Starter Activity For each of the following factors

Starter Activity For each of the following factors identity the impact on an organisation: • An increase in interest rates • Prediction of an increase in temperatures over the summer period • A reduction in VAT • A new organisation is opening up in town where a similar organisation already exists

Foundation Apprenticeship in Business Skills Understanding Business – Methods of Growth

Today we will… • Discuss the different ways an organisation can grow

Business Growth Why do businesses grow?

Growth To grow means to make the business larger. Not all organisations will aim to grow. Local government organisations for example aim instead to serve the local community, so growing is not of interest to them. Some sole traders, partnerships and private limited companies like to stay small too as their customers like the personal touch that bigger franchises and multinationals can’t offer.

Advantages of Growth Increase profits To avoid being taken over To remove competition Economies of Scale Finance

Internal (Organic) Growth Open new branches Develop new products Advertise to increase sales Hire additional staff

Individual Activity Explain the advantages of internal (organic) growth.

External Growth Merger Take Over De-Merger Horizontal integration Vertical integration Conglomerate integration (Diversification) Divestment Outsourcing Franchising

Integration means two businesses becoming one. There are two ways that this can happen:

Merger This is when one firm combines with another

Take Over This is when one firm takes control of another

Individual Activity Complete the Disney-Pixar Case Study.

Horizontal Integration occurs when two businesses from the same sector of industry become one business. This could be two dairy farms merging (primary sector) or one bank taking over another bank (tertiary sector).

Vertical Integration Backward Vertical Integration occurs when a business takes over a supplier Guarantees stock Cheaper stock

Vertical Integration Forward Vertical Integration occurs when a business takes over a customer Control pricing Control distribution

Conglomerate Integration Conglomerate integration occurs when businesses in different markets join together. In other words, a merger of businesses whose activities are totally unrelated. This helps: Spread the risk of failure Maximise profits

Diversification This is when a business expands into markets different from it’s core activity 9 0 0 1986 2 200 4 Mackie’s and Taypack Joint Venture in 2009

Activity Complete the Proctor & Gamble case study.

De-merger A de-merger occurs when a single business splits into two or more separate components.

Activity Complete the Lloyds TSB Case Study.

Divestment This is when a firm sells its business assets or subsidiary companies

Activity Complete the Pringles Case Study.

Outsourcing is when an organisation contracts another to do work for them

Outsourcing ADVANTAGES

Outsourcing DISADVANTAGES Confidentiality issues Firm may take a long time to complete the job May be very expensive The organisation will have reduced control May involve redundancies Communication problems may mean the job is not of a suitable standard

Individual Activity Google’s development of its new headquarters is an example of organic (internal) growth. Describe other methods of growth available to Google.

Homework Activity Complete the International Airlines case study