Benefits of External Growth

• Faster way to grow and evolve

E.g. if a chain of supermarkets merges with another chain, then this is much quicker than having to buy or rent new land to open more outlets.

• quick way to reduce competition in a market

E.g. taking over a rival, a firm is able to eliminate a competitor

allow the new larger firm to have greater market power

• can bring out greater market share with its associated benefits

• can generate new skills, experiences, and customers

Working with other businesses and sharing of good practices and ideas.

• Can help a firm to evolveSpreading risks across several distinct markets firms can benefit from risk-bearing

economies of scale

Strategic Alliances

Definition

• A strategic alliance is similar to a joint venture in that two or more business seek to form a mutually beneficial affiliation by cooperating in a business venture.

Advantages1. Share the cost of product development,

operations and marketing.

2. Gain synergy from the different strengths of the members and the pooling of their resources

• E.g. the partners can benefit from each other’s expertise and financial support.

3. Gain more creditability and brand awareness

4. By working on a larger scale, the members of alliance can all gain from economies of scale such as purchasing and marketing economies.