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Business Studies
Unit 2 ­ Expanding a business…read more

Slide 2

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Business Growth…read more

Slide 3

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Internal (organic) Growth
· Expansion within the business
e.g. Opening a new branch
Pro's Con's
Bigger market share Harder to offer good customer service
Spread risk Less control
Economies of scale More stress/workload
More customers More risk (more money to lose)
More well respected ­ suppliers respect
more = trade credit
Easier to get loans from bank
Customers trust business so will pay more
Predator pricing can be used…read more

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Why organically grow?
· Slow and steady
· Easier to manage
· Less risk
· Finance growth from profits
· Too slow
· Less market share
· No benefits of integration…read more

Slide 5

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External (inorganic) Growth
· Achieved by a merger or takeover
Vertical backward: joining
two businesses in the same
Diversification: joining
Diversification: `D' ­ industry but different stages
two businesses in
different. of production towards the
different industries. E.g.
Horizontal: straight supplier. E.g. Building firm
An insurance company
line ­ same and brick works
with a bakers.
Vertical backward:
`backward' going
backwards in the stage Horizontal: joining two
of production. businesses in the same
Vertical forward: going industry and stage of
forward in the stage of production. E.g. Two
production. hairdressing businesses.
Vertical forward: two businesses in the
same industry but different stages of
production towards the customer. E.g.
Farmer buying a food shop.…read more

Slide 6

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· Horizontal ­ more market share, less
competition, economies of scale more likely
· Vertical ­ reliable suppliers/outlays for
· Diversification ­ spreads risk over many
· (General) ­ expensive and so may require
loan, harder to control larger business.
· (vertical + diversification) ­ employees lack
experience of new markets…read more

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Slide 10

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Maira Jay


Very helpful

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