METHODS OF GROWTH

• What is the main wish of every private business, franchise, and multinational?

  Survival and/or growth
• What must a business do to achieve survival and growth?


  • Maintain/improve it’s customer base, loyalty and reputation
  • Take advantage of economies of scale and cut costs/reduce spending
  • Maximise profits
  • Become market leader and fend off takeovers
• What is one of the goals of a business in terms of profits?

  Maximize profits
• What are the two types of growth in businesses?

  Internal (organic) growth and external growth
• What characterizes internal (organic) growth?

  It naturally grows over time by expanding output and increasing market share
• What is external growth in businesses?

  It involves merging or integrating with other businesses
• What is horizontal integration?

  It is when two businesses merge at the same stages of production or share a customer base
• What is vertical integration?


  It is when businesses at different stages of production merge
• What are the benefits of vertical integration?


  • Own the suppliers
  • Achieve greater economies of scale
  • Discount prices on supplies
  • Eliminate costs of middleman
• What is forward vertical/lateral integration?

  It is when businesses merge at a later stage of production
• What is backward vertical integration?


  It is when businesses merge with an earlier stage of production
• What is conglomerate diversification?

  It is when businesses move into other brands or product areas, sometimes unrelated
• What are the benefits of conglomerate diversification?


  Allows them to spread the risk between products, allows them to remain active in season fluctuations, more recognisable brand, different manage and expertise in other areas
• How does conglomerate diversification help during seasonal fluctuations?

  It allows businesses to remain active year-round with diverse revenues
• What are the disadvantages of vertical/lateral integration?

  Different sectors depend on eachother, Supply issues could occur
• What is the disadvantages of horizontal integration?

  May begin to dominate market, not good for small businesses
• What are the disadvantages of conglomerate and divsersification?

  Different languages in different countries, different rules in different countries
• What is outsourcing?

  Outsourcing is when a business uses another business to carry out specific roles.
• Why might a business choose to outsource?

  To reduce costs and focus more on core services.
• What are potential drawbacks of outsourcing?


  Long-term fixed contracts may cost more than doing it yourself and can lead to cash flow problems.
• What is a key requirement for successful outsourcing?


  Good communication between organizations is essential to avoid mistakes.
• What are the benefits of outsourcing?

  • Focus more on care services, improving main services
  • No need to pay for internal equipment/labour
  • Outsourced organisations will have the best equipment
  • Specialised businesses can achieve better economies of scale, leading to reduced costs
• What can outsourced organizations provide that may benefit the hiring business?

  Outsourced organizations should have the best equipment, leading to better quality products/services.
• How can specialized businesses impact costs?

  Specialized businesses can achieve better economies of scale, resulting in reduced costs.
• Why might a business choose to outsource?

  To avoid paying for specific roles internally.
• What is a potential drawback of outsourcing related to contracts?

  Businesses may be locked into long-term fixed contracts that could cost more than doing it themselves.
• How can outsourcing affect cash flow?

  Paying for private firms to do work can increase costs and lead to cash flow problems.
• What is the disadvantages of outsourcing?

  • May be locked into long-term fixed contracts
  • Paying for private firms to do work can increase costs
  • Need good communication between organisations