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• To understand the following different methods of external growth> Mergers & Acquisitions & Takeovers> Joint Ventures> Strategic Alliances> Franchising
Learning Outcomes
Methods of Growth
2
Methods of growth
Internal External
Merger Takeover Acquisition
When a business buys part of another business
When a business buys a smaller business
Joining together of two similarly sized businesses
When a firm grows without involving other businesses
Where two businesses join to form another business
Growth and expansion
External growth - integration
3
Growth
• Internal expanding original operations (existing ) sales
• External operations involving a takeover or merger.
External growth (Integration)
5A hostile takeover occurs when the acquired company has no wish to integrate with the ‘aggressor’
Horizontal Lateral
VerticalForwards
Vertical Backwards
External growth (Integration)
• Horizontal: Two businesses which make similar products at the same stage of the chain of production join together
• Lateral: A business buys a related business at the same level of production
• Forward vertical: A business buys another business which is further forward in the chain of production
• Backward vertical integration: A business buys another business which is further back in the chain of production
• Conglomerate merger: Where two businesses with no common interests merge to form a single company
6
Research TaskFind real life examples of each method (google doc)
• Use the Internet to investigate a recent takeover or merger– The BBC Business website is a good
place to start a search• Questions
– Why did the two parties integrate?– What are the expected gains?– What about losses? Who might lose
out from the merger?– Do you think the merger would be a
good thing?