Growths

Question 1

Internal growth

Answer 1

When a business expands its existing operations, new products, new stores

Question 2

External growth

Answer 2

When a business expands by combining with another business, (mergers and takeovers)

Question 3

Internal advantages

Answer 3

100% controlled
Less risk
Builds up the business name

Question 4

Internal disadvantages

Answer 4

Slower
Limited growth
More competiton

Question 5

External advantages

Answer 5

Reduced competition
Diversify
Rapid expansion

Question 6

External Disadvantages

Answer 6

Complicated
Very risky
Not in 100% of control
Demotivated employees argurements

Question 7

Why would a business want to grow

Answer 7

More money and profit
To help their customers
Increase market share
Survival
To benefit of economics of scale

Question 8

Types of external growth and their definitions

Answer 8

Mergers, is when owners from different business decided to combine together
Takeovers, is when one business buys the other business
Horizontal integration, is when one business merges with another business in the same industry
Vertical integration, is when one business merges with another business in the same production line (can be forward or backwards)
Diversification, when a business merges/takeovers a business in a completely different industry

Question 9

Benefits for horizontal and vertical integration forward and backward)

Answer 9

Horizontal
- reduces competitors in the industry
- opportunities for economies of scale
- increased market share

Vertical (forward)
- can set any price it wants (doesn’t have to charge higher prices)
- easier to gather information from the customers
- the retailer cant sell competing products

Vertical (backward)
- guarantee supply of goods
- supplier cant sell to other competing businesses
- cost of components can now be controlled

Question 10

Disadvantages to business growth

Answer 10

Larger business are more difficult to control
Poor communication
Expansion costs is too high the business doesn’t have enough money to sustain itself
Integrating with a another business is difficult as they might have a different work culture

Question 11

Why do business want to remain small

Answer 11

The owners objectives
The type of industry the business operates in
The market size