IGCSE, A Level Business Student Forum

Q20 Analyse the benefits of mergers as growth strategies to a business. [6]

Possible Structure:
[KN]
[AN]
[AN+]

[KN]
[AN]
[AN+]

[KN] Economies of Scale.
[AN] Mergers can result in cost savings due to economies of scale. When two companies combine, they can often reduce duplicate functions, share resources, and negotiate better deals with suppliers.
[AN+]This can lead to reduced costs per unit, making the business more competitive.

[KN] Access to New Technologies and Skills
[AN] Mergers can provide access to new technologies, expertise, and skills that the merging companies might not have possessed individually.
[AN+] This can lead to innovation and improved product development.

[KN] Increased Market Share
[AN] Combining with another company can lead to a larger market share, which often results in enhanced competitiveness.
[AN+] thus leading to increased output thus business expands further

[KN] Economies of Scale
[AN] Merged companies can achieve cost savings through economies of scale, reducing the average cost per unit of production.
[AN+] this can lead to cost savings and business will become to competitive

KN: Increased Market Share
AN: Merging with another company can lead to a significant increase in market share, allowing the merged entity to dominate its industry
AN+: expand into new markets
KN: Diversification
AN: Merging with a company in a different industry or with complementary products/services can diversify a business's portfolio
AN+ : reducing risk and dependency on a single market.

[KN]market expansion
[AN]Mergers allow a business to enter new markets.This may beneficial when a business aims to diversify its customer base
[AN+]This leads to higher customer base and is quicker and more efficient than organic expansion

[KN]Improving brand image
[AN]Merging with a well known business can lead to a positive impact on the business
[AN+]This may lead to business charging high prices for a product due to the reliability of their product in the eyes of customers

[KN]Market Expansion and Access
[AN] Mergers provide an opportunity for businesses to expand their market reach by entering new geographic areas or accessing new customer segments
[AN+]This leads to higher sales and revenue

[KN]Diversification and Risk Mitigation
[AN]Mergers allow businesses to diversify their product or service offerings, customer base, and market exposure.
[AN+]This diversification can reduce the overall risk associated with being heavily reliant on a single market or product line.

[KN] Increased Market share
[AN] Mergers and acquisitions can rapidly increase a company's market share, allowing it to become a more dominant player in its industry.
[AN+] This can lead to improved pricing power and competitiveness.

[KN] Economies of scale
[AN] Combining resources and operations through mergers can result in significant cost savings due to economies of scale.
[AN+] Larger companies often have lower unit costs and increased efficiency.

(Kn) share of risk (an) since everything is shared in a merger the chance of failing not only decreases but the cost of failure reduces too(an+) this can not only help the business in times of failure as both can pitch in but they also help to keep each other stable if the product does fail
(Kn)economies of scale(an) when a business expands it benefits from lower long run average cost(an+) such can be seen that when a firm buys goods in bulk a disvoun Will be offered lowing costs and hence lowering prices which in turn increase sales

(kn)increase power
(an)as it makes you the stakeholder of another company their companies shares and your companies share combined make you more powerfull
(an+)making you the lead shareholder
(kn)eliminate completion
(an) the company might have been a competitor and by merging with it, it could have decreased completion
(an+)and also decrease advertising cost

[KN] Increased in advancement in technology
[AN] with an increase in capital the firms will be able to buy new machinery for production
[AN+] this would help them expand even further

[KN] Finishing competition
[AN] and business may mergers with an competition
[AN+] this would lead to gain more market share

[KN] Economies of scale.
[AN] As the combined entity becomes larger, it can reduce per-unit costs leading to achieving buying economies of scale.
[AN+] Thus this will result in improvement in efficiency and enhance profitability.

[KN] Strengthened brand and reputation.
[AN] Combing the reputations and brand image of both the merging companies will lead to a stronger overall brand identity.
[AN+] Thus this will result in customer trust and loyalty.

(KN) Market Expansion and Access
(AN) Mergers provide an opportunity for businesses to expand their market reach by entering new geographic areas or accessing new customer segments
(AN+) This leads to higher sales and revenue

(KN) Diversification and Risk Mitigation
(AN) Mergers allow businesses to diversify their product or service offerings, customer base, and market exposure.
(AN+) This diversification can reduce the overall risk associated with being heavily reliant on a single market or product line.

[KN]Economies of scale
[AN] when large quantities of output is produced,cost is spread on each unit leading to low avg cost
[AN] hence profit margins can be increased


[KN]high market share
[AN] in a merger customers of the merged business combine and so one business now sells to all of them
[AN] leading to high sales for the new business

Kn] economies of scale
[An] when two business merge with each other they tend to produce a larger output because of which they buy raw material in bulk getting bulk discount
[An+] hence reducing its cost per unit and increasing profits

[Kn]Avoid duplication
[An]Consumers could benefit from a single firm with lower costs.
Avoiding duplication would have environmental benefits and help reduce congestion.

[kn] increase service offering
[an] by merging it helps a business fill in gaps of a businesses service offerings which may have been affected by a change in rules or regulations
[an+] which would help expand even further
[kn] reduces reliance on single product
[an] merging helps diversify investments and therefore reduce risks
[an+] which helps the company be surer and thus more successful