Transcript ###Business Growth - PowerPoint Presentation

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Business Growth
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Business Growth
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Financing Growth
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Financing Growth
• To grow a firm needs to be able to
expand – plant, equipment,
buildings, human resources, etc.
• To do this it needs to acquire
finance
• There are two basic sources:
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Internal Sources
Firms like Marks and Spencer have been around
for many years, their growth has been primarily
internal but has taken time.
Copyright: Les Powell, http://www.sxc.hu
• Private funds –
personal savings
• Profits – retained
profit ploughed back
into the business.
This assumes
the business
is successful
• Internal sources
tend to mean
growth is slower
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External Sources
• Loans – from banks
and financial institutions
• Venture Capital – specialist groups
who provide capital – may take over
ownership of the firm, build it up
then sell it on at a profit in a few years
• Leasing – allows a degree of flexibility
in finance arrangements
• EU/Government Grants
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Overtrading
• Sudden growth can mean
a sharp increase in demand – or be
the result of it!
• The firm may try to cater for this
growth but not be able to meet demand
• Investment may be made in new
capacity which incurs extra cost but
customers may not pay at the same
rate leading to cash flow problems
and possible insolvency
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External Growth
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Takeovers
• One firm buying/securing a controlling
interest in another, the taken over firm
may lose its identity (e.g. Morrisons
takeover of Safeway will eventually lead
to the disappearance of the name ‘Safeway’)
• Horizontal – a business at the same stage
of the production process
• Vertical – a firm at different stages
of the production process.
– Forwards – towards the market
– Backwards – towards the source
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Mergers
• The amalgamation of two or more firms
• Each firm may retain some degree
of identity – e.g. Cadbury Schweppes,
– Horizontal mergers – at the same
stage of the productive process
– Vertical – at different stages
of the productive process
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Conglomerate Growth
• Conglomerate Growth
– the acquisition of firms
in different production
areas from its core
market – Kingfisher own
Comet, B&Q,
Woolworths, MVC and
Screwfix
Many people may not have recognised Kingfisher plc as a ‘business’ but are likely to have heard of the
branded businesses they own. Sponsorship of Dame Ellen MacArthur’s sailing exploits have helped raise
the group’s profile.
Title: Vendee Globe Challenge. Copyright: Getty Images, available from Education Image Gallery
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Internal Growth
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Internal Growth
• Internal growth can come from:
– Innovation – new product development, new processes,
new systems, etc. which can improve the efficiency
of the firm
– Competitive Advantage – the means by which a firm
is able to make itself stand out from its rivals –
innovation could be one source of competitive advantage
• Others might include:
–
–
–
–
–
–
After sales service
Quality
Price
Cost advantages
Brand image
Environmental consciousness
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Managing Growth
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Managing Growth
• Businesses are human organisations –
humans are difficult to manage!
• Larger organisations may suffer
from diseconomies of scale
• Larger organisations may necessitate
changing roles for the
managers/leader/owners
• There may be a divorce between
ownership (the shareholders)
and control (the Board)
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