Ways to Achieve Growth Flashcards
What are the 5 ways of achieving growth?
Takeovers
Mergers
Franchising
Becoming a multinational
Internal growth e.g. new staff, new products
What’s a takeover?
A takeover involves one business (usually a larger business) buying another (usually smaller) business.
What are the advantages of a takeover?
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.W
What are the disadvantages of a takeover?
Integration can lead to 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.
What’s a merger?
A merger involves two businesses agreeing to join forces and become one organisation.
What are the advantages of a merger?
Market share and resources are shared, which can spread risk of failure and increase profits.
Economies of scale can be achieved.
Each can bring different areas of expertise to the merger.
Unlike a takeover, jobs are more likely to be spared in both businesses.
Can overcome barriers to entering a market, such as strong competition.
What are the disadvantages of a merger?
Customers may dislike the changes a merger may bring e.g. new logo, new name etc as the familiarity of the previous businesses are lost.
Marketing campaigns to inform customers of changes can be expensive.
Can be bad for customers as less competition will mean higher prices.
