Slides in this set
Why might a business want to grow?
· To make more money
· To expand their business
· To gain a variety of customers
· To make more money from selling their shares
· To branch out and create a wider range of products
· To increase market share
· To enhance brand recognition
Ways of growing a business...
Internal Growth (Organic Growth)
- Increase products or services
- Increase marketing
- Increasing customers
Sell your business as a Franchise
External Growth (Integration) Joining up with another business.…read more
Merger: This is where two businesses come together and form a brand
new business. A + B = AB
Acquisition: Complete take over. X Y = X
An example of this would be Kraft and Cadbury.
Advantages of Integration:
· Sharing ideas and experience
· Having a higher status within the market
· Can ensure that a firm keeps control of its supplies which would
improve reliability and reduce costs
Disadvantages of Integration:
· Diseconomies of scale are the problems involved with controlling,
communicating and motivating staff on much bigger businesses
· Culture clashes can occur because firms are used to doing things
in different ways
Economies of Scale is the benefits of growing and being a big business.
Diseconomies of Scale are the disadvantages of growing too big.…read more
Disadvantages of Growing too big...
· Make more mistakes
· Motivating staff becomes more difficult
· Communicating with employees becomes harder
Are take over's and mergers good?
Share Holders They will see an increase in the values of their
In the new company the dividends may go up or down.
Employees They will possibly be made redundant.
They will have greater training opportunities.
They will have the possibility of a promotion.
Horizontal Integration: (Acquisition) This occurs when one
business acquires another business at exactly the same stage of the
Vertical Integration: This is where one business buys another at a
different stage in the distribution chain (cycle).
Forward Vertical is where one business buys another that is further
on in the supply chain. E.g. If a shoe manufacturer buys a shoe shop.…read more
Conglomerate is a combination of two or more corporations
engaged in different businesses to make one. They are usually
multi-industry companies which means they sell a variety of
different things. E.g. Virgin.
Businesses growing will affect all the different stakeholders, such as;
Managers better job security, more money, their own reputation.
Shareholders dividend growth, share price to increase.
Employees pay increase, opportunity / new jobs.
Consumers increase in choice and range, price improvements.
The Government increase in tax revenue, stronger economy.
Suppliers / Creditors increase sales and profit.
The local community increase job opportunities.
Owners investment growth.
Innovation Improving a process, product or service.
Going International Expanding sales into other countries.
- Getting location right will greatly improve your chances of
- Getting it wrong will make it harder to achieve your aims and…read more
When a business starts up it is likely that it will only have a few
products, but as it expands this number will increase. Businesses refer to
those products as a portfolio.
The Boston Matrix:
Low High…read more