Business growth

• What is one way a business grows?

  By selling more output over a period of time
• Why is business growth often considered an important objective?

  Because it may help to increase market share, improve profits, and increase revenue
• What is one potential benefit of business growth?

  It may help a business to open more branches
• What is internal (organic) growth in a business context?

  Internal (organic) growth refers to a business expanding its operations without external assistance.
• What are the ways business growth can occur?

  • Employing more people
  • Opening more branches
  • Increasing sales or revenue
  • Increasing profits
• What is internal growth, or organic growth?

  It occurs when a business expands its own activities by launching new products and/or entering new markets
• What is external (inorganic) growth in business?

  External growth usually involves a merger or takeover.
• What is the difference between a merger and a takeover?


  A merger occurs when two businesses join to form a new business, while a takeover involves one business buying more than half the shares of another.
• Why might a business decide to enter new markets?

  A business may enter new markets to achieve growth.
• If Business ‘A’ and Business ‘B’ decide to merge, what resources do they share?

  They share locations, stock, marketing, products, and staff.
• Why might Business ‘A’ choose to take over Business ‘B’?


  Business ‘A’ might want to grow into an area already occupied by Business ‘B’ and take control by buying over 50% of its shares.
• What percentage of shares must a business acquire to take control in a takeover?

  More than 50% of the shares.
• What are the four methods through which a business can merge with or take over another business?

  • Method 1: Merger
  • Method 2: Takeover
  • Method 3: Joint venture
  • Method 4: Strategic alliance
• Why do businesses engage in internal growth?

  To improve their chances of increasing customers, revenues, and profits
• What is a risk associated with entering new markets compared to developing new products?

  Entering new markets carries a higher risk because the business has not dealt with these markets before.
• What is a common starting point for many new businesses?

  A single product idea
• What are the three ways a business can attempt to enter new markets?

  1. Entering overseas markets 2. Amending its marketing mix 3. Taking advantage of technology
• Why is it easier and less risky for a business to expand its product range once it has a market?


  Because it already has customers to sell to
• What is one potential benefit of a business entering overseas markets?

  It can give the business access to a brand new market, potentially increasing profitability.
• How can a business ensure successful internal growth?

  • Engage in research and development
  • Focus on innovation
  • Introduce new products
  • Improve existing processes
• What is a challenge of developing new, unfamiliar markets?

  It can be complex and expensive.
• What is horizontal integration?

  Horizontal integration occurs when two competitors join through a merger or takeover.
• Why is it vital for a business to re-examine its marketing mix when entering a new market?

  Because the business might not know or understand the new market.
• What is the result of horizontal integration for the new business?

  The new business becomes more competitive and increases its market share.
• How does horizontal integration affect a company's control in negotiations?

  It gives the company more control when negotiating and setting prices.
• What is forward vertical integration?

  It occurs when a business takes control with another that operates at a later stage in the supply chain.
• How might a business need to adjust its pricing strategy when entering a new market?

  The price might need to be changed to appeal to the new market.
• What role does technology play in entering new markets?

  Businesses can use technology, such as e-commerce, to target new markets and reach customers who are not nearby.
• What is backward vertical integration?


  It occurs when a business takes control of a business earlier in the supply chain.
• How can new technology help a business lower prices?

  New technology may make items cheaper to produce.
• What is one advantage of internal (organic) growth?

  It is low risk, allowing a business to maintain its own values without interference from stakeholders.
• What is conglomerate integration?

  Conglomerate integration occurs when businesses in unrelated markets join through a takeover or merger.
• What is the primary benefit of conglomerate integration for businesses?

  It enables businesses to spread their risk over a wider range of products and services.
• What is one benefit of higher production in internal growth?

  Higher production allows the business to benefit from economies of scale and lower average costs.
• What is a disadvantage of internal growth?

  It is slower growth, with a long period between investment and return on investment.
• What limits the growth potential in internal growth strategies?

  Growth may be limited and is dependent on the reliability of sales forecasts.
• What is one advantage of external (inorganic) growth for a business?

  Competition can be reduced
• What is another advantage of external growth?

  Market share can be increased very quickly overnight
• What is the difference between internal and external sources of finance?


  Internal sources of finance come from within a business, while external sources come from outside the business.
• What is one disadvantage of external growth?

  It can be expensive to takeover/merge with another business