3.9 revision

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  • Created by: 1234am
  • Created on: 07-01-21 23:58
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  • types of intergration
    • forward
      • This involves acquiring a business further up in the supply chain
    • vertical - conglomerate
      • This involves the combination of firms that are involved in unrelated business activities
    • horizontal
      • businesses in the same industry and which operate at the same stage of the production process are combined
    • REVISION
      • retrenchment
        • Retrenchment is a term used to describe when a business decides to significantly cut or scale-back its activities.
          • - Reduce output & capacity          - Job losses / redundancy programmes  - Product / market withdrawal     - Disposal of business unit - Scaling back planned capital investment
            • causes...        - new leadership      - high cost/low profits              - low ROCE    - high gearing           - a failed takeover or merger
      • organic growth
        • Organic (or internal) growth involves expansion from within a business
          • involves strategies such as...       - Developing new product ranges           - Launching existing products directly into new international markets        -  Investing in additional production capacity or new technology
          • beneifts...        - less risk than extrenal  - sensible rate of growth        - builds on strengths
          • risks...              - hard to build market share              - slow growth   - franchises can be hard to manage
      • takeovers
        • reasons for...    - increase market share   - acquire new skills                - access economies of scale                - eliminate competition
        • positives over organic growth...          - existing products are in later stages of life cycle      - business lacks expertise         - growth is priority
        • risks...              - high cost       - problems of valuation          - upset customers/ suppliers          - problems of intergration
      • merges
        • A merger is a combination of two previously separate firms which is achieved by forming a completely new business into which the two original firms are integrated.
          • a new company is formed - and the shares in the new company are distributed to the shareholders of the two original businesses in a suitable split.
      • joint ventures
        • A joint venture (JV) is a separate business entity created by two or more parties, involving shared ownership, returns and risks
        • benefits...         - expertise and resources        - reduces the risk of a growth strategy
          • risks...              - clash of cultures           - objectives may change    - could fail
    • backward
      • This involves acquiring a business operating earlier in the supply chain
  • vertical - conglomerate
    • This involves the combination of firms that are involved in unrelated business activities

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