methods of growth

• methods of growth 


  organic growth

  franchising

  external growth - ventures , takeovers
• organic growth 


  involves expansion within the business
• adv of organic growth

  -less risk

  -financed through internal funds

  -builds on business strengths

  -allows the business to grow at a sensible rate
• disadv of organic growth

  -hard to build market share

  -slow growth

  -franchises can be hard to manage
• franchising 


  when a franchisor grant a license to a business to allow it trade using the brand
• adv of franchising 


  -running ur own business

  -tried & tested brand

  -easier to raise finance

  -buying power of franchisor

  -lower risk method
• disadv of franchising


  -not cheap

  -restrictions on actions

  -franchisor owns brand
• joint ventures 


  a separate business entity created by 2 or more parties - involving shared ownership , returns , risks
• benefits of jv


  -benefit from each others expertise and resources

  -reduces the risk of growth strategy
• drawbacks of jv 


  -risk of clash organisational cultures

  -objectives of each partner may change

  -may turn out to be a imbalance of expertise
• takeovers


  one business taking control of another business
• adv of takeovers 


  -access economies of scale

  -overcome barriers to entry

  -eliminates competition
• disadv of takeovers 


  -high costs

  -problem of valuation

  -upset customers/suppliers

  -resistance from employees
• why do takeovers fail ?

  -price paid was too high

  -poor communication

  -competitors take advantage and gain market share
• types and direction of intergration

  forward & vertical - acquiring a business further up in the supply chain

  backward & vertical -acquiring a business earlier in the supply chain

  horizontal - acquiring a business in the same stage of the supply chain

  conglomerate - no clear connection to the business
• horizontal integration 


  -most likely to achieve economies of scale

  -secure revenue synergies

  -wider range of products

  -reduces competitors
• vertical integration 


  -enables a business to capture a greater share of profit on each sale

  -secures important sources of supply or distribution

  -create a barrier to entry to potential new competitors

  -gain greater insights into customer needs and wants at each stage of the supply chain