HOW TO EXPAND

Internal 'Organic growth'

• safe
• slow
• finance is likely to come from retained profit as the business invests in additional facilitites
• development into new markers with the existing brand and the induction of new staff into John lewis culture
• wothout the problems associated with taking over another busiess
• no need to change brand image
• no need to change company culture

Growth

• the fastest way to achieve significant growth and to gain access to foreign markets

Cost Synergies

• 2+2=5 the whole is greated than the sum of parts, typcial benefits = bulk buying

Marker Power

• combined firm = higher marker share, competition is reduce = higher profit

Diversifaction

• entering different market to spread risk,with known brand saves time and money
• alread with established brand image

Vertical

• at different stages of the same production process Backwards: towards the supplier, gaining secuirty of supply. Forwards: towards the customers - gaining control over market

Horizontal

• at same stage of the same production process
• cutting cost to elimiate duplication of resources
• economies of scale facilitiates expansion
• reduction in comeptition

Conglomerate

• firms which have no clear connection with each otherl may join for diversifaction or asset *********

• sometimes firms realise they have growth to large to be controleld effctively; diseconomies of scale

• there is also growing sceptism of the benefits; 70:30 rule

• takeovers are often finances by loans and they firm may seek to reduce interest chargers by selling off assets

• firms may simply decide to refocus on their core activities

Venture capitalist

• in recent years over half money spent on takeover have been funded by private equity firms
• these are management groups backed by bank loans
• about 90% gearing usualy
• they take over companies and are sometimes accused for asset *********

• if it goes well the few shareholders make HIGH profit
• if it goes bad staff are made reduncant and they go in to liquidation and the loan is not repaid back

• MARKET PENETRATION
• MARKET DEVELOPMENT
• PRODUCT DEVELOPMENT
• DIVERSIFATION

Risk increases down the list

It is usefull to assess risk using the matric

• Company leaders frequently claim enormouse benefits from proposed megers
• 'synergies leading to better services/lower prices'
• 'creation of a world leading brand'

In reality

• factor closures
• elimination of small niche brands
• poor service

The higher the failure rate suggests that the real reasons for some takeovers may be arrogance, personal ambition, gree

The main problems

• integrating different business cultures
• expanding into new markers/products which the managers have little knowledge of