Methods of growth- UB

Question 1

When a business grows what 2 big advantages does it gain?

Answer 1

They can have more influence over the market price and can often enjoy economies of scale.

Question 2

Describe economies of scale.

Answer 2

Can bulk buy more cheaply and reducing unit costs.

Question 3

What is Organic Growth?

Answer 3

When a business grows naturally.

Question 4

Give 2 ways organic growth can be achieved.

Answer 4

Hiring more staff and opening new stores.

Question 5

Give 2 advantages to organic growth.

Answer 5

There will be no loss of control as no outsiders are involved and hiring more staff will bring new ideas.

Question 6

Give 2 disadvantages to organic growth.

Answer 6

Can be a slow method of growth and Restricted by the amount of finance available.

Question 7

What is horizontal integration?

Answer 7

It is when 2 companies at the same stage f the production process merge or take over each other.

Question 8

Give an example of horizontal integration.

Answer 8

If 2 car manufacturers like Ford and Toyota merged together.

Question 9

Give 2 advantages of horizontal integration.

Answer 9

Removes competitor from the market and business gains a greater market.

Question 10

Give 2 disadvantages of horizontal integration.

Answer 10

Hostility and job losses may occur and it can be expensive to buy another company.

Question 11

What are the 2 types of verticle integration?

Answer 11

Forward verticle and backward verticle integration.

Question 12

What is forward verticle integration?

Answer 12

When a business takes over a company later on in the production stage

Question 13

Give 2 advantages to forward verticle integration.

Answer 13

Cuts out the middle man leading to increased profits and more control over pricing and product display.

Question 14

Give a disadvantage to forward verticle integration.

Answer 14

Entering new markets may affect core activities.

Question 15

What is backward verticle integration?

Answer 15

When a business takes over a company earlier on in the production stage.

Question 16

Give 2 advantages to backward verticle integration.

Answer 16

Can limit supplies to competitors and cuts out the middle man leading to increased profits.

Question 17

Give a disadvantage to backward vertical integration.

Answer 17

May affect core activities.

Question 18

Give an example of forward verticle integration.

Answer 18

Ford merging with car showroom like Arnold Clark.

Question 19

Give an example of backward verticle integration.

Answer 19

Ford merging with a major automobile supplier. companies that supply glass for windows or the rubber for tires.

Question 20

What is diversification?

Answer 20

When a firm moves into a new market, different from its core business.

Question 21

What is conglomerate integration?

Answer 21

When a business moves into an entirely different market.

Question 22

Give an example of conglomerate integration.

Answer 22

A supermarket merging with a bank.

Question 23

What is Lateral integration?

Answer 23

When a business moves into a different market but within a related industry.

Question 24

Give an example of lateral integration.

Answer 24

Hairdressers merging with a beauty therapist.

Question 25

Give 2 advantages of diversification.

Answer 25

Spreads the risk across different markets and Targets new markets increasing customer base.

Question 26

Give 2 disadvantages of diversification.

Answer 26

Entering new markets may affect core activities and may not have the knowledge required to run the newly acquired business.

Question 27

Name 5 ways a business can achieve growth.

Answer 27

Merger, takeover, franchising, increasing staff and advertising.

Question 28

Explain outsourcing.

Answer 28

When a company hires another business to do the work for them.

Question 29

Explain buy-out.

Answer 29

When the manager or employees who are currently employed by the business from the owners.

Question 30

Explain buy-in.

Answer 30

When managers who are not employed by the company purchase the business and believe that they can run it more profitably.

Question 31

Explain demerger.

Answer 31

Occurs when a firm divides or breaks into more than one company.

Question 32

Explain deintegration.

Answer 32

Involves selling off part of the company that was previously integrated.

Question 33

Explain Divestment.

Answer 33

When a company sells off an asset to raise finance.