First 265 words of the document:
Reasons for growth
Survival They have no choice. Some firms have to grow in order to survive
Economies of scale May be the only way to reduce costs. Lower unit costs
Increased market share More well-known and then you will increase profits and
consumers are more dependant and loyal therefore reducing PED
Managerial reasons More incentives to do well for the higher bonus's
To spread risk If one market fails then your product isn't dead.
Further long term profit maximisation The bigger you are the more profit you can
Mergers and Takeovers
Takeover: One firm buying/owning a controlling share in another firm. This can be done in a
hostile or a friendly way.
Merger: The combining of two firms under one management a merger is normally brought
about by mutual agreement.
Types of Mergers
Horizontal Merger: Firms joining at the same stage of the production process.
E.g. Two different Car manufactures
Backwards vertical merger: A firm merges with a firm closer to the suppliers in a
E.g. Component supplier with a car manufacturer
Forwards vertical merger: A firm merges with a firm closer to the market or consumers in
a production process.
E.g. Car Manufacturer with car rental firm
Diversification: Expanding into different markets.
E.g. Car Manufacturer with a food retailer
Demerger: When a firm splits into two or more separate firms.