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Chapter 3-2 Growth & Expansion

Chapter 3-2 Growth & Expansion. Objectives. You will be able to explain how businesses can reinvest their profits to grow and expand You will be able recognize the reasons that cause firms to merge You will be able to identify two different types of mergers. Growth Through Reinvestment.

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Chapter 3-2 Growth & Expansion

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  1. Chapter 3-2 Growth & Expansion

  2. Objectives • You will be able to explain how businesses can reinvest their profits to grow and expand • You will be able recognize the reasons that cause firms to merge • You will be able to identify two different types of mergers

  3. Growth Through Reinvestment • depreciation = non cash charge for the general wear and tear on capital goods • Cash flow = the bottom line, the real measure of profits • Can be allocated to investors (as dividend) or reinvested in the business

  4. Growth Through Mergers • Reasons for merging: • grow faster — desire to be a bigger • business quickly • efficiency—only need one CEO, CFO • etc. • need for new product lines • ex: phone companies bought cable tv • companies to offer internet & phone • as one package

  5. Catch up w/ or eliminate rivals • ex: --Royal Caribbean and Celebrity Cruise • merged to double in size to catch up • to Carnival • --Staples tried to buy Office Depot but • the gov’t said NO—it would reduce • competition too much

  6. Types of Mergers • Horizontal --2 or more firms that produce the same kind of product --ex. Exxon and Mobile Ford and Volvo Disney and Miramax Bell Atlantic & GTE = Verizon

  7. Vertical --firms involved in different steps of manufacturing join together --Ex: oil company owns oil field refineries gas station

  8. Conglomerate • A firm that has @ least 4 businesses EX: Pfizer —makes prescription meds (Lipitor and Viagra), chewing gum (Trident, Dentyne), razors (Schick), cough drops (Halls), breath mints (Clorets and Certs) and antacids (Rolaids)

  9. Household Cleaners• Bounty• Febreze• Mr. Clean• Swiffer Batteries• Duracell Procter & Gamble Feminine Care• Always• Tampax Antiperspirants, Deodorants, & Colognes• Old Spice• Secret Baby & Child Care• Charmin• Children’s Pepto• Clearblue Easy• Dreft• Luvs• Pampers• Pampers Kandoo• Pampers UnderJams• Puffs Beauty – Makeup/Skincare• CoverGirl• Max Factor• Braun• Gillette Complete Skincare• Olay Health Care• Align• Braun• Clearblue Easy• Fibersure• Metamucil• Pepto-Bismol• Prilosec OTC• PUR• Vicks Dish Washing• Cascade• Dawn• Ivory• Joy Laundry & Fabric Care• Bounce• Cheer• Downy• Dreft• Era• Febreze• Gain• Ivory• Tide Oral Care• Braun• Crest• Crest Glide• Crest Whitestrips• Fixodent• Gleem• Scope• Oral-B Hair Care/ Color• Aussie• Clairol• Head & Shoulders• Herbal Essences• Infusium 23• Pantene Body Wash & Soap• Camay• Ivory• Olay• Old Spice• Safeguard• Zest Shaving• Braun• Gillette Fusion• Gillette M3Power• Gillette SatinCare• Gillette Venus Snacks• Pringles

  10. Consumer brands

  11. Multinationals • Corporation that has manufacturing or service operations in a # of different countries Ex: GM, Ford, Nabisco, Mitsubishi, and Sony

  12. = In India

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