Please enable JavaScript.
Coggle requires JavaScript to display documents.
EXTERNAL GROWTH - BUSINESS - Coggle Diagram
EXTERNAL GROWTH - BUSINESS
Inorganic Growth
Merger
- two businesses merge to become one new one
Takeover
- One business will takeover another business
A business may decide to grow quicker and so it will decide to merge or takeover another business:
Advantages of a takeover
Economies of Scale
- Better deals because of increased order size, bulk-buying, discounts etc
Increased Revenue and Market Share
- Increased size of the combined company increases market power and ability to set higher prices
International Expansion
- Buying a business in another country helps with culture issues, foreign laws etc
Advantages of merging
Economies of Scales
- Better deals because of increased order size, bulk-buying, discounts etc
Increased Revenue and Market Share
- Increased size of the combined company increases market power and ability to set higher prices
Buying Technology
- Sometimes its simply impossible for a company to create the technology it needs to sustain its growth. It can be a lot simpler to just buy it
International Expansion
- Buying a business in another country helps with culture issues, foreign laws, etc
Disadvanges of a takeover
With a takeover one business will no longer exist
Create a closures of units/stores and create a load of unemployment
Possible communication problems
- As the business gets bigger, or if there are too many employees
Diseconomies of Scale
- As a business gets larger costs will go up with problems of motivation, communication and co-ordination
Disadvanges of merging
Clash of cultures
- All businesses have a slightly different culture and they may not work well together
Possible communication problems
- As the business gets bigger, or if there are now too many employees
Unreliable Merger Partners
- A good merger will depend on trust between the business
Diseconomies of Scale
- As a business gets larger costs will go up with problems of motivation, communication and co-ordination