1.3 growth

Question 1

why wud you want to expand?

Answer 1

• higher profit
• more status
• lower avg cost -economies of scale
• more market sahre

Question 2

internal growth

Answer 2

This occurs when a business expands its existing operations.

This is a slow means of growth but easier to manage than external growth.

Question 3

external growth

Answer 3

This is when a business takes over or merges with another business. It is sometimes called integration as one firm is ‘integrated’ into the other.

Question 4

merger

Answer 4

A merger is when the owner of two businesses agree to join their firms together to make one business.

Question 5

takeover

Answer 5

A takeover occurs when one business buys out the owners of another business , which then becomes a part of the ‘predator’ business.

Question 6

horizontal merger

Answer 6

when one firm merges with or takes over another one in the same industry at the same stage of production.
adv:
-reduces number of competitors
-economies of scale
-bigger share of market

Question 7

vertical merger

Answer 7

when one firm merges with or takes over another firm in the same industry but at a different stage of production

Question 8

forward vertical merger

Answer 8

When one firm merges with or takes over another firm in the same industry but at a stage of production that is ahead of the ‘predator’ firm.
adv:
-Merger gives assured outlet for their product.
-The profit margin of the retailer is now absorbed by the expanded firm.
-The retailer can be prevented from selling the goods of competitors.

Question 9

backwards vertical merger

Answer 9

When one firm merges with or takes over another firm in the same industry but at a stage of production that is behind the ‘predator’ firm
adv:
-Merger gives assured supply of essential components.
-The profit margin of the supplying firm is now absorbed by the expanded firm.
-The supplying firm can be prevented from supplying to competitors.

Question 10

Conglomerate merger

Answer 10

This is when one firm merges with or takes over a firm in a completely different industry. helps in diversification
adv:
-activities in more than one country. This allows the firms to spread their risks.
-transfer of ideas. This transfer of ideas could help improve the quality and demand for the two products.

Question 11

problems linked to business growth and how to overcome them

Answer 11

• diseconomy of scale difficult to control
• –decentralization
• poor communication
• –new tech and decentralization
• less finance
• –reinvest and slow expansion
• harder to manage
• –new managment style

Question 12

Why businesses stay small

Answer 12

• Type of industry: speacalized cuz larger wud be harder to maintian coutimer contact
• market size: niche market , luxorious products
• owner objective: control,stress amangae

Question 13

Why businesses fail

Answer 13

• lack of management skills: lack of experience and planning
• over expansion: dis econmies of scale
• changes in environment: faliure to plan for future changes
• poor financial managment: faliure to plan cash flow less cash

Question 14

Why new businesses are at a greater risk of failure

Answer 14

• less experience
• new market
• not a lot of sales
• don’t have a lot of money