Growth And Survival Of Firms Flashcards
Q: Why do small firms exist in markets where large firms are also present?
A:
Some markets are too small for big firms
Small firms involve specialist skills
Service industries are generally small firms
Develop market niches
Big firms of tomorrow
Entrepreneurs sometimes want their business to stay small
Large firms sometimes like to contract out some peripheral tasks
Increased access to technology
Small firms tend to be very innovative
Q: What are the two types of growth for firms?
Internal Growth - profit put back into the company
External Growth - involves takeovers and mergers
Q: What is Horizontal Integration?
A:
Horizontal Integration achieves economies of scale and involves firms at the same stage of production
Q: What is Vertical Integration?
A:
Vertical Integration offers firms the chance to capture the profit margins at the other stages of production.
Q: What are Mergers and Acquisitions (M&A)?
A:
M&A is a general term used to refer to the consolidation of companies. A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which no new company is formed.
Q: What is a cartel?
A:
A cartel is an agreement between competing firms to control prices or exclude entry of a new competitor in a market. Example: Organization of the Petroleum Exporting Countries (OPEC).
Q: Why might firms set up overseas?
Firms may set up overseas to protect against a downturn in the domestic economy.
