Risks of External Growth
- Created by: tanja soulsby
- Created on: 02-06-17 12:49
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- Risks of External Growth
- Tensions between staff of merged businesses
- Occurs as they try to establish their status in the new business
- Take time for staff to learn new procedures
- Could lead to poor customer service
- Some parts of the business could need to be sold off / closed
- Additional redundancy costs
- Reduce profitability
- Additional redundancy costs
- Clashes on important issues
- Mergers and joint ventures could have different objectives / cultures
- Inefficiency
- Cause diseconomies of scale
- Extra liabilities
- When one company buys another it takes on all that business' liabilities
- E.g. compensation claims for long-term disabilities suffered by ex-employees
- When one company buys another it takes on all that business' liabilities
- Competition and Markets Authority
- Inspect whether a proposed merger will restrict competition in the market place
- If found to be the case, government can stop merger from taking place
- Finance used to plan merger wasted
- Restrictions could be put in place
- If found to be the case, government can stop merger from taking place
- Inspect whether a proposed merger will restrict competition in the market place
- Limited experience in the industry
- If takeover part of diversification strategy, purchasing business will have limited experience in new industry
- Take time to learn how it works
- Mistakes would reduce profitability
- If takeover part of diversification strategy, purchasing business will have limited experience in new industry
- Risks of expanding overseas
- Different laws
- Different languages
- Different cultures
- Just because growth strategy successful in one country, doesn't mean it will be successful in another
- Tensions between staff of merged businesses
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