Methods of Growth

• What are the four methods of growth?

  Mergers, takeovers, joint ventures, franchising
• What is a merger?

  • Combination of two or more companies
  • Creates a single, larger entity
  • Aims for cost savings and efficiency gains
• Why do companies pursue mergers?

  To achieve cost savings and increased market power
• What are potential problems of mergers?

  Cultural clashes may hinder intended benefits
• What factors influence the success of a merger?

  Planning, implementation, and cultural compatibility
• What authority might block a merger in the UK?

  Competition and Markets Authority (CMA)
• What is a takeover?

  • Purchase of majority shares in another company
  • Gains control over the acquired company
  • Quick access to new markets and technologies
• What are advantages of takeovers?

  Quick access to new markets and technologies
• What are disadvantages of takeovers?

  Risk of overpaying and employee resistance
• What should be evaluated in a takeover?

  Valuation of the acquired business versus cost
• What financial aspects should be considered for a takeover?

  Funds available through debt or equity
• What is a joint venture?

  • Collaboration between two or more companies
  • Creation of a new subsidiary company
  • Sharing of resources and risks
• What are advantages of joint ventures?

  Sharing resources, risks, and expertise
• What problems can arise in joint ventures?

  Conflicts in decision-making and profit sharing
• What should be evaluated in joint ventures?

  Alignment and communication between companies
• What is franchising?

  • Granting rights to operate under a brand
  • Franchisee pays for the opportunity
  • Rapid expansion with minimal capital investment
• What are advantages of franchising for the franchisor?

  Rapid expansion and utilization of local expertise
• What is a disadvantage of franchising?

  Consistency in quality across locations may vary
• What should be evaluated in franchising?

  Effectiveness of quality control measures
• What is important in selecting franchisees?

  Having a rigorous selection process