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BusinessActivity

1.6Businessgrowth

Keyelementstothistopic

Benefitsanddrawbacksof

businessgrowth

Organicgrowth Externalgrowth

Whatisbusinessgrowth?

Theprocessofafirmgettingbigger

Differentwaysofgrowingabusiness

Organic EXTERNAL

GAININGNEWCUSTOMERS MERGER

INCREASINGOUTPUT

INCREASINGMARKETSHARE

OPENINGNEWSTORES

TAKEOVER/ACQUISITION

DEVELOPINGNEWPRODUCTS

OrganicGrowth

Organicgrowth,isachievedbythebusinesssellingmore

ofitsproducts.

Openingnewstores

• Increasemarketshare• Increasesales• Raiseawarenessofthebrand

Contextcorner

Aldiisopeningmanynewstores.StatetwopossibleeffectsonAldiandanindependentgrocer.

IndependentGreengrocerAldi

Introducingnewproducts

• Accessnewcustomers• Additionalsalesfromexistingcustomers• Raiseawarenessofthebrand

ExternalGrowth

Alsoknownasintegration,itisachievedbyjoiningwith

anotherbusiness

Merger

• Twoormorefirmsjointocreateanewbusiness• Benefitscanincludereducedcostsandincreasedrevenues

Takeover(acquisition)

• Onebusinessbuysanother• Canprovideaccesstonewmarkets,suppliers,technology

Typesofintegration

• Horizontal – abusinessjoinsabusinessatthesamestageoftheproductionprocess• Vertical – abusinessjoinswithitssuppliers(backwardvertical)oritsdistributors(forwardvertical)• Diversification– abusinessjoinsabusinessinadifferentmarket

WhyisAmazonbuyingWholeFoods?

Watchtheclipandidentify2reasonswhyAmazon’sboughtWholeFoods

AmazontakeoverWholefoods

Amazonaremovingintothegrocerymarket.

Whattypeofexpansionisthis?

Factorsaffectingmethodofgrowth

Sizeofbusiness

Natureofproduct

Positioninthemarket

Financialpositionofthebusiness

Regulation

Benefitsofgrowth

“WearedelightedouracquisitionofHomeRetailGroupisnowcomplete,”chiefexecutiveMikeCoupesaid.“ThecombinationofSainsbury’sandHomeRetailGroupcreatesoneoftheUK’slargestfoodandnon–foodretailers.

https://www.retailgazette.co.uk/blog/2016/09/sainsburys-acquisition-of-argos-parent-company-now-complete/

Justaminute

Youhave60secondstowritedownthebenefitsanddrawbacksofSainsbury’s

expansionplan

Advantages Disadvantages

AdvantagesandDisadvantages

Advantagesofgrowth

Accesstomoreretailers/outlets

Greaterbrandawareness

Lessvulnerabletotakeover

Greaterrangeofrewardsforstaff

Diversify/spreadtherisk

Disadvantagesofgrowth

Slowerdecisionmaking

Communicationmoredifficult.

Employeesmaybecomedemotivated

Co-ordinationcanbemoredifficult.

Increasedcosts

Iamthinkingof3differentwaysof

expandingabusinessWhatarethey?

FranchisingMerger/ TakeoverOrganic Growth