Question

Exam Style Questions

Answer 1

Answer:

a) What is meant by 'takeover'?

In this context, a takeover means vertical integration, either backwards (buying a supplier, in this case, the phone manufacturer), or forwards (buying a distributor, in this case, the retail store).

b) Identify two other ways a business might grow apart from takeovers.

Businesses can grow by internal expansion: by pouring their own resources into a new business division, a new product, a new sector, and so on.

Businesses can also grow by forming strategic alliances with other companies.

c) Identify and explain two reasons why external groups would be  interested in measuring the size of businesses such as TelCom.

Investors, as an external group, are interested in measuring the size of the business in order to determine is value, and decide if investing in the business is a good decision or not.

The government, as an external group, is interested in measuring the size of the business simply to determine how many taxes to impose on it.

d) Identify and explain two possible reasons why senior managers at

Telcom want to expand the business.

They may want to expand the business because they want to increase profits, and larger companies almost always have larger profits than smaller ones.

They also may want to expand the business in order to meet some other corporate strategy goal, like reducing costs, or achieving a specific amount of sales.

e) How should TelCom expand - taking over a phone manufacturer or a

chain of shops selling mobile phones? Justify your answer.

They should do what is most profitable. Apparently, the retail business is less profitable than the mobile manufacturing business, so under this scenario, TelCom should integrate backwards, and buy the manufacturer.