Fig. 1 shows how a regional furniture retailer plans to grow. It will buy a smaller furniture retailer that sells similar products in the same country. Both...
Question 1 Report
Fig. 1 shows how a regional furniture retailer plans to grow. It will buy a smaller furniture retailer that sells similar products in the same country. Both businesses sell sofas, tables and beds to households.
(a) Identify the type of external growth shown in Fig. 1. [1]
(b) Explain one benefit of this type of growth for Oakline Furniture. [2]
(c) Which business is most likely to lose its separate identity after the purchase? [1]
(d) Explain one possible problem caused by the growth. [1]
Answer Details
(a) This is horizontal integration, also called a horizontal merger or takeover. Both businesses sell similar furniture products at the same stage of production and distribution. [1]
(b) Oakline gains HomeNest’s customers and outlets. It can therefore increase its market share and sales more quickly than if it had to open and establish new stores itself. [2]
(c) HomeNest Furniture is most likely to lose its separate identity after being purchased by Oakline. [1]
(d) Staff and managers from the two businesses may have different ways of working. This can cause conflict while the businesses are integrated. [1]
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