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BUSINESS GRWOTH, PROBLEMS OF GROWTH - Coggle Diagram
BUSINESS GRWOTH
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External growth
growth achieved through joining yourself with another business, either through a takeover or merger
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Reasons for intergration
Backward vertical
to gain control over suppliers (more efficient, reduced risks and a competitive advantage)
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Conglomerate
spread the risk by buying a firm operating in a completely different market (eager to expand as size provides more options for finance)
Horizontal
gain a greater market share (reduction in average costs due to economies of scale, make R&D more affordable,, reduce competition in the market)
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PROBLEMS OF GROWTH
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Diseconomies of scale (problems with motivation, communication and co-ordination and control
Coping with the different corporate cultures (values, attitudes and beliefs of those within the organisation)
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The large cost involved initially, which may take years to recoup, or may never be recouped
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