Ways to Achieve Growth

Question 1

What are Takeovers?

Answer 1

A takeover involves one business (usually larger business)buying another (usually smaller) business.

This can often be hostile and comes as a result of the smaller business struggling financially and the larger business exploiting the situation.

Question 2

What are advantages of Takeovers?

Answer 2

• The buying business gains the market share and resources of the taken-over business.
• Risk of failure can be spread.
• Economies of scale can be achieved.
• Competition is reduced, which will increase sales.

Question 3

What are disadvantages of Takeovers?

Answer 3

• Integration can to lead job losses in the taken-over business as the buying business wants its own management and employees.
• If the buying business moves the headquarters or production to its home country/area, this can have a bad effect on the taken-over business’s local economy.
• Integration can be bad for customers as less competition means higher prices.
• A change of name can put off loyal customers of the taken-over business.
• It can be expensive to acquire another business.

Question 4

What are Mergers?

Answer 4

A merger involves two business agreeing to join forces and become one organisation.

This is often friendlier than a takeover and can result in new name and logo for the new, merged organisation.

Question 5

What are advantages of mergers?

Answer 5

• Market share and resoirces are shared, which can spread risk of failure and increase profits.
• Economies of scale can be achieved.
• Each business can bring different areas of expertise to the merger.
• Unlike a takeover, jobs are more likely to be spared in bother businesses.
• Can overcome barriers to entering a market, such as strong competition.

Question 6

What are disadvantages of Mergers?

Answer 6

• Customers may dislike the changes a merger may bring e.g. new logo, new name etc… as the familiarity of the previous business are lost.
• Marketing campaigns to inform customers of changes can be expensive.
• Can be bad for customers as less competition will mean higher prices.

Question 7

What are other ways of achieving growth?

Answer 7

• Franchising
• Becoming a multinational
• Internal Growth, e.g. new staff, new products.