3.2 Business Growth

What are the objectives of growth?
To achieve economies of scale, increased market power over customers and suppliers, increased market share and brand recognition, increased profitability
1 of 12
What problems can arise from growth?
Diseconomies of scale, internal communication can suffer, overtrading
2 of 12
What are the main reason for mergers and takeovers?
Growth, cost synergies (output will rise/can bulk buy), diversification (can enter new markets reducing risk, more market power
3 of 12
What is the difference between a merger and a takeover?
A merger occurs when two businesses come together and may split ownership 50/50. A takeover is where one company buys out another
4 of 12
What is vertical integration?
Occurs when one firm takes over or merges with another at a different stage in the production process
5 of 12
What is horizontal integration?
Occurs when one firm buys out another in the same industry at the same stage of the supply chain
6 of 12
What are the financial risks and rewards of takeovers?
They rely heavily on debts so if doing well, the high debt levels boost the profits made. But if there is an economic downturn trading losses can ruin a business
7 of 12
What are the problems of rapid growth?
Managers are now less available, risk of staff leaving, staff focused more on internal disputes than customers
8 of 12
What is the distinction between inorganic and organic growth?
Organic growth comes from within the business, inorganic does not
9 of 12
What are the advantages of organic growth?
keeps it personal, minimises financial risk, provides a secure career path
10 of 12
What are the disadvantages of organic growth?
Ambitious staff may leave if company becomes focused on sales, difficulty of getting scale to match your competitors (they grow quicker than you), many products have a short life cycle (important to make as much cash as possible
11 of 12
How can a small business survive?
Product differentiation, flexibility in responding to customer needs, good customer service, e-commerce
12 of 12

Other cards in this set

Card 2

Front

What problems can arise from growth?

Back

Diseconomies of scale, internal communication can suffer, overtrading

Card 3

Front

What are the main reason for mergers and takeovers?

Back

Preview of the front of card 3

Card 4

Front

What is the difference between a merger and a takeover?

Back

Preview of the front of card 4

Card 5

Front

What is vertical integration?

Back

Preview of the front of card 5
View more cards

Comments

No comments have yet been made

Similar Business Studies resources:

See all Business Studies resources »See all Business Plans resources »