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EXTERNAL GROWTH (Mergers and acquisitions (Disadvantages (Deos (Incresed…

- - - - 2 firms agree to form new comp
    - - A comp buys a controlling interests in another firms
  - - - Amalgamation of firms operating in same industry
    - - Btwn buss at dif stages of prod
    - - Firms that hv similar operation but x directly compete w/each oth
    - - Amalgamation of buss that are in completely distict/diversified markets
  - - - Larger cust base
    - - Lower unit cost
      - Improve firm’s competitiveness/prof margins
    - - Distribution channels
      - New tech
      - Hr and mngmt know-how
      - boost prod and prof
    - - Alllow new firm to be in stronger post to compete rival
    - - Larger cust base
      - Reduced risks
  - - - Job losses to save cost
    - - Potential disagreements and arguement btwn firms
    - - Employee need to adapt bew method of working
      - Entail changes to firm’s core values and mission
    - - Incresed bureaucracy
      - Longer channels of communication
      - Less effective in decision-making
    - - Government may concerned prevent create monopoly
    - - New board of directors need to destructured
      - Original mngmt team lose some degree of control
- - - - receive royalty payments from franchisee
      - Allow to hv a national /international presence w/o higher cost of org growth
      - Benefits from growth w/o hv to worry about running costs
      - Experience rapid growth w/o hv to risk huge amounts of money
      - Increase chance of success
    - - Huge risk to allow oth use franchisor’s name
      - Difficult to control daily operations of franchisee
      - Not as quick as M&A
  - - - Greater awareness of local markets
      - Lower start-up costs
      - Low risk
      - Best interest of franchisors
    - - Cant simply use their own initiative to try out new ideas
      - Buy it very expensive
      - Hv to pay significant percentage of their revenue
- - - - Pooling of experiences, skills and resources of collabrating firms
    - - Reduce financial burden on any single org
    - - Ational laws allow only JV can enter some foreign markets
    - - Unlikely to directly compete w/each oth
    - - Not be case as M&A which exposed to potential prob of overseas expansion
    - - Friendly and receptive
      - Pool their funds, resources
- - - - Investigate and establishthe rationale, obj, feasibility
    - - Analyse the potential of dif partners
    - - Determine each member’s contributions and rewards
    - - Operations are initiated w/commitment to contract from all parties