IB Business & Management Revision Workbook – ANSWERS
1.7 Growth and Evolution
U nit 1 .7
Grow th a n d Ev olut io n
Task 1 - Complete the missing words…
retained
organic
acquiring
inorganic
external
takeover
joint venture
cost
average
purchasing
optimum
Task 2 – Vocab Quiz
Key Term
Acquisition
Conglomerate
integration
Franchises
Horizontal Integration
Inorganic growth
Integration
Merger
Strategic alliance
Task 3 – Economies and Diseconomies of Scale
a.
There are relatively higher barriers to entry in the pharmaceutical trade, e.g. licensing, patents and
government restrictions.
b.
Traffic congestion, escalating rents, higher market wage rates...
1
IB Business & Management Revision Workbook – ANSWERS
1.7 Growth and Evolution
Task 4 - True or false?
True / False
a.
F
b.
T
c.
T
d.
T
e.
F
f.
T
g.
F
h.
F
i.
T
Task 5 – Ansoff’s Matrix
a. True
b. True
c.
Diversification
d. Product Development
e. Diversification
f.
Market Penetration
g. Product Development
h. False
New
Existing
New
Diversification
Product Development
Existing
Products
Markets
Market Development
Market Penetration
j.
A saturated market suggests that sales may experience decline as a product reaches the end of its
life cycle; There will be established market leaders in a saturated market and hence entry might be
futile.
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IB Business & Management Revision Workbook – ANSWERS
1.7 Growth and Evolution
k.
Diversification entails entering new markets with new products – both of which are unfamiliar to the
organisation since they lack experience and/or know-how.
Task 6 – Explain the difference between
a.
The franchisee is the buyer of a franchise whereas the franchisor is the seller.
b.
Management buy-in occurs when external investors buy a controlling interest in an organisation in
order to take control; Management buy-out occurs when the internal (management) investors buy a
controlling interest.
c.
Acquisitions (or takeovers) tend to be hostile and occur when the buyer has purchased a controlling
interest (majority stake) in the target firm. Mergers occur when two (or more) firms agree to
amalgamate as a new company.
Task 7 – Economies and Diseconomies of Scale Multiple Choice
1.
C.
Enjoy economies of scale
2.
A.
The exercise of control by managers being weakened with a larger workforce
3.
C.
There is sufficient market demand for the product
4.
A.
Industry, location
5.
B.
Potential diseconomies of scale
6.
B.
Economies of scope
7.
A.
Internal diseconomies of scale
8.
C.
Specialised back-up services available in a particular region
9.
C.
Acquisition
10.
D.
Late deliveries due to congestion in busy locations
11.
C.
Decreasing returns to scale
12.
B.
Mergers and acquisitions
13.
D.
Ferrari (luxury car manufacturer)
14.
D.
To minimise internal communication problems
15.
C.
Generate lowering unit costs
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IB Business & Management Revision Workbook – ANSWERS
1.7 Growth and Evolution
Task 8 – External and Organic Growth Multiple Choice
1.
D.
Profits from the venture can be shared equally
2.
B.
Focused marketing
3.
D.
Lowest cost supplier with image for high quality
4.
D.
Market extension
5.
B.
Economies of scale that may be achieved
6.
D.
Better management control
7.
B.
A firm acquires or merges with another firm at the same stage of production
8.
D.
Opportunities
9.
A.
Organic growth
10.
B.
Right to trade using another firm’s products, name and image
11.
B.
Horizontal integration
12.
C.
Agree, external
13.
B.
Increased staff turnover
14.
D.
It is suitable for firms looking to grow rapidly
15.
D.
Choice of finance options
16.
C.
A joint venture
17.
B.
Diversification
18.
B.
Franchisors have little if any control over the way the franchise operates
19.
A.
Market Penetration
20.
D.
Corporate culture
21.
D.
Potential market dominance
22.
C.
Joint venture
23.
D.
Franchising is considered as a form of internal growth
24.
C.
Product development
25.
A.
Market penetration
26.
B.
Market development
27.
C.
They can grow through diversification
28.
B.
Cost leadership
29.
A.
Brand acquisition
30.
C.
Horizontal integration
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