Methods of growth

Question 1

Internal growth examples

Answer 1

new employees
purchase new machinery
open new stores/retail outlets
expand product range

Question 2

advantages to internal growth

Answer 2

less risky than being bought over by other businesses
financed by own funds
building upon existing strengths

Question 3

Disadvantages of internal growth

Answer 3

slow method of growth
dependant on increased demand

Question 4

External growth examples

Answer 4

merger/ takeover

Question 5

What is a merger

Answer 5

2 or more businesses join together on equal terms

Question 6

what is a takeover

Answer 6

when a business buys over another business
can be friendly or unfiendly
a business loses its identity

Question 7

What is horizontal integration

Answer 7

When a company takes over or merges with another organisation that is at the same stage of production

Question 8

What are the advantages of horixontal integrational

Answer 8

more profit/sales/market share
economies of scale
reduce competition
acquire the firms assets
to become stronger and reduce chance of takeover

Question 9

Disadvantages of horizontal integration

Answer 9

diseconomies of scale
become too large that your business becomes difficult to manage

Question 10

What is backward vertical integration

Answer 10

When a company merges or takes over with another business at the previous stage of production

Question 11

What are the advantages of backward vertical integration

Answer 11

cheaper supplies
more control of supplier
guaranateed stock
no middle man- so increased profit

Question 12

Describe forward vertical integration

Answer 12

When a company merges or takesover with another business which is at the next stage of production

Question 13

What are the advantages of forward vertical integration

Answer 13

no middle man - so increased profit
more control over distribution

Question 14

Describe conglomerate of diversification

Answer 14

when a business merges or takesover with an organisation which operates in a different market

Question 15

What are the advanatges of conglomerate of diversification

Question 16

What are the disadvantages of conglomerate of diversification

Question 17

Describe lateral

Answer 17

When a business merges of takes over with an organisation which operates in a related industry

Question 18

Describe the advanatges of lateral

Question 19

Describe the disadvantages of lateral

Question 20

Describe a demerger

Answer 20

splitting 1 firm into 2 seperate firms
- concentrate on businesses core activity

Question 21

Describe a deintegration

Answer 21

selling non profitable/ minor areas
- concentrate on businesses core activity

Question 22

Describe a divestment

Answer 22

when a business sells some of its assets to another company
- raise finance which is reinvested into the business

Question 23

Describe asset stripping

Answer 23

buying and business and selling it off bit by bit
- the parts whihc are making a loss are closed down

Question 24

Describe management buy out

Answer 24

when current managers buy the business from its current owners

Question 25

describe management buy in

Answer 25

when managers form outside the company buy it from its current owners

Question 26

Describe outsourcing

Answer 26

Hiring another company to perform your non core activities rather than doing them yourself

Question 27

Describe the advantages of outsourcing

Answer 27

You can concentrate on your core activities
less equipment and labour required
outsourced staff should have greater expertise
only use them when required
more efficient and therefore cheaper than doing the activity yourself

Question 28

Describe the disadvantages of outsourcing

Answer 28

difficult to keep confidential infomration confidential
less control over the work
employees often unsure of loyalty