Business Growth - Introductory Concepts
- AS, A Level, IB
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 14 Apr 2019
Core revision notes on the different pathways available for businesses to grow along with some recent examples.
BACKWARD VERTICAL INTEGRATION
This involves acquiring a business operating earlier in the supply chain – e.g. a retailer buys a wholesaler, a brewer buys a hop farm.
- Apple buying a chip supplier Dialog in 2018
- Tesco buying the wholesaler Booker for £4bn in 2018
A conglomerate has a large number of diversified businesses
- General Electric
- Tata Group
- Phillips (Netherlands)
FORWARD VERTICAL INTEGRATION
Forward vertical integration involves acquiring a business further up (forward) in the supply chain – e.g. a vehicle manufacturer buys a car retail business.
- Live Nation merging with Ticketmaster
- Shell buying First Utility
- Amazon buying Whole Foods
When companies from the same industry amalgamate - firms are at the same stage of the production process e.g. two car manufacturers.
- Horizontal mergers in the betting industry: Ladbrokes and Gala Coral, Betfair and Paddy Power.
- Mergers in the brewing industry.
INTERNAL (ORGANIC) GROWTH
Organic (or internal) growth involves expansion from within a business, for example by expanding the product range, or number of business units and location.
- Domino’s Pizza (UK)
A joint venture occurs when two or more businesses join together to pursue a common project
- Docklands Light Railway
- Google and NASA developing Google Earth
- Toyota and Panasonic setting up an EV battery joint venture
- IAG/American Airlines joint venture
Mergers and takeovers
A merger is a combination of two companies to form a new company
A takeover, is the purchase of one company by another, in which no new company is formed.
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