Inorganic growth

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  • Inorganic growth
    • Vertical backward e.g building firm takes over brickworks
      • Offers reliable supply of materials
    • Vertical forward - towards customer e.g farmer buys food shop
      • Offers reliable outlet for products.
    • Diversification - joining two businesses in different industries
      • Spreads risk and one business can make up the loss of another
    • Horizontal integration: joining two businesses in the same industry and stage of production
      • Benefits: Increase in market share
      • Reduces competition
      • Take advantage of economies of scale
    • Disadvantages
      • Expensive to take over another business. Loans and shares usually  needed.
      • Vertical and diversification can cause management problems as a lack of experience.
      • Problems managing and controlling a larger business

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