unit 1.6

A firm may choose to demerger for the following reasons, except to

• Avoid falling profits in the business

• Enjoy economies of scale

• Focus more on a target market

• Focus on a smaller range of products

A business grows in size due to its own finance and retained profits. This process is known as

• Conglomerate

• Acquisition

• Internal growth

• Inorganic growth

A merger between two newspaper companies is an example of

• Conglomerate

• Horizontal

• Vertical

• Lateral

The process of taking over another businesses’ brands rather than the whole company is

• Brand acquisition

• Brand awareness

• Brand loyalty

• Brand recognition

Reasons for airlines to form a strategic alliance include all the following, except

• The airline companies keep their separate legal identities

• They benefit from economies of scale from combined purchasing and marketing power

• They can cover more destinations (flight locations) by joining forces

• They can grow through diversification

Internal economies of scale are those that

• Generate lower unit costs of production

• Increase due to the growth of the industry as a whole

• Reduce production costs in the short run

• Result from changes in production techniques

Horizontal integration occurs when

• A firm acquires or mergers with another firm at the same stage of production

• A firm acquires or mergers with another firm operating in a different stage of production

• Two or more firms that are in direct competition decide to merge

• Two or more firms that are not in direct competition decide to merge

An advantage, to the buyer, of a takeover bid includes

• A. Changes to corporate culture

• Changes to the corporate identity

• Possible staff redundancies

• Potential market dominance