UB - Methods of growth

Question 1

Horizontal integration (same type) advantages

Answer 1

• economies of scale
• competition decreased so market share increased
• could raise prices with less competition

Question 2

Horizontal integration (same type) disadvantages

Answer 2

• quality may suffer due to lack of competition

- takeover may breach EU competition rules

Question 3

Methods of organic growth

Answer 3

• launching new product, meet needs of different market segments
• opening new branches, reach new markets
• hiring more staff, make better sales and decisions

Question 4

Backwards and forwards vertical integration advantages

Answer 4

• control quality of supply

- increases profits as cuts out middle man

Question 5

Lateral integration advantages

Answer 5

• target new markets therefore increase sales

- new products complement existing ones

Question 6

Lateral integration disadvantages

Answer 6

• may adversely affect core activities

- lack of knowledge leads to low quality

Question 7

Conglomerate integration advantages

Answer 7

• business can spread risk over different markets
• overcome seasonal fluctuations in their markets
• buyer acquires assets of other company

Question 8

Conglomerate integration disadvantages

Answer 8

• lack of knowledge of market, bad product
• lose focus on core activities
• becomes too large and inefficient to manage

Question 9

Deintegration advantages

Answer 9

• focus on core activities

- increased choice in vertical chain, don’t have to buy from yourself

Question 10

Deintegration disadvantages

Answer 10

• may have to pay marked up prices for supplies

- competitors acquire deintegrated components and control supply chain

Question 11

De-merger advantages

Answer 11

• new component can concentrate on core activities

- divested which meets EU competition laws

Question 12

De-merger disadvantages

Answer 12

• significant costs such as rebranding shop fronts

- customers put off by business entirely

Question 13

Management buy-out/buy-in

Answer 13

• buy-out when management of business buy company they work for
• buy-in is when the management of another business buy it

Question 14

Outsourcing advantages

Answer 14

• concentrate on core activities
• high-quality work from outsourced as greater expertise and equipment
• outsourced cheaper due to economies of scale
• only use when required so no idle staff and machinery

Question 15

Outsourcing disadvantages

Answer 15

• less control over outsourced work so quality may fall
• business have to share sensitive information
• communications must be clear to meet specifications