Term
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Definition
| Ansoff matrix is an analytical tool that helps managers to devise their product and market growth strategies, depending on whether they want to market new or existing products in either new or existing markets. |
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Term
| Backward vertical integration |
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Definition
| Backward vertical integration is a form of amalgamation that takes place when a business acquires or merges with a firm operating in an earlier stage of the chain of production, eg: a car manufacturer buying out a supplier of tyres or other components. |
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Term
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Definition
| Conglomerates are businesses that provide a diversified range of products and operate in an array of different industries. Conglomerates are likely to have resuted from external growth strategies. |
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Term
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Definition
| Diseconomies of scale are the cost disadvantages of growth. Unit costs are likely to eventually rise as a firm grows in size due to internal factors (such as lack of control, coordination and communication) and external factors (such as saturated markets which create a need for cost cutting). |
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Term
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Definition
| Diversification is a growth strategy of large businesses by spreading risks over a variety of products and markets. Conglomerates, for example, provide a whole range of goods and services to clients all around the globe. |
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Term
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Definition
| Economies of scale refer to the lower average costs of production as a firm operates on a larger scale. Benefits include easier and cheaper access to finance, marketing economies, division of labour and technological economies. |
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Term
| External diseconomies of scale |
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Definition
| External diseconomies of scale refer to an increase in the average costs of production as a firm grows due to factors beyond its control. This is often caused by problems associated with too many firms being in the industry. |
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Term
External growth
(Inorganic growth) |
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Definition
| External growth occurs when a business grows by collaborating wtih, buying up or merging with another firm. It is a more expensive but quicker method of growth than organic growth. |
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Term
| Forward vertical integration |
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Definition
| Forward vertical integration is a growth strategy that occurs with the acquisition or merger of a firm operating at a later stage in the chain of production, eg: a book publishing company merging with a book retailer. |
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Term
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Definition
| Franchise refers to an agreement between a franchisor selling its rights to other businesses (franchisees) to allow them to sell products under its name. In return, the franchisee pays a fee and a royalty (percentage of the profits) to the franchisor. |
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Term
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Definition
| Horizontal integration is an external growth strategy that occurs when a business acquires or merges with a firm operating in the same stage of the chain of production, eg: two commercial banks decide to merge. |
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Term
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Definition
| Joint venture refers to a strategy that combines the contributions and responsibilties of two different organisations to a shared project by forming a separate enterprise. Unlike a merger or takeover, both businesses in a joint venture retain their original identity. |
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Term
Internal growth
(Organic growth) |
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Definition
| Internal growth occurs when a business grows internally, using its own resources to increase the scale of its operations and sales revenue. It occurs through a firm's efforts to sell more of its own products by using its own resources. |
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Term
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Definition
Merger refers to the method of external growth whereby two (or more) firms agree to form a new organisation, losing their original identities.
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Term
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Definition
| Takeover is a form of external growth whereby one business buys up another. This is done by purchasing a controlling interest in that company, often against the wishes of their directors. |
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Term
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Definition
| Strategic alliance is similar to a joint venture in that two or more businesses seek to form a mutually beneficial affiliation by cooperating in a business venture. The firms share the costs of the venture, however, unlike a joint venture, the affiliated businesses remain independent organisations. |
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