1.4 Business expansion Forms of business expansion Expansion 1. forms ....................................... takeover/acquisition merger (friendly or 3. external = 2. .......................................) 4. ....................................... Types of expansion Businesses constantly aim to grow in order to increase their profits and expand their sphere of influence, and they can do so either: internally, by changing their legal status (and becoming incorporated, for example), raising more capital, entering new lines of production, increasing efficiency, and modernising, or externally, by combining with other companies; this type of growth is known as integration. ONLINE RESOURCES Corporate raiders and bankruptcies backward: all indietro conditioner: balsamo forward: in avanti merger: fusione tile: piastrella 40 Forms of integration A company can integrate with other companies in the following ways: Takeover or acquisition. This takes place when one firm accumulates enough shares of another company to take over its control and ownership. Such an operation can be: friendly, when both companies agree to the acquisition, hostile, when the target company is opposed to being purchased but cannot stop the process. Acquired companies may keep their names and features especially if they are well-known on the market but change ownership; Merger . This is when two existing companies, which usually operate in the same sector and are of similar size, decide to join together to form one new, bigger company. ....................................... types horizontal vertical (5. ....................................... or forward) 6. ....................................... Joint venture. This is an agreement between two or more companies to work on a new project together by sharing their expertise, management, costs, profits and risks for a limited period of time, usually until their objectives have been achieved. Each company keeps their separate identity, and another specific business organisation is temporarily created. Types of integration Integration can occur in three different ways depending on the companies which combine together. Horizontal integration occurs when the businesses are competitors and work in the same sector; it aims to reduce competition and improving production. Vertical integration occurs when the companies operate in same sector but at different stages in the production or distribution chain. It can be: backward , when the other company is at a previous stage in the chain; forward , when the other company is at a later stage in the chain. It aims to reduce costs, getting greater control over supplies or better access to distribution channels; Conglomerate integration occurs when the businesses that combine are involved in completely different sectors and want to diversify their activities.