Growth and Outsourcing

Question 1

Merger means…

Answer 1

When two businesses join together, each have a share in the others business which means it’s mutually beneficial

Question 2

Integration means…

Answer 2

Growth which occurs externally from the business

Question 3

Takeover means…

Answer 3

A forced often hostile deal when a business buys a share in another business

Question 4

Horizontal means…

Answer 4

When two business who sell the same product or service join together

Question 5

Horizontal advantages are…x4

Answer 5

Reduces competition
Increases market share/market leader
All customers and sales from other business gained
EOS

Question 6

Horizontal disadvantages are…x3

Answer 6

CMA could get involved if customers aren’t getting best price
Quality may suffer do the lack of competition
Higher prices charged to customers

Question 7

Backwards vertical means…

Answer 7

Taking over the stage before your business e.g. costs coffee taking over a coffee plantation

Question 8

Forwards vertical means…

Answer 8

Taking over the stage after your business e.g. Jean manufacturer taking over a jeans shop

Question 9

F+B advantages are…x4

Answer 9

Ensures sales
Ensures deliveries are on time due to control of a raw materials
Ensures quality
Saved profit from cutting out middle man

Question 10

F+B disadvantages are…x3

Answer 10

Lose focus on core activities
Lack of knowledge and experience
Monopoly of integration- when customers don’t get the best price

Question 11

Conglomerate means…

Answer 11

Taking over a business which is completely different

Question 12

Conglomerate advantages are…x4

Answer 12

Overcome seasonal fluctuations meaning sales all year round, helps cash flow
Acquire assets from other business
Increased market share
Spread risk over multiple markets

Question 13

Conglomerate disadvantages are…x4

Answer 13

Lack of knowledge and experiences in sector
Expertise and resources need to be shared
Lose focus on core activities
Too large to manage

Question 14

Lateral means…

Answer 14

Taking over a business with a similar theme e.g. weetabix and alpen

Question 15

Lateral advantages are…x2

Answer 15

Increased market share, increasing customer base
Acquire customers, sales and assets that can be used as businesses compliment each other

Question 16

Lateral disadvantages are…x2

Answer 16

Expertise and resources need to be shared which affects core activities
Lack of knowledge and experience required to run new business

Question 17

Organic growth means…

Answer 17

When a business increased the number of products it offers or increased the number of branches/outlets or staff it has

Question 18

Organic growth advantages are…x3

Answer 18

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

Question 19

Organic growth disadvantages are…x3

Answer 19

Slow method of growth
Hard to build market share if already leader
Growth is dependent on the growth of the overall market

Question 20

Deintegration/detergent is when…

Answer 20

A business splits into two or more separate businesses

Question 21

Outsourcing is when…

Answer 21

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

Question 22

Outsourcing advantages are…x4

Answer 22

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

Question 23

Outsourcing disadvantages are…x4

Answer 23

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