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Business growth (Mergers and takeovers (Tactical reasons (Increase market…
Business growth
Mergers and takeovers
Takeover
One business buys more than 50% shares in another
Friendly
Hostile
Tactical reasons
Increase market share
Access to technology / staff / intellectual property
Strategic reasons
Access new markets
Improved distribution networks / brands
Growth
Increase market share / profitability
Faster
Diversification
Removes competition
Vertical integration
Economies of scale
Synergy
Merger
Two businesses join together
Culture clashes
Loss of core capabilities
Economic cycle
Duplication of resources
Problems
Diseconomies of scale
Coordination / communication / motivation
Takeovers = costly
Deal with CMA
Different cultures / leadership styles
Over - optimistic view
Rationalisation
Emphasis on past financial performance
Difficult to manage
Divestment
Overtrading
Why
Economies of scale
Internal
Financial
Purchasing and marketing
Technical
Managerial
Risk - bearing
External
Ways to explain
Labour
Other businesses
Co - operation
Increased power over customers / suppliers
Suppliers
Limit power by looking for new ones
Backward vertical integration - merge / takeover supplier
Customers
Charge higher prices
Lack completion = innovation / quality will suffer
Too expensive to switch
Forward vertically integrate
Increased market share and brand recognition
Strategies to increase market share
Innovation and investing in branding
Differentiate
Increased profitability
How to
Vertical integration
Horizontal integration
Conglomerate integration