Business growth - EduqasExternal (inorganic) growth
Business growth is important as it enables businesses to increase the scale of their operation and competitiveness. This may be done either internally (organically) or externally (inorganically).
external growthBusiness growth as a result of mergers and takeovers. (inorganic growth) usually involves a merger When two or more businesses join together to operate as one business. or takeoverA takeover occurs when an existing business expands by buying more than half the shares of another business.. A merger occurs when two businesses join to form a new (but larger) business. A takeover occurs when an existing business expands by buying more than half the sharesFinancial stakes in a company or business. of another business.
An example of a merger
Business ‘A’ and Business ‘B’ each want to expand but do not feel they can get any bigger on their own. The two businesses decide to come together and share their locations, stock, marketing, productA product is a good or service that is sold to customers or other businesses. and staff. This allows them to grow together as a single business.
An example of a takeover
Business ‘A’ decides it wants to grow but the area it wants to grow into is already occupied by a similar or smaller business, called Business ‘B’. Business ‘A’ decides to buy over 50% of the shares in Business ‘B’ in order to take control. This gives Business ‘A’ access to growth through ownership of a new business in either the same or a different area of the market.
