Business Growth & Expansion

Brainstorm the following vocabulary terms and come up with speculative definitions: 1.Merger – 2.Horizontal merger – 3.Vertical merger – 4.Conglomerate – 5.Multinational –

Net Income Net Income are the funds leftover from revenues after the company deducts expenses and taxes. Depreciation is the non-cash charge taken for the wear and tear on its capital goods. Cash Flow is the combination of net Income and Depreciation. Reinvesting Companies takes this money and improves their facilities and operations by re-investing this money in themselves. However, they sometimes use these funds to buy other companies who do the same thing they do or a supplier. This is considered mergers and acquisitions. CASH FLOWS

Merger – Is the combination of two or more businesses to form one single firm. Business Combinations When two or more businesses merge, sometimes they combine their name (i.e. AOL/Time Warner, DaimlerChrysler, PriceWaterhouseCooper) Sometimes the stronger company that bought out the other company and merged, changes the weaker company’s name to theirs (i.e. Huggies diapers, buys out Dasani water = Huggies Sparkling Water). Lastly, some companies that merge are one company, have one legal identity, but keep separate names. Why? Business Growth & Expansion

Reasons for Merging Growth through Reinvestment (Become Larger) Reinvestment is taking the company’s profits (net income) and using that money for growth and expansion. Growing through Mergers (Efficiency) Acquisition of another company also known as a merger allows the company to grow faster than it can grow by reinvestment. Business Growth & Expansion

Horizontal Mergers Horizontal Mergers – between companies that produce the same types of goods or services. Examples? Vertical Mergers Vertical Mergers – between companies involved in different steps/types of manufacturing or marketing process. Examples? Business Growth & Expansion McKing’s Bountysoft

Conglomerates Conglomerate – is a firm made up of many unrelated divisions or subsidiaries. To qualify as a conglomerate the firm must own four or more different companies, none of which contribute a majority of its sales. Diversification is one of the main reasons to form conglomerates. Multinationals Multinational Business – is a firm that sells and produces products in multiple countries. They are important because they can move resources, financial capital, and goods and services. Business Growth & Expansion

Conglomeration

You are the CEO (Chief Executive Officer) of any corporation of your choice in Wheaton, IL or immediately surrounding towns. You are going to merge horizontally once and vertically once with any other corporation in Wheaton. However, with the merger, you have strategically planned to lay some people off to increase your cash flow. Write an article to the Wheaton Bulletin naming your company, the two companies you plan to merge with, and why the merger is taking place using economic terms from this section. The purpose of this article is to justify the mergers from your point of view; however without offending people of the local community or creating panic. (Be specific, use complete sentences). Assignment