Page 40 - Cambridge IGCSE Business Studies

Cambridge IGCSE Business Studies Section 1 Understanding business activity

■ Conglomerate integration is the bringing together of two businesses who are in
completely different industries, for example a cosmetics manufacturer and a soft

drinks manufacturer.

Horizontal Integration
Primary Business Primary Business
Secondary Business Secondary Business

Tertiary Business Tertiary Business

Forward Vertical Integration
Manufacturer Retailer

Backward Vertical Integration
Producer Supplier

Conglomerate Integration
Business in Industry A Business in Industry B
Figure 3.6 Horizontal, forward vertical, backward vertical
and conglomerate integration

ACTIVITY 3.3
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1 Copy and complete the table below.

Form of integration Business activity Business activity

Forward vertical Oil refining
Conglomerate Restaurant
Large car manufacturer Small car manufacturer

Backward vertical Fruit canning
Fast food outlet Supermarket
Overseas holidays Travel agency

2 Explain the main advantage to the fruit canning business of backward vertical integration.
3 What do you think is the main advantage of conglomerate integration?
4 What is the advantage to the overseas holiday business of integration with a travel agency?
5 Discuss the advantages to both the large and small car manufacturers of their integration.

Problems linked to business growth

Although businesses benefit from growth, there may also be problems.
■ Internal growth is usually slow. There is a risk that other businesses, using
an external growth strategy, grow much faster. These larger firms may then
dominate the market and remove the opportunity for other businesses to expand.
■ When two separate businesses are brought together, managers and workers in
each business may fear loss of their jobs or status. This is particularly the case if one