1. Why have LIDL decided to grow and expand?
Starter
Why have LIDL decided to grow and expand?

2. Why grow?
If a business has a popular product or meets customer needs, expansion is sensible.
It can enable a business to increase its turnover and profits.
If output increases = unit costs reduced – Economies of scale
Competitive advantage over smaller rivals as can charge lower prices

3. Organic Growth
Expansion of a single business by extending its own operations rather than by a merger or a takeover
Slower but more secure
Example: Coca Cola
Expanded by opening new facilities of their own
Organic growth; Expanding by opening new facilities of their own, through their own profits and expansion. (Franchises Coco-cola, McDonalds)

4. Inorganic Growth
Inorganic growth; refers to expansion by merger and takeover.

5. Types of integration
1) A takeover / acquisition – this involves one business taking control of another business following a buyout of their shares. 
2)  A merger – this is the process of two businesses joining together and is usually by consensual agreement to merge. 
Different types of integration – table pg 10

6. 2 mins
Why Merge?
On your whiteboard write down the reasons you may think that a business might want to merge.
What are the advantages or disadvantages of a merger?
Extension Task:
Are there any disadvantages to growing the business?

7. Synergy
The concept that the value and performance of two companies combined will be greater than the sum of the separate individual parts
2+2=5

8. How is synergy gained?
Access to larger market share – horizontal integration
Remove uncertainty – merge with supplier or customer – vertical integration
Benefit from economies of scale
Greater Market power
Monopoly power – price makers
Monopsony power – control over suppliers

9. Monopoly Power Increasing share of market = acquire market power
Expanding by mergers/takeovers removes rivals from the market
Fewer rivals to challenge for customer = greater influence over market price

10. Monopsony Power
Larger business = stronger position negotiating with suppliers
Monopsony Power = single buyer. Buyers have control over their suppliers and can force them to reduce prices or lose their contracts
Example: Supermarkets squeezing suppliers’ margins and unfriendly contract terms – are there ethical issues here?

11. Summary
Copy table pg 8

12. Conflicting pressures
Consider the stakeholders that would be winners and losers in a proposed merger between two rival business