Business growth (OCR GCSE Business): Revision Notes

1.6 Business growth

Organic growth – internal growth

Examples

1. Increasing output - This can be done by using new technology to make products more quickly and efficiently, or by training workers to do this instead.
2. Gaining new customers – Perhaps by cutting prices or improving marketing
3. Introducing new products – This would involve some research and development
4. Increasing market share – This can be done by increasing sales so the business has a larger share of the market.

External growth – This can be achieved by mergers and takeovers

Types

Horizontal takeover	Taking over or merging with a company in the same field of business. For example, if one supermarket joins with another. + One less competitor in the market. This means less need to advertise and lower prices below)
Backward vertical takeover	Taking over or merging with a company which can supply you with goods; e.g. a crisp manufacturer takes over a potato farm + Take control over own supply chain to ensure good quality and prices
Forward vertical takeover	Taking over or merging with a company which you can sell your goods to. For example if a brewery takes over a pub. + A guaranteed market to achieve sales from
Diversification	Taking over or merging with a company in a completely unrelated industry. For example if a car manufacturer takes over cupcake business. + If one market fails (e.g. a decline in car sales) then the business has another area to fall back on.