Business Growth

Many businesses have an objective and that is to grow in size. Keeping Growth as an objective has its own advantages for the business.

Why businesses set growth as an objectives

  • Possibility of higher profits
  • More and salaries for managers
  • Economies of scale

How can businesses expand?

Business can expand is two main ways:

Internal Growth or also known as organic growth where the business expands by opening more outlets/factories/offices gradually by using its profits.

External growth involves buying out other business and making them a part of your business. Examples are takeovers and mergers.

Integration can be of three types

Horizontal Integration: when one firm merges with another firm or takes over another one in the same industry and at the same stage of production. Example Vodafone and Hutch

Horizontal_integration

Vertical Integration: one firm merges or take over another firm in the same industry but at a different stage of production. Vetical Integration can be either forward or backward.

Example of vertical integration The world’s 4th largest steelmaker POSCO is bidding to purchase the world’s 3rd largest shipbuilding company Daewoo Shipping & Marine Engineering (DSME). While both firms are Korean, they are also multinationals (and therefore of interest to us). POSCO believes it can add considerable value to DSME by specifically tailoring its steel the specifications of the ships being built. Steel is a very significant input in ship building. As such, this can be seen as forward integration by POSCO into one of the activities where its major products are used.POSCO is also putting efforts to buy iron-ore and coal mines in Australia. It has significant share-ownings in seven such Aussie firms. Both iron-ore and coal are major inputs in making steel, so this is backward integration. POSCO is looking at other mines in Africa, Siberia, Indonesia and Eastern Europe, and says it is looking to own 30% of its input supplies in the future.

vertical-integration

Backward Integration is when a business merges or takes over a business which takes it near to the source of raw materials. For example an oil refinery combined with another firm which is into oil driling.

Forward Integration is when a business merges or takes over a business which takes it near to the customers. For example, an oil refinery is combined with company which owns Petrol stations.

Conglomerate Integration: It is also known as lateral integration. Take over or merge with another firm in a completely different industry. example a shoe manufacturer buys a biscuit producing business.

New Youtube Channel - ThinkIGCSE

Hi Everyone, I have launched a new YouTube channel with more than a 100 videos on  Economics and Business Studies, tailored specifically for IGCSE and A Level and IBDP students.

Subscribe now and join us on this learning journey: @thinkIGCSE

Exciting News!

IMPORTANT MESSAGE

Quizzes and worksheets on this website have been developed in Flash format. Flash is no more supported by browsers. Therefore, you might see blank pages on some instances. Install Flash player plugin for Chrome from Chrome Web Store. Click here 

Similarly, for other web browsers you will have to activate the relevant flash player plugins.

JOIN OUR ONLINE COURSES

WHO'S ONLINE

We have 283 guests and no members online

MindMaps

PDF FILE

Download

Cheatsheets

PDF FILE

Download

Crosswords

PDF FILE

Download

Save
Cookies user preferences
We use cookies to ensure you to get the best experience on our website. If you decline the use of cookies, this website may not function as expected.
Accept all
Decline all
Read more
Analytics
Tools used to analyze the data to measure the effectiveness of a website and to understand how it works.
Google Analytics
Our website uses Google Analytics to understand how you interact with our site and improve your browsing experience. These cookies collect information in an anonymous form, including the number of visitors to the site, where visitors have come from, and the pages they visited. The data helps us analyze trends and user behavior to enhance our website's functionality and content.
Accept
Decline
Marketing
Set of techniques which have for object the commercial strategy and in particular the market study.
Marketing
Our website uses Google marketing cookies to deliver personalized ads and measure the effectiveness of our advertising campaigns. These cookies track your online activity to help us show you relevant ads on Google services and partner websites.
Accept
Decline