7115 · 1.3
Enterprise, business growth and size flashcards
Revision flashcards for Cambridge 7115 Enterprise, business growth and size (syllabus 1.3). Flip, recall, then mark a real past-paper question.
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Organic growth?
Internal expansion — new stores, products, markets over time.
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Inorganic growth?
Merger, takeover, joint venture — instant size increase.
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Horizontal integration?
Merge with competitor at same stage — e.g. two supermarket chains.
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Vertical backward?
Take over supplier — e.g. brewer buys hop farm.
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Vertical forward?
Take over retailer/distributor — e.g. manufacturer opens shops.
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Conglomerate?
Unrelated businesses — risk diversification.
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Why grow?
Economies of scale, market power, shareholder returns, survival.
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Diseconomies link?
9.1.2 — communication breakdown if integration poorly managed.
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What is organic growth?
Expansion of a business from its own resources and activities, such as by launching new products or opening new locations. It does not involve acquiring other companies.
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Define horizontal integration.
The merger or acquisition of a business operating in the same industry and at the same stage of production. Example: A supermarket chain buying another supermarket chain.
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What is the difference between forward and backward vertical integration?
Backward vertical integration is acquiring a business at an earlier stage of the supply chain (a supplier). Forward vertical integration is acquiring a business at a later stage (a distributor or customer).
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What is conglomerate integration?
The merger or acquisition of businesses in completely unrelated industries. The main objective is diversification to spread risk.
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Define diseconomies of scale.
Factors that cause long-run average costs to rise as the scale of output increases. Often caused by communication problems, poor coordination, and low morale in a large business.