external expansion means expanding by working with other business
what are some external expansion ways?
mergers
takeovers
what is a merger?
a merger is when two firms join together to form a new (but larger) firm
what is a takeover?
a takeover is when an existing firm expands by buying more than half the shares in another firm
true or false. external expansion is slower than internal expansion
false, external is faster but it can be difficult for the businesses involved
four basic ways a firm can merge with or takeover other firms
suppliers - a firm joins with a supplier, this allows a firm to control the supply cost, and quality of its raw materials
customer - a firm takes over a customer, gives the firm greater access to consumers. making it easier to sell products
unrelated firm - two unrelated firms join together, diversifying into new markets, reduces risks that come with relying on a few products
competitor
merge and takeover disadvantages
less than half are successful
hard to make two different businesses work as one
management styles can be different - employees may not be motivated by the style of management in the new one
takeover bid can be hostile and unpopular
often lead to cost cutting
a disadvantage of inorganic growth is..
that two different business may have a different way of doing things, this would cause conflict inside the business, potentially causing people to resign.
