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Business Growth and Expansion

Business Growth and Expansion. Businesses grow through merging with other companies and by investing in the machinery, tools, and equipment used to produce goods and services. Growth. Analyze income statements. Net Income Depreciation – non-cash charge on wear and tear

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Business Growth and Expansion

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  1. Business Growth and Expansion Businesses grow through merging with other companies and by investing in the machinery, tools, and equipment used to produce goods and services.

  2. Growth • Analyze income statements. • Net Income • Depreciation – non-cash charge on wear and tear • Cash Flow – sum of net income and non-cash charges. • Businesses will then decide how cash flow will be used. • Bonus • New plant, equipment, products, services.

  3. Mergers - Combination of two or more businesses • Growth – Acquire additional funds (be the biggest). • Efficiency – Better use of resources • Advertising • Outlets • Volume purchases • New Products – Ex: Cablevision & Optimum Online.

  4. Mergers • Eliminate rival companies • Subject to review government approval • Change corporate identity • Valuejet + AirTran • NYNEX + Bell Atlantic + GTE = Verizon

  5. Types of Mergers • Vertical– • Firms of different levels of manufacturing or markets (product lines). • Acquire all phases of production. • Ex: U.S. Steel • Horizontal – • Firms of the same product or service. • Ex: Standard Oil

  6. Conglomerates • Firm that combines four or more businesses. • Each company produces unrelated products. • Diversified – Do not put all your eggs in one basket. • Not one area is responsible for a majority of sales http://www.freepress.net/ownership/chart/main

  7. Multinational • Corporations that operate in different countries. • Excellent ability to move goods and resources from place to place. • Introduce technology, jobs, and revenue to new locations. • Some multinationals may be conglomerates. • Can use their influence as a bargaining tool • Abuse of power/Export natural resources

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