gcse economics - firms - growth of businesses
Growth means that the business is becoming larger, this may be an objective for the business. It can grow in a number of ways;
1. INTERNAL GROWTH
This means that it grows without joining with another business. It could
•
build new premises
•
‘take on’ more employees
2. EXTERNAL GROWTH
In this case it has some involvement with another business
a) MERGER
Two firms join together and have equal ownership e.g. Lloyds and TSB merge to create Lloyds TSB bank.
b) TAKEOVER
One firm takes over another firm and has the ownership of that business. It is probably against the wishes of the other business. e.g. Lloyds could takeover TSB. It would probably still be called Lloyds but it would also own TSB.
BENEFITS OF GROWTH
• Increased profits
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Increased market share
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Gain new ideas from the other business
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Avoid having to compete with the other business
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Gain from economies of scale (page)
•
The new business may not need all of the workers. They could remove some
workers to become efficient and make more profit
PROBLEMS OF GROWTH
To the businesses
• There may be two sets of managers who are unable to agree on the
best direction for the company. This could cause many problems.
•
The businesses may have different objectives and targets
•
It costs a lot of money to merge with or takeover another business
To customers
• Possibly less choice in the market and possibly higher prices to pay
To workers
•
Possible job losses and job insecurity
These GCSE Economics revision notes have been kindly provided by Peter Davies of Mill Hill School, Ripley Keep Up-todate with your GCSE Economics - Subscribe Free to Economics in the News by Email
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