growth and Outsourcing Flashcards
Merger means…
When two businesses join together, each have a share in the others business which means it’s mutually beneficial
Integration means…
Growth which occurs externally from the business
Takeover means…
A forced often hostile deal when a business buys a share in another business
Horizontal means…
When two business who sell the same product or service join together
Horizontal advantages are…x4
Reduces competition
Increases market share/market leader
All customers and sales from other business gained
EOS
Horizontal disadvantages are…x3
CMA could get involved if customers aren’t getting best price
Quality may suffer do the lack of competition
Higher prices charged to customers
Backwards vertical means…
Taking over the stage before your business e.g. costs coffee taking over a coffee plantation
Forwards vertical means…
Taking over the stage after your business e.g. Jean manufacturer taking over a jeans shop
F+B advantages are…x4
Ensures sales
Ensures deliveries are on time due to control of a raw materials
Ensures quality
Saved profit from cutting out middle man
F+B disadvantages are…x3
Lose focus on core activities
Lack of knowledge and experience
Monopoly of integration- when customers don’t get the best price
Conglomerate means…
Taking over a business which is completely different
Conglomerate advantages are…x4
Overcome seasonal fluctuations meaning sales all year round, helps cash flow
Acquire assets from other business
Increased market share
Spread risk over multiple markets
Conglomerate disadvantages are…x4
Lack of knowledge and experiences in sector
Expertise and resources need to be shared
Lose focus on core activities
Too large to manage
Lateral means…
Taking over a business with a similar theme e.g. weetabix and alpen
Lateral advantages are…x2
Increased market share, increasing customer base
Acquire customers, sales and assets that can be used as businesses compliment each other
Lateral disadvantages are…x2
Expertise and resources need to be shared which affects core activities
Lack of knowledge and experience required to run new business
Organic growth means…
When a business increased the number of products it offers or increased the number of branches/outlets or staff it has
Organic growth advantages are…x3
By expanding e-commerce or outlets it can reach a wider geographical area which increases customer base
Less risky
Can build at what their already good at
Organic growth disadvantages are…x3
Slow method of growth
Hard to build market share if already leader
Growth is dependent on the growth of the overall market
Deintegration/detergent is when…
A business splits into two or more separate businesses
Outsourcing is when…
An external provider is used by a business to complete a selected process. This external provider owns, controls and administrates the processes to a high standard
Outsourcing advantages are…x4
EOS
Business doesn’t have to provide equipment
Saves wages costs as staff aren’t required for that area
Allows org to focus on core activities
Outsourcing disadvantages are…x4
Expensive as specialist staff need to make profit
Long time to complete or late
Might not meet agreed standard
Communication needs to be clear or mistakes can arise
