Outsourcing

The growth of a business is when it expands in size. Businesses either grow organically or by acquisition and mergers.
• Organic growth means the business grows by expanding its sales or their operations and is financed through its own profits.
Acquisitions and mergers are when the business joins or buys other businesses, not necessary of the same type.
2. Reasons of merger:
Businesses may wish to expand for the following reasons:
• Benefit from economies of scale – lower unit costs due to an increase in size
• A larger market share (selling more products than before) means they can charge higher prices and gain more profit
• As means of survival if they wish to compete with other growing businesses Some businesses start selling or acquiring businesses that are not in the same market as the markets they are presently selling in. This is known as diversification. Businesses may wish to diversify because:
• Helps spread the risks across a number of products. If one product fails due to market conditions then other products in different markets should not be affected.
• Good way of expanding if present market seems already full.
• Gives the business fresh objectives and may act to motivate managers and staff.
A business can grow organically in the following ways:
• Lower price - People will buy more at lower prices.
• Increase advertising - Customers are made more aware of the attraction of the products.
• Sell in different location - Selling to a new set of customers, more potential.
• Sell on credit - Customers are attracted by the ability to buy now pay later.
3. Explanation
Mergers and Acquisitions
A merger is where two or more businesses AGREE to join together to become one larger firm. An
acquisition is when one firm BUYS another firm.
When a one business buys another it is possible that the acquisition or merger integrates...

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