Chains of analysis

• Growth - buy in bulk - negotiate with suppliers - obtain purchasing economies of scale - reduce unit costs - increases cost competitiveness - improves profitability
• Merger / takeover - more ideas - synergy - increased competitiveness - more innovation - attracts customers - increases demand - higher sales - more profit
• Horizontal integration - learn more production techniques - better efficiency - less waste - satisfy stakeholders
• Growing too quickly may lead to overtrading - strain on working capital - poor current ratio - cannot pay short term debts - need external sources of finance - high cost of short term borrowing - become highly geared
• Focus on core competencies - generate a USP - Porter's strategic matrix - differentiation approach - increased demand due to innovation - more sales revenue
• Retained profit - invested into product development - Ansoff's matrix - satisfies customer demands - brand loyalty - word of mouth promotion - more customers without spending on promotion
• Brand loyalty - less affected by new competitors who may enter the market - Porter's 5 forces - minimise the threat of new entrants through barriers to entry - can focus on long term objectives