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Methods of Growth

Business in Contemporary Society. Methods of Growth. Methods of Growth. Organic or Internal Growth When a business ploughs back large parts of its profits into expansion Inorganic or External Growth When a business grows by taking over or joining together with other firms.

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Methods of Growth

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  1. Business in Contemporary Society Methods of Growth

  2. Methods of Growth • Organic or Internal Growth • When a business ploughs back large parts of its profits into expansion • Inorganic or External Growth • When a business grows by taking over or joining together with other firms

  3. Methods of Growth - External • Merger • Takeover • De-merger • Divestment • Horizontal integration • Vertical integration • Diversification

  4. Methods of Growth - External • Merger – an agreement to bring two firms under one board of directors. • Takeover – when a firm buys over 50% of another firm’s share capital. • De-merger – when a firm is split into two parts. • Divestment – selling off parts of the business that no longer fit the long-term strategy.

  5. Horizontal Integration • Occurs when a firm takes over or merges with another firm at the same stage of the production chain. • For example, if Ford Motor Company merged with or bought out Toyota – both are car manufacturers at the same stage of the production chain.

  6. Vertical Integration Rubber plantation Car showroom

  7. Diversification • Diversification is when businesses reduce risk by expanding the number of goods/services they provide. • Virgin and General Electric are examples of diversified firms.

  8. Research • AG Barr and Britvic • BT and ESPN • Nike and Umbro - Takeover and divestment • Nokia sold to Microsoft • Lloyds TSB - divestment • Microsoft and Skype - Merger • Hertz and Dollar Car Rental - horizontal integration • Organic Growth • Whitbread who own Costa Coffee and Premier Inn • CathKidston • American Airlines and US Airways - merger

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