Business growth

• What is vertical integration in business strategy?

  It is a strategy where a company expands by acquiring or controlling other businesses in the supply chain.
• What is the main goal of vertical integration?

  To gain more control over the entire value chain from raw materials to final product delivery.
• What are the two types of vertical integration?

  • Backward vertical integration
  • Forward vertical integration
• What is backward vertical integration?

  It is when a company acquires businesses earlier in the production or supply chain.
• Why might a car manufacturer engage in backward vertical integration?

  To secure a stable supply of raw materials like steel for production.
• What is an example of backward vertical integration?

  A car manufacturer acquiring a steel manufacturer.
• What is forward vertical integration?

  It is when a company acquires businesses closer to the end-consumer in the supply chain.
• What was a significant example of forward vertical integration?

  Amazon acquiring Whole Foods Market in 2017.
• What are the benefits of forward vertical integration?

  • Increased market power
  • Enhanced control over distribution
  • Higher profitability
• How does forward vertical integration increase market power?

  By gaining control over distribution channels and access to final customers.
• How does forward vertical integration enhance control over distribution?

  It allows a company to control how its products are distributed and displayed.
• What are the drawbacks of vertical integration?

  Mergers can create communication problems and lead to inefficiencies.
• What is horizontal integration?

  It is a merger or takeover between two businesses in the same industry at the same production stage.
• What is an example of horizontal integration?

  The Walt Disney Company acquiring 21st Century Fox's entertainment assets.
• What are the advantages of horizontal integration?

  • Exploiting internal economies of scale
  • Cost savings from business rationalization
  • Creating a wider range of products
  • Reducing competition
  • Buying well-known brands
• What is a drawback of horizontal integration?

  It can reduce flexibility due to increased personnel and processes.
• What risk does horizontal integration pose regarding competition authorities?

  It may attract scrutiny if it lessens competition and raises prices.
• What is conglomerate integration?

  • It involves acquiring diversified businesses.
  • Examples include 3M, Siemens, and Samsung.
• What are the world's largest conglomerates as of 2022?

  Conglomerates like 3M, Siemens, and Philips.
• What are the motivations for business growth?

  • Profit motive
  • Cost motive
  • Market power motive
  • Risk motive
  • Managerial motives
• What is organic business growth?

  It is the internal growth of a business based on its own capabilities and resources.
• How can a business grow organically?

  • Increasing production capacity
  • Developing new products and sales channels
  • Finding new markets
  • Growing the customer base
• What are the limits to business growth?

  • Regulations and compliance
  • Threat of competition from new technologies
  • Financial constraints
  • Size of the market
• What are regulations and compliance costs?

  Costs associated with adhering to health and safety regulations and data protection rules.
• What is a threat of competition from new technology?

  Challenges businesses face from disruptive technologies that change their industries.
• What are financial constraints on business growth?

  Challenges related to limited access to capital, cash-flow issues, and high debt levels.
• How can market size constrain business growth?

  Businesses relying on local customers in small areas may face market size limitations.
• What is an example of a market size constraint?

  Custom-made products may have limited market size due to resource requirements.
• How can high average prices constrain market size?

  High prices can lower effective demand for products.