Business Growth & Expansion
Brainstorm the following vocabulary terms and come up with speculative
definitions:
1. Merger –
2. Horizontal merger –
3. Vertical merger –
4. Conglomerate –
5. Multinational –
http://www.youtube.com/watch?v=6WS-NtVKwDk&feature=relmfu
Business Growth & Expansion
Merger – Is the combination of two or more businesses to form one single firm.
Business Combinations
• When two or more businesses merge, sometimes they
combine their name (i.e. TomberTapp)
• Sometimes the stronger company that
bought out the other company and merged,
changes the weaker company’s name to theirs
(i.e. Huggies diapers, buys out Dasani water
= Huggies Sparkling Water).
• Lastly, some companies that merge are one company, have
one legal identity, but keep separate names. Why?
Business Growth & Expansion
Reasons for Merging
• Growth through Reinvestment (Become Larger)
Reinvestment is taking the company’s profits (net income) and using that
money for growth and expansion.
• Growing through Mergers (Efficiency)
Acquisition of another company also known as a merger allows the company
to grow faster than it can grow by reinvestment.
Business Growth & Expansion
http://www.youtube.com/watch?v=XmOFbk1aVbw
Horizontal Mergers
•Horizontal Mergers – between companies that produce the same types of
goods or services.
Examples?
McKing’s
Vertical Mergers
•Vertical Mergers – between companies involved in different steps/types of
manufacturing or marketing process.
Examples?
Bountysoft
Business Growth & Expansion
Conglomerates
Conglomerate – is a firm made up of many unrelated divisions or
subsidiaries.
•To qualify as a conglomerate the firm must own four or more different
companies, none of which contribute a majority of its sales.
•Diversification is one of the main reasons to form conglomerates.
Multinationals
•Multinational Business – is a firm that sells and
produces products in multiple countries.
•They are important because they can move
resources, financial capital, and goods and
services.
Conglomeration
Assignment – Due Tomorrow, 11/12
You are the CEO (Chief Executive Officer) of any corporation of your choice in
Baldwin or Woodville, WI.
• You are going to merge horizontally once and vertically once with any other
corporation in Baldwin or Woodville.
• However, with the merger, you have strategically planned to lay some people
off to increase your cash flow.
• Write an article to the Baldwin Bulletin naming your company, the two
companies you plan to merge with, and why the merger is taking place using
economic terms from this section. The purpose of this article is to justify the
mergers from your point of view; however without offending people of the
local community or creating panic. (Be specific, 8-point paragraph, TYPED (I
will not accept written work!), 12-point/Times New Roman, double-spaced.
• Also, Quiz tomorrow (Short-One).