Economics 3.1 revision

What is backward vertical integration?
A joining together into one firm of two or more firms where the purchaser mergers with one or more of its suppliers.
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What is conglomerate integration?
A joining together into one firm of two or more firms producing unrelated products.
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What is a demerger?
When a firm splits into two or more independent businesses.
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What is forward vertical integration?
A joining together into one firm of two or more firms where the supllier mergers with one or more of its buyers.
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What is horizontal integration?
A joining together into one firm of two or more firms in the same industry at the same stage of production
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What is a merger?
The joining together of two or more firms under common ownership.
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What is organic (internal growth)
A firm increasing its size through investment in capital equipment or an increased labour force.
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What is synergy?
When two or more activities or firms put together can lead to greater outcomes than the sum of the individual parts.
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What is vertical integration?
A joining together into one firm of two or more firmsat different stages of production stages in the same industry.
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What are the reasons for growth?
1. To exploit economies of scale 2. reduce competition 3. reduce risk
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What are the reasons for remaining small?
1. lack of finance for expansion 2. avoiding diseconomies of scale 3. providing niche products which have a low PED or high YED. 4. offering a more personal service 5. act as local monopolies 6. lifestyle choice
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What are the advantages of vertical integration?
greater control over the supply chain resulting in reducing costs and improving quality, and better access to raw materials
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What are the disadvantages of vertical integration?
different cultures in businesses and diseconomies of scale
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What are the advantages of horizontal integration?
economies of scale, spreading risk, allowing rationalisation, reducing competition
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What are the disadvantages of horizontal integration?
different cultures in businesses and diseconomies of scale
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What are the advantages of conglomerate integration?
reducing risk by operating in different markets and benefiting knowledge from the other market
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What are the disadvantages of conglomerate integration?
The requirement for different skills, not necessarily benefiting from economies of scale, cultural difference.
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What are the constraints on business growth?
size of market/ access to finance/ owners objectives/ regulation
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What are the reasons for demergers?
Lack of synergies/ price/ focussed companies/ worth more seperate
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What is the impact of demergers on workers?
1. possibly more jobs as new roles created 2. possibly redundancies 3. workers may prefer working in small teams
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What is the impact of demergers on the firms?
1. Increase value/ share price 2. More focused/ can specialise 3. greater efficiency which enables firms to survive greater competition in their markets.
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What is the impact of demergers on consumers?
They will gain if the demerged firms become more efficient, cut costs and offer lower prices. More competition= cheaper price, better service
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Other cards in this set

Card 2

Front

What is conglomerate integration?

Back

A joining together into one firm of two or more firms producing unrelated products.

Card 3

Front

What is a demerger?

Back

Preview of the front of card 3

Card 4

Front

What is forward vertical integration?

Back

Preview of the front of card 4

Card 5

Front

What is horizontal integration?

Back

Preview of the front of card 5
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