Practise IB Business Management SL/HL 1.5.2 by applying internal and external growth concepts to exam-style questions.
Henri Trouvé’s father operated a small hardware business as a sole trader. His unique selling point was personal customer service, especially free delivery to customers’ homes and workplaces. Todos os Mercados (TM) is a public limited company whose main aim is to have the lowest prices in the market. It uses lean production, just-in-time, outsourcing and strict control to reduce costs; it has expanded mainly through internal growth by opening stores, widening its product range and entering services. Its marketing strategy supports the low-price position and one-stop shopping concept. TM’s hypermarket made Henri’s business go into liquidation when he could not obtain external finance.
Explain the advantages for TM of internal growth rather than external growth.
Advantages include:
- more able to retain more control
- easier to manage and coordinate
- no need to seek synergy
- can use tried and trusted managers
- creates career opportunities for employees with a known employer
- franchising was unsuccessful
- has enabled TM to expand stores, services and markets
- possible retention of future profits
- accept any other relevant advantage.
Explanation should come from at least two advantages stated.
Relevant stimulus material includes: unsuccessful franchising; successful expansion into new stores/markets/services; its systems of rigid controls which would be easier to maintain and might not work through external growth.
Marks should be allocated according to the markbands on page 3 with further guidance below.
Award a maximum of [3] for a theoretical answer, or for only explaining one advantage.
Award a maximum of [5] if the explanation of at least two advantages are not developed but in context.