Company growth
- Created by: Fi Alade
- Created on: 31-03-14 11:53
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- Company growth
- Horizontal Integration
- merger between two firms at the same stage of production in the same industry
- e.g. Orange and T-Mobile Sep 2009 & Lloyds TSB and Halifax Bank of Scotland (HBOS) in Jan 2009
- Vertical Integration
- Backward
- When a firm takes over a business at the previous stage of production in the same industry
- when a purchaser merges with one of its suppliers e.g. a car manufacturer buying a tyre manufacturer
- Forward
- When a firm takes over a business at the next stage of production in the same industry
- i.e. a supplier merging with one of its buyers e.g. a newspaper buying newsagents or car manufacturer buying a car dealership
- Backward
- Conglomerate Intergration
- When firms producing unrelated goods/services merge
- e.g. a bank merges with a car manufacturer, a clothing chain merges with a supermarket
- Reasons for growth
- economies of scale
- increase market share/control
- risk reduction (especially conglomerate) increase power against takeover and economic downturn
- profit increase (price setting, sales increase, lower costs of production)
- satisfy managerial ambitions
- legacy, salary, bonuses
- redirect profit into investment in another business (corp. tax avoidance)
- use expertise of other firm to branch out
- cheaper than internal growth and building from scratch
- asset *********
- companies with high asset value but low stock market prices; e.g. inefficient management, bought and sold in parts
- Horizontal Integration
- e.g. Orange and T-Mobile Sep 2009 & Lloyds TSB and Halifax Bank of Scotland (HBOS) in Jan 2009
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