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3.1.2 BUSINESS GROWTH, image, image, DISADVANTAGES, image, image, image,…
3.1.2 BUSINESS GROWTH
CONSTRAINTS ON GROWTH
SIZE OF MARKET-
not all producers can producers as eventually there is a limit to quantity demanded. Eg Luxury/ Niche markets
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ORGANIC GROWTH
When a firm grows through increasing output. Eg more labour or new products.
Lego did this with lego friends branch
ADVANTAGES-
-Better alternative to mergers, as they are high risk and evidence shows that share price falls after mergers.
-Owners get to keep more control of the business.
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HORIZONTAL INTEGRATION
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Advantages
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-Firms will be able to specialise, which reduces areas of duplication
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CONGLOMERATE INTEGRATION
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ADVANTAGES -
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-Easier to expand as finance is more available to if they were on their own and managers can be transferred.
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INTEGRATION
VERTICAL INTEGRATION
-When a firm takes over firms in the same in the same industry but at different stages of the production process.
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ADVANTAGES:
-There is increased potential for profit as the firm takes the profit from a longer chain of the production process.
-There will be less risks as suppliers do not have to be worried about buyers buying goods and buyers do not have to be worried about supply.
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