Key term 9

• organic growth

  internal
• External growth

  Growth through joining or buying other businesses
• Merger

  Two businesses join
• Takeover

  Buying another business
• Horizontal integration

  Joining with a business at the same stage of production
• Vertical integration

  Joining business at a different stage, e.g. supplier or retailer
• Forward integration

  Joining with a business closer to the customer
• Backward integration

  Joining with a business closer to raw materials
• diversification

  Joining with complete different business
• Economies of scale

  Lower average cost as output increases
• Diseconomies of scale

  Higher average cost due to business being too big
• Franchising

  Letting someone run a business using your brand in return for a fee
• Franchisee

  Person who buys and runs the franchise
• Franchisor

  Business that owns the brand and sells the franchise rights
• Outsourcing

  Paying another business to do part of your operations
• Offshoring


  Moving operations to another country
• Innovation

  Creating new ideas, products or methods
• Patent

  Legal protection for a new invention
• Licensing

  Letting another business use your product or idea for a fee
• Joint venture

  Two firms create a new business together, but stay separate
• Retrenchment

  cutting back to reduce costs or stop losses
• Strategic drift

  When a business fails to adapt to changes
• Planned strategy

  A deliberate long-term plan
• Emergent strategy

  A strategy that forms overtime not planned
• Divestment

  Selling part of the business
• Disruption

  New ideas or businesses that shake up an industry
• Cultural resistance

  Staff pushback against change
• Implementation

  Putting the strategy into action
• Suitability

  whether the strategy fits the business and its environment
• Acceptability

  Weather stakeholders support the strategy
• Contingency planning

  Back up plan for unexpected problems
• Risk management

  Identifying and reducing potential risks
• Scenario planning

  Thinking about I’m preparing for future possible events