How Businesses Grow?

By Author: fed pats
Total Articles: 225
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Ever thought how McDonalds grew into such a massive organization? It all just started from one fast food restaurant and then expanded up to 31000 retailing outlets. Yes! McDonalds have 31000 outlets which all just evolved from a single restaurant. The business has surely incurred massive growth. But why would a person need such a large business? Most probably the reasons could include aims for very high profits for the owners, or increased fame and recognition. Or probably they might just opt to control a greater share of the market or achieve economies of scale. Whatever the owners’ objective are, we are here to analyze the ways in which a business can grow.

The business growth is categorized into two categories. One is internal while the other is external. Internally, growth can be achieved by opening more retailing stores under the same brand. This is done through owner’s investment or saving or from the profit achieved by the business overtime. External growth however can be achieved in a number of ways that is through takeovers or mergers.

A merger is when two businesses, who are operating in the ...
... same industry and are of the same nature decide to join together and form one functioning business unit. This merger is an example of a horizontal merger. The advantage of such merger is that a larger business may be able to achieve economies of scale, that is less average costs and so the price of the commodities will go down. Secondly, when one single business will control a large share of market, they will be as efficient as possible so that they maintain their position. Lower prices and efficiency may obviously be in the interest of most of the customers.

Another type of merger is a vertical merger. Vertical merger also has two types. One is forward vertical integration, while the other is backward vertical integration. Vertical integration means that you merge with the business, which is in the same industry as your business does, but is one step ahead or back in the production line... For example, you are an automobile company. The supplier or manufacturer of the automobile parts would be your predecessor, while a car showroom will be your successor. So if you integrate with the manufacturer, you will undergo a backward vertical integration, as you moved a step back in the line of production. While if you merge with a car showroom, you will undergo a forward vertical integration, since you moved a step ahead in the line of production. This type of merger is beneficial because the owner is pretty much sure that about the quality of products and will ensure that there is never a delay in the business chain.

The last type of merger is conglomerate integration. In this type, when a business takes over the other business, they two are not of the same production line, neither of the same industry. Such mergers are called diversification because two, entirely different types of businesses are managed by just one person. However, the advantage of this is that one business can be used for benefits of other and that if one type of business incurs failure, the other one is always there to bridge.

Company: Toronto pcs

Address: 222 Spadina Avenue, Unit # 116 A
Toronto, ON - M5T3B3


Zip code: M5T3B3


Contact person: micdaved


Phone: 647-693-5036


Email: fed.pats@gmail.com

For more information: http://www.torontopcs.com/