Business Growth and Expansion
Growth through Reinvestment
Company reinvests profit back into company
Main way for small businesses to growCan reinvest profits into another franchise
Growth through mergers
One company gives up its legal identity to another Reasons for merging
Faster growth – Wells Fargo and Wachovia Improved efficiency – Fiat and Chrysler Need to acquire new product lines – AMD and ATI Catch up or eliminate rival – Home Depot and
Yardbirds or Coca-Cola and Inca Cola Remake identity – Cingular and AT&T
Types of Mergers
Horizontal Merger – two firms make the same type of product Home Depot and Yardbirds
Vertical Merger – Firms in different steps of manufacturing or marketing process Ford buys a steel company
Four types of monopolies
Geographic – Ex. Small town with only one gas station.
Technological – Patents and copyrightsNatural – To be profitable, must be able to
serve large number of customers – utilities.
Governmental – post office and Amtrak, business licenses
Business Expansion cont.
Conglomerate – firm that operates in at least 4 different industries
Multinational – firm with manufacturing or service operations in different countries
Alliances – companies don’t merge but help each other. Ex. McDonald’s and Coca-Cola or Starbucks and Pepsico
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