Document translated from Shona to English

1a) Explain the methods a business might adopt to achieve GROWTH. [10]

Growth refers to the expansion of a business in size.

Business growth can be achieved in a number of ways and these forms of growth can lead to
different effects on stakeholder groups such as workers, customers, competitors and the
community. Growth can be classified into two; internal growth and external growth. Internal growth
can be referred to as Organic growth and external as Inorganic growth.

INTERNAL GROWTH (Organic): This is the expansion of a business through opening of new branches
or subsidiaries e.g. if TM Pick n Pay opens new outlets in Nyakatsapa and Murambinda, this will be
internal growth. This growth can be quite slow with perhaps only a few branches opening each year.
However, it can avoid problems of excessively fast growth which can lead to shortages of working
capital.

EXTERNAL GROWTH (Inorganic): It is the expansion achieved by means of merging with or taking
over another business, from either the same or different industry. With a TAKEOVER, a business will
buy more than 50% of the shares of another company. There are two types of takeover and these
are hostile and mild takeover. Hostile takeover is when the new business takes over management
and employs new staff altogether. Mild takeover is when only a few or no changes are made and
original owners often remain in charge of the company. A MERGER is an agreement by shareholders
and managers of two businesses to bring both firms together under a common board of directors
with shareholders in both businesses owning shares in the newly combined business. Mergers exist
in three forms; conglomerate, horizontal and vertical integration. Conglomerate integration is
integration with a business in a different industry. Horizontal integration is when two firms in the
same industry and at the same stage of production combine. Vertical integration can be forward or
backward. Forward vertical integration is when an existing firm merges with a customer of the
business e.g. Unilever and Spar. The business will now be able to control the promotion and pricing
of its products. Backward vertical integration involves the merging of a firm and its supplier e.g.
Ferrari combining with Ferodo which makes car brake parts. Ferrari will now be able to control
quality and delivery of brake parts from Ferodo.