Growth of Firms - External Expansion

Question 1

Name the four basic ways a firm can merge with or take over another firm

Answer 1

Supplier - joins with - allows firm to control supply, cost and quality
Competitor - joins with - more economies of scale and bigger market share - able to compete with more
Customer - takes over - greater access to customer, easier to sell products
Unrelated firm - joins with - expand by diversifying with new markets, reduces risk

Question 2

Problems with merges and takeovers

Answer 2

Less than half of them are successful - difficult for them to work as one - different management styles
Create a bad feeling - takeover bid is hostile and unpopular
Often lead to cost-cutting - making lots of people redundant - lead to tension and uncertain employees

Question 3

Growth through franchising

Answer 3

Good way of increasing brand awareness

Achieve greater economies of scale