Growth of Firms
Why do firms want to grow?
- To gain economies of scale
- To gain market share (become more like a monopoly)
- To reduce competition
Inorganic Growth
- Vertical Integration – merging with a firm that operates in a different stage of production
- Backward Vertical Integration – merging with a firm that operates in the previous stage of production
- Forward Vertical Integration – merging with a firm that operates in the next stage of production
- Conglomerate (diversifying) merger – merging of firms involved in completely different business abilities
- Horizontal Integration – merging of two firms which are in exactly the same line of business
- Lateral Integration – merging of two firms that produce similar goods but are not in competition with each other
- Merger – the joining together of two or more businesses, usually to make a new one
- Organic Growth – growth achieved through the expansion of current business activities
- Takeover (acquisition) – the purchase of one business by another
