Ch36 Growth and survival of firms

Front

What is a conglomerate?

Back

A conglomerate is a company that has a large number of businesses that produce a wide range of goods and services.

Front

What defines small and medium-sized enterprises (SME)?

Back

Small and medium-sized enterprises (SME) are firms that have fewer than 250 employees.

Front

What is diversification in business?

Back

Diversification is when a firm grows through producing or selling a wide range of different products.

Front

What is horizontal integration?

Back

Horizontal integration occurs when a firm merges or acquires another firm that is in the same type of business.

Front

What is vertical integration?

Back

Vertical integration is when a firm grows often through merger or acquisition by producing backwards or forwards in its supply chain.

Front

How does a cartel work?

Back

A cartel works when members formally agree to limit competition and honour their agreement to limit supply or fix the price of their product.

Front

What is the principal–agent problem?

Back

The principal–agent problem is when one person (the agent) makes decisions on behalf of another person (the principal).

Front

Why might small firms be typical in certain markets?

Back

Small firms are typical in markets that are small or local, such as retail or food service, operating alongside big players like McDonalds, KFC, Dominos, and Starbucks.

Front

Why might there be a large number of SMEs?

Back

The large number of SMEs may result from limited funding for new start-ups. Conglomerates have better access to cheaper funds and prove less of a risk to lenders.

Front

Why is the principal–agent problem less likely to affect small firms?

Back

In small firms and most SMEs, the principal is the owner and also the sole agent, reducing the likelihood of a principal–agent problem.