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3.2.1 Organic growth and 3.2.2 Mergers and Takeovers, Exam tip: When asked…

- - - - even though its slower, the finance required is likely needed in smaller, more steady batches
      - use retained profits as a source, this should be able to steadily grow the firm without the need of taking on debt/interest - organic growth = likely to prevent the dangers of increased gearing ratio
    - - increased business growth = growth in structure = more senior managerial positions
      - increase in internal promotions = prevents middle and junior managers leaving to develop their careers: skills, talents + experience are retained within business
      - can be linked with (THEME 1.4) Herzberg's motivator of growth, advancement or Maslow's esteem and self-actualisation needs
  - - - may fall behind growing rivals who use takeovers/mergers = can result to rivals achieving economies of scale that make competing with them harder
    - - organic growth can lead to doing the same thing every year - can prevent staff who are looking for new challenges = increased turnover of potentially innovative/entrepreneurial staff
- - - - benefit
        
        guaranteed outlet for the business' products
      - drawback
        
        customers may resent loss of choice
    - - benefit
        
        secures supplies
        
        should lower costs of supplies
      - drawback
        
        can tie business into a supplier that may not offer the best option
  - - - economies of scale
    - - can lead to diseconomies of scale
      - could be confusion in terms of which culture should some areas adopt
  - - - diversifies the business: risk bearing - no longer reliant on one market/product
    - - potential failure to understand target company as it may be an unfamiliar market
      - may distract management from original business due to unfamiliarity and slowness to integrate