UB - Growth

Question 1

What is organic growth?

Answer 1

When a business grows from its own internally generate resources

Question 2

Advantages of organic growth (3)

Answer 2

Less risky than taking over other businesses
Can be financed through internal funds
Builds on a business’ strengths

Question 3

Disadvantages of organic growth (2)

Answer 3

Growth may be dependent on the market

Slower method of growth - shareholders prefer fast methods

Question 4

What is horizontal integration?

Answer 4

When 2 businesses producing the same product or service combine together

Question 5

Advantages of horizontal integration (4)

Answer 5

Can help the business dominate the market
Can help the business become stronger and more resistant to takeovers
Business can now take advantage of economies of scale
Higher prices can be charged if competition is reduced

Question 6

Disadvantages of horizontal integration (3)

Answer 6

The business can become too big and too difficult to manage
Communication and coordination can become an issue
Some staff may become redundant

Question 7

What is forward vertical integration?

Answer 7

When a business takes over a business it’s customer

Question 8

Forward vertical integration advantages(3)

Answer 8

Business can control marketing, supply and distribution of their product
Already existing place for them to sell their product
Increased profits

Question 9

Disadvantages of forwards vertical integration (1)

Answer 9

Increased costs of business is unable to manage the new business effectively

Question 10

What is backwards vertical integration?

Answer 10

When a business takes over its supplier

Question 11

Advantages of backwards vertical integration (3)

Answer 11

More control of quality, price and availability of raw materials
Guaranteed supply and prices of raw materials
Allows the business to control the supply chain

Question 12

Disadvantages of backwards vertical integration (1)

Answer 12

Higher costs if the business is unable to effectively manage the new business

Question 13

What is conglomerate integration (diversification)?

Answer 13

When a businesses operating in different markets merge together or one takes over the other

Question 14

Advantages of conglomerate integration (3)

Answer 14

Reduces chance of business failure as product portfolio is increased
Makes a larger more financially secure business
Breaking into new markets is easier

Question 15

Disadvantages of conglomerate integration (2)

Answer 15

Requires significant financial and Human Resources

Question 16

What is a merger?

Answer 16

When two businesses join together to make one on equal terms

Question 17

Advantages of a merger (4)

Answer 17

Reduces risk of business failure and increases market share
Makes the business larger and more financially secure
Decreases competition in the market
Merged companies can share business experiences and ideas

Question 18

Disadvantages of a merger (4)

Answer 18

Requires a significant amount of financial and Human Resources
Risk that the main business will be harmed
Conflict between objectives can occur

Question 19

What is a takeover

Answer 19

When one large firm takes over another smaller firm so the smaller one is lost completely

Question 20

Advantages of a takeover (4)

Answer 20

Reduces risk of business failure
Makes business larger and more financially secure
Increased brand awareness as the business expands
Eliminates competition

Question 21

Disadvantages of takeover (4)

Answer 21

Requires significant financial and Human Resources
Risk of harming the main business
Business can become harder to control
More decision making and more risks

Question 22

What is a de-merger?

Answer 22

When a business splits into two separate organisations