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External Growth (Horizontal Integration (Advantages (Removes a competitor…
External Growth
Horizontal Integration
When
two businesses
at the same stage in the production process
join together
Either a
take over (not friendly)
or a
merge (friendly)
Advantages
Removes a competitor from the market
Larger and more financially secure
Increased customer base
Disadvantages
Takes time to merge
Diversification
When a
business expands into markets different from its core activity
Advanatges
Reduces the risk
of business failure
Increases the profit stream
Customers in new market can be attracted to existing products
Backward
Vertical Integration
When a
business takes over a supplier
Advantages
Allows the business to
control its' source of goods and materials
Adds the
supplier's profit
to its own
Can ensure the
quality and quantity of supplies
Can
control supplies to competitors
Forward
Vertical Integration
When a
business takes over a customer
Advantages
Guarantees and outlet for its goods
Can control the marketing mix for its products
Adds the profit of the customer to its own