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Size of Business - Coggle Diagram
Size of Business
Integration
Horizontal Integration
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Advantages: eliminates a competitor, economies of scale, power over suppliers
Impact on stakeholders: consumers have less choices, workers may lose job security
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External Growth
business expansion by merging or taking over another business, from either the same or different industry.
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Synergy
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when the new larger business is more successful compared to the two, formerly separate, businesses were
Takeover
when a company buys more than 50% of the shares of another company and becomes the controlling owner of it.
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Merger
an agreement by shareholders and managers of two businesses to bring both firms together under a common board of directors.
Rapid Growth
Problems
Financial: more expensive (business expansion, require addition capital, takeover), can lead to negative cash flow
Managerial: management can't cope with problems of controlling large operations, lack of coordination, hard to adapt as a leader for the original owner
Marketing: old marketing strategy might not be effective anymore, growth from national to international might not succeed if marketing strategies aren't suitably adapted
Loss of control by original owner: most likely to occur when sole traders takes on partners or when a private limited company converts to a public company.