Growth (c2) Flashcards
What are the 2 types of growth?
Organic growth and External growth.
Describe organic growth
The expansion of a business by selling more of its products, it expands without involving any other business, it invests in itself.
Name ways of how a business could grow organically
Expanding the product range, targeting new markets(e.g abroad), expanding distribution network(more available), benefiting from E.O.S.
Name 2 advantages of organic growth
Less chance of a culture clash as it doesn’t involve other businesses, likely to be cheaper than a merger/takeover however likely that you’ll need to advertise.
Give a disadvantage of organic growth
It is likely to take a long time due to R&D and gradually improving etc.
Describe External growth
When a firm is involved in a takeover or acquisition of another firm, or it merges with another firm.
What is a takeover? Give an example.
The acquisition of one business by another, either on agreed or hostile basis. E.g the Kraft takeover of Cadbury’s which was a hostile takeover.
What is a merger? Give an example.
The process by which two businesses become one, usually with a business of an equal size. An example would be T-mobile and Orange to form EE.
Give 2 advantages of External growth
It’s a quick way of expanding as you are acquiring another business, brings new skills to the table.
Give 2 disadvantages of external growth
There may be cultural challenges(different ways of working), redundancies may need to be made meaning payouts and low job security.
Give 2 advantages of mergers
Access to new markets, E.O.S, shared knowledge
Give 2 disadvantages of mergers
Clash of cultures, diseconomies of scale e.g. communication issues if overseas, redundancies, customers may be angry
Give 2 advantages of takeovers
acquired intangible assets, spreads risk by diversifying, eliminates competition, new skills
Give 2 disadvantages of takeovers
high costs/ problems of valuation, disruption upsets customers and suppliers.
Name 2 reasons for a merger and takeover
Access to new markets (especially overseas), increased market share leading to higher powers in the market.
