Unit 5

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How Business Grow

There are two types of growth, internal and external.

Internal growth is when the firm increases its size without the help of any other businesses.

Some methods of internal growth are changing the marketing mix, for example, the firm satrts to use a franchising sytem, thus allowing the business to operate in a wide range of places. Another method is innovation, the successful release of a new invention. Lastly, dveloping a new product which isn't currently available.

External growth  is when a business joins forces with another, in order to hasten business growth.

There are two approaches to business growth, a merger and a takeover. A merger is where two firms agree to join up, it's a voluntary agreement, and both firms keep their names. A takeover is when one business buys another. To gain control of a company you have to have bought enough shares, therefroe meaning you can take over.

Mergers and takeovers can take place when firms join at different stages of production.

Methods of external growth are:- Backward vertical - firm joins with one at a previous stage,                            e.g. a supplier. 

                                                   - Forward vertical - firm joins with one at a later stage, e.g. a customer.

                                                   - Horizontal - firms at the same stage join.

                                                   - Conglomerate - firms with no common business interests join.

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