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3.1 Business Growth - Coggle Diagram
3.1 Business Growth
Demergers
demergers happen due to principle agent problem; issues with the divorce of ownership between shareholders and the board of directors.
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Consumers may have less choice due to smaller operations. But they also may have lower prices due to competition. Likely to lose confidence in the the business potentially.
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Sizes and types of firms
Some firms grow because:
- personal incentive to make more money
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Business growth 3.1.2
How businesses grow
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Forward takeover: where a business takes over another business that is further forward in the supply chain than them. This would typically be a secondary business purchasing a tertiary business.
Advantages: fast, effective, proves advantage against competition
Disadvantages: dangerous, requires finance, no guarantee of the takeover working
Backwards takeover: Where a business takes over another business that is further back in the supply chain. This could be a manufacturer buying a producer or a seller buying a manufacturer.
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Conglomerate integration: where a business buys another that is in a completely different market and industry as them self.
Advantages: diversifies assets, diversifies risk, allows for cross subsidisation, grows business
Disadvantages: risky as it is in an entirely new area that the business will have likely no experience in.
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