3.1.2 - Business Growth

• Business growth - intergration

  • Horizontal intergration
  • vertical intergration
  • Conglomerate intergration
  • Lateral intergration
• Horizontal intergration is when 2 business in the same industry at the same stage of production becoming one

  For example

  • Volkswagen buying porsche
• vertical intergration is when a business in the same industry but at a different stage of the Supply chain
• Forward intergration: an intergration of a business that is closer to final consumers e.g a manufacturer buying a retailer.
• Backwards vertical: closer to the raw materials in the supply chain
• conglomerate intergration

  • A conglomerate has a large number of diversified business
• key constraints on Business growth:

  • Regulation
  • Competition
  • Finance
  • Size of the market
• Organic growth is where firms grow by increasing their output
• Firms can grow inorganically through merging with, acquiring or taking over another firm.
• Advantages to organic growth

  • Keep ownership and control
  • Lower risk.
• Disadvantages to organic growth

  • Lose ownership and control through selling shares
  • Slower growth
• Advantages of vertical integration.

  • Control of the supply chain
  • Reduce intermediary costs
  • Better access to consumers
• Disadvantages to vertical integration

  • Regulation.
  • Costs from diseconomies of scale
  • May lack expertise
• Advantages to horizontal integration

  • Internal economies of scale
  • Rationalisation
  • Reduce competition
• Disadvantages to horizontal integration

  • Internal diseconomies of scale
  • Jobless
  • Brand dilution
• Advantages of conglomerate integration

  • Risk bearing economies
  • Increase brand awareness
  • Knowledge transfers
• Disadvantages to conglomerate integration

  • Diseconomies of scale
  • Brand dilution
  • Lack of expertise