Organic and Inorganic Growth Flashcards
Business size/growth
business size is usually measure by revenue, market share, number of employees or assets.
One objective of growth is
can be to increase profitability which in turn can increase profits
What does having a big market share mean
means that a business has more influence over the market which it can be used to control prices for its customers and suppliers (higher market power)
Economies of scale internal and external
this happens when industries are concentrated in small geographical areas
Mergers
These are when two businesses join together to form one business. might keep name of one business and change the other one
Takeovers
are when one business buys enough shares in another so that it has more than 50% of total shares. this is called controlling interest
Inorganic growth (Horizontal integration)
Happens when a business combines with another business in the same industry at the same stage of the production process
Inorganic growth (Vertical integration)
Occurs when a business combines with another business in the same industry but at a different stage of the production process
Organic Growth
AD and DIS
Expansion from within a business is known as organic growth and doesn’t involve any other businesses
AD - Can maintian current management style culture and ethics of the business
- its easy fir the business ti manage organic growth and control how much the business will grow
DIS - it can take a long time for a business to grow organically and can take a long time for the business to adapt to big change
- market size isnt affected by organic growth. if market isnt growing then they are restricted to increase the market share
What can business do in organic growth
they can grow organically and are often able to finance their growth by reinvesting profits into the business
Businesses may chose to stay small because of …
Product differentiation
- a business that makes a highly differentiated product may find it hard for the business to grow. this is because they could lose USP(unique selling point) and not suited to mass production
Flexibility to responding to customer needs
- small business able to respond to customer needs more easily
- this is because the business is small, communication between staff and customers can be quick and easy
Customer service
- small business more easily to be run by the original owner which might result in a more personal and higher quality customer service experience
- remaining small will mean that the original owner is close contact with all their staff which helps them to ensure that the business i always working towards its corporate aims
