Methods Of Growth

Question 1

Horizontal integration

Answer 1

This is combining of two firms operations at the same stage of production, e.g. Tesco and Asda

Reasons for;
Eliminate competition and increase market share
Acquire assets of other firm
Become stronger

Question 2

Vertical integration

Answer 2

This is the joining together of firms operation at different stages of productions

Backward - this is when a firm takes over another at an EARLIER stage of production - e.g. Jam company taking over a fruit farm

Forward - this is when a firm takes over another at a LATER stage of production. E.g. An Oil company taking over a petrol station

Question 3

Diversification integration

Answer 3

This is when firms in completely different markets join together e.g. A airline company takes over a chain of fast food

This allows;
The company to spread the risk
Overcome seasonal fluctuations

Question 4

De merger

Answer 4

This is when two company’s joined together and then decided it doesn’t work then, become there own company again

Question 5

Divestment

Answer 5

This involves selling off of one or more subsidiary company’s e.g. When British aero space sold rover to BMW

Question 6

Asset stripping

Answer 6

This is when you buy another another business and then selling of the profitable parts of the business

Question 7

Contracting/outsourcing

Answer 7

A business hires another business to carry out an activity e.g. Cleaning or cooking at schools