3.9 revision
- Created by: 1234am
- Created on: 07-01-21 23:58
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- types of intergration
- forward
- This involves acquiring a business further up in the supply chain
- vertical - conglomerate
- This involves the combination of firms that are involved in unrelated business activities
- horizontal
- businesses in the same industry and which operate at the same stage of the production process are combined
- REVISION
- retrenchment
- Retrenchment is a term used to describe when a business decides to significantly cut or scale-back its activities.
- - Reduce output & capacity - Job losses / redundancy programmes - Product / market withdrawal - Disposal of business unit - Scaling back planned capital investment
- causes... - new leadership - high cost/low profits - low ROCE - high gearing - a failed takeover or merger
- - Reduce output & capacity - Job losses / redundancy programmes - Product / market withdrawal - Disposal of business unit - Scaling back planned capital investment
- Retrenchment is a term used to describe when a business decides to significantly cut or scale-back its activities.
- organic growth
- Organic (or internal) growth involves expansion from within a business
- involves strategies such as... - Developing new product ranges - Launching existing products directly into new international markets - Investing in additional production capacity or new technology
- beneifts... - less risk than extrenal - sensible rate of growth - builds on strengths
- risks... - hard to build market share - slow growth - franchises can be hard to manage
- Organic (or internal) growth involves expansion from within a business
- takeovers
- reasons for... - increase market share - acquire new skills - access economies of scale - eliminate competition
- positives over organic growth... - existing products are in later stages of life cycle - business lacks expertise - growth is priority
- risks... - high cost - problems of valuation - upset customers/ suppliers - problems of intergration
- merges
- A merger is a combination of two previously separate firms which is achieved by forming a completely new business into which the two original firms are integrated.
- a new company is formed - and the shares in the new company are distributed to the shareholders of the two original businesses in a suitable split.
- A merger is a combination of two previously separate firms which is achieved by forming a completely new business into which the two original firms are integrated.
- joint ventures
- A joint venture (JV) is a separate business entity created by two or more parties, involving shared ownership, returns and risks
- benefits... - expertise and resources - reduces the risk of a growth strategy
- risks... - clash of cultures - objectives may change - could fail
- retrenchment
- backward
- This involves acquiring a business operating earlier in the supply chain
- forward
- vertical - conglomerate
- This involves the combination of firms that are involved in unrelated business activities
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