Business Growth: Internal and External Strategies and Constraints

The video tutorial explores why businesses grow, focusing on profit, economies of scale, and market share. It distinguishes between internal (organic) and external growth, including mergers and acquisitions. The stages of production—primary, secondary, and tertiary—are explained, along with types of integration: horizontal, vertical, and conglomerate. Constraints on growth, such as market size and regulation, are discussed, as well as the concept of demergers.

What is one of the primary reasons firms seek to grow?

• To reduce their workforce

• To earn larger profits

• To decrease market share

• To increase operational costs

What is internal growth also known as?

• External growth

• Organic growth

• Inorganic growth

• Horizontal growth

Which of the following is a characteristic of horizontal integration?

• Firms reduce their market share

• Firms in different industries merge

• Firms at different stages of production merge

• Firms in the same market and stage merge

What is a potential benefit of horizontal integration?

• Decreased market power

• Economies of scale

• Higher managerial costs

• Increased competition

What does vertical integration allow a firm to control?

• Its employee salaries

• Its competitors

• Its market size

• Its supply chain and distribution

What is an example of backward vertical integration?

• A manufacturer buying a supplier

• A retailer buying a manufacturer

• A retailer buying another retailer

• A supplier buying a retailer

What is conglomerate integration?

• Merging with firms in the same industry

• Merging with firms in different industries

• Merging with firms to reduce size

• Merging with firms at the same production stage

Why might a firm choose to demerge?

• To increase its market share

• To increase its workforce

• To focus on core products

• To expand into new markets

What is a potential consequence of a demerger for consumers?

• Reduced product choice

• Increased product prices

• More competition and choice

• Decreased service quality

What can prevent a firm from continuing to grow?

• Unlimited market size

• Lack of financial resources

• Excessive competition

• Abundant government support