Size of business

Question 1

External growth

Answer 1

Business expansion achieved by means of merging with or taking over another business, from either the same or a different industry.

Question 2

Merger

Answer 2

An agreement by shareholders and managers of two businesses to bring both firms togetehr under a common board of directrs with shareholders in both businesses owning shares in the newly merged business.

Question 3

Takeover

Answer 3

When a company buys more than 50% of shares of another company and becomes the controlling owner of it-often referred to as acquisition.

Question 4

Synergy

Answer 4

Literally means ‘the whole is greater than the sum of parts’, so in integration it is often assumed that the new, larger business

Question 5

Benefits of Synergy

Answer 5

Business can share research facilities and ideas
Economies of operating a larger scale
Save on marketing and distribution costs

Question 6

why integration fails

Answer 6

Clash of management styles
Redundancies–> decrease motivation
Customers seek alternative suppliers ( fear of monopoly power)

Question 7

Types of External growth

Answer 7

Vertical forward
Vertical backwards
Horizontal integration
Conglomerate

Question 8

Horizontal integration

Answer 8

Integration with firms in the same industry and at the same stage of production

Question 9

Vertical integration

Question 10

Conglomerate intergration

Answer 10

Integration with a business in a different industry