managing change

a2 unit 4 business

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AQA A2 BUSINESS STUDIES UNIT 4

MANAGING CHANGE

EXTERNAL CAUSES OF CHANGE:

Internal or organic growth is when a firm expands its existing capacity or the range of activities, for example the building of new factories from its own resources.

external growth is the intergration of 2 or more firms which can be a merger or a takeover.

a merger is when 2 or more firms agree to come together under one board of directors.

a takeover is also know as a (acquisition) this is where one firm take control of the other for example larger firms buying smaller firms eg. kraft bought Cadburys.

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INTERNAL GROWTH:

IS WHEN A FIRM GETS BIGGER BY SELLING MORE OF ITS PRODUCTS, THIS IS ORGANIC GROWTH AND TENDS TO BE MORE GRADUAL.

GROWING THROUGH INCREASING ITS TRADING IS SLOWER AS IT TAKES TIME TO PENETRATE THE MARKET AND INCREASE SALES.

IT IS LESS PROBLEMATIC AND DESTABILISING THAN SUDDEN CHANGE.

INTERNAL GROWTH MAY ALSO NOT SUIT SOME MARKETS,IF ITS A NEW MARKET WHERE GETTING MARKET SHARE IS THE MOST IMPORTANT THING INTERNAL GROWTH IS SLOWER THAN EXTERNAL. 

WHEREAS EXTERNAL GROWTH TENDS TO BE MORE SUDDEN .

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WHY MERGE OR TAKEOVER   (EXTERNAL GROWTH)

GROWTH:

  • FASTEST WAY TO GROW 
  • ECONOMIES OF SCALE
  • SYNERGY 1+1=3

DIVERSIFICATION:

  • SPREADS THE RISK 
  • DIFFERENT MARKETS TO REDUCE DEPENDENCE 
  • MANAGING SAVES TIME AND GIVES EXPERTISE AND PRODUCTS IN NEW MARKETS.

MARKET POWER:

  • ABILITY TO DOMINATE A MARKET
  • GOVERNMENT INTERVENES IN THE INTEREST OF CONSUMERS THROUGH COMPETITION COMMISSIONS CAN INVESTIGATE  FIRMS WITH MORE THAN 25% MARKET SHARE.

ASSET STRIPPING:

  • WHERE THE ASSETS ARE UNDERVALUED THEY ARE BOUGHT AND THEN SOLD OFF GOODS FOR CASH FLOW - UNPOPULAR WITH THE STAFF.

DE MERGER:  WHERE A LARGER COMPANY SELLS OF A PART  OF ITS BUSINESS. 1+1=2 (BUSINESS SPLITS INTO 2)

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