Methods of Development

Question 1

Organic growth

Answer 1

~ expansion without taking over other firms

~ useful method in growing market w/ opportunities

Question 2

Benefits of organic growth

Answer 2

~ better understanding of market
~ same mgt and corporate culture
~ less disruption
~ steady growth

Question 3

Synergy

Answer 3

benefits gained from two or more businesses combining

Question 4

Motives of acquisitions

Answer 4

~ marketing advantages
~ production advantages e.g. EoS
~ finance and mgt
~ risk-spreading
~ retain independence
~ overcome barriers to entry
~ outplay rivals

Question 5

Proc and cons of joint ventures/strategic alliances

Answer 5

\+ similar to M&A
\+ share costs and risk
- similar cons to M&A
- share rewards
- break up risk (IP)
~ best for risky ventures where it is preferable to share risk

Question 6

Strategic alliances

Answer 6

looser contractual arrangement than a JV + no separate company is formed

Question 7

Benefits of strategic alliances

Answer 7

~ sharing development costs

~ regulatory environment prohibits takeover

Question 8

Limitations of strategic alliances

Answer 8

~ lost flexibility
~ dependency and associated risk
~ may not create new competences

Question 9

Franchising mechanism

Answer 9

1. grants a licence to the franchisee
2. franchisee pays for rights and support services
3. franchisee responsible for running day to day

Question 10

Benefits and limitations of franchise/licence

Answer 10

\+ easy revenue
\+ minimum investment
\+ lower risk (expand)
- some brand risk
- management risks

Question 11

Licensing agreement

Answer 11

a licence grants a 3rd-party organisation the rights to exploit as asset belonging to a licensor
e.g. brand, receipts, patent, asset (e.g. movie)

Question 12

Merger/Acquisitions pros and cons

Answer 12

\+ eliminate competition
\+ synergy
\+ quick access
- can be very costly
- culture clash
- business disruption
~ saturated markets = difficult to keep growing