Business growth and internationalisation

Businesses seek to grow for several reasons: to take advantage of economies of scale, gain market share, negotiate with greater bargaining power with suppliers and customers, and, fundamentally, survive in markets where rivals keep growing. Choose two of these reasons, explain them in your own words, and give an example of each applied to a supermarket chain.

Growth can be internal (or organic: the company grows through its own means) or external (it grows by joining with or acquiring control of other companies). Classify these decisions into one method or the other and justify your answer: building a second factory of its own, acquiring 100% of a competitor, merging with another company in the sector to form a new one, opening three owned stores in other cities, purchasing 30% of a supplier's shares, and signing a logistics alliance with another company without any change in ownership of either.

The diagram summarises the growth paths of a business, with its two main branches and specific forms. An external growth path is missing, marked with "?": think about how many restaurant chains grow without opening their own premises. Identify it, explain what it consists of, and give an example.

A juice company decides to sell more of the same juice by opening its own stores, while another juice company adds biscuits and breakfast cereals to its catalogue. a) Explain what growth strategy each one follows (specialisation versus diversification). b) Point out one reason why each may have chosen its path and one risk it runs with it.

An artisan yoghurt producer launches three new yoghurt flavours; a year later it also starts making cheese, and finally, it buys a farm to supply its milk. a) State what type of growth each step represents (specialisation or diversification, pointing out whether there is backward integration in any of them). b) Explain the advantages and risks of diversifying compared to remaining specialised in a single product.

An electric scooter manufacturer launches a line of electric bicycles and, two years later, enters the travel insurance business. a) Distinguish which launch is related diversification and which is unrelated (or conglomerate) diversification, justifying it by the closeness to its main activity. b) Analyse what advantages it can leverage in the related diversification (battery technology, brand, sales channels) and what risks it runs in the unrelated one by entering a sector it does not know.

An ice cream parlour chain buys the dairy farm that supplied its milk and also opens its own sales stalls on the seafront promenade, where it previously sold through third-party kiosks. a) Identify what type of vertical integration each move represents: backward (towards the supplier) or forward (towards the customer). b) Explain what the company gains with each of the two moves.

Merging, acquiring, and allying are not the same thing. Identify which operation describes each case and explain what happens to the ownership and control of the companies involved: a) two medium-sized banks merge by dissolving and creating a new bank; b) a large clothing chain buys 100% of a small brand, which becomes its property; c) a bottling company buys 25% of a recycled plastics company to secure supply; d) two airlines agree to code-share routes and sell tickets for each other, without either buying the other.

Distinguish, with invented examples from the telecommunications sector, between a pure merger (two companies dissolve and together create a new company) and a takeover (one company buys the other, which disappears integrated into the buyer). Then explain what each company may seek with the operation and what the employees and customers of the acquired company usually fear.

An opticians' chain wants to grow and is studying two paths: opening five new stores itself, one each year, or buying a small chain that already has five stores operating. a) State which growth path each option represents (internal or organic versus external). b) Compare both paths in terms of speed and effort required, and reason which you would choose if the chain is in a hurry to gain market share.

A very successful coffee shop wants to expand nation-wide, but does not have the capital to open its own premises nor wants to take on debt. a) Explain what the franchise system consists of and what the franchisor provides versus what the franchisee provides. b) State two advantages and two risks of growing this way for the coffee shop (speed and cost versus control over the brand and quality).

FitLife is a chain of 15 'premium' gyms that has sustained profits, but whose level of bank debt is bordering on the admissible limit after its latest investments. Its Board of Directors approves the strategic objective of reaching 30 centers within a non-extendable period of two years to block an international competitor. Three options are being considered: 1) build and open 15 self-owned gyms; 2) acquire a rival chain of 15 'low-cost' gyms facing financial difficulties; 3) franchise its commercial brand.

1. a) Analyze the feasibility of each of the three options in light of the case's constraints (two-year deadline, debt limit, and 'premium' brand positioning). Reasonably determine which ones should be discarded and why.
2. b) Recommend and justify the most appropriate path (or a coherent combination) to meet the established objective.
3. c) Design two specific control mechanisms that FitLife's management must implement to prevent the chosen option from deteriorating service quality and brand reputation.

A winery starts selling its wine outside its country. Explain the difference between exporting (producing at home and selling abroad) and setting up abroad (producing directly there), and point out one advantage and one disadvantage of each entry method for the winery (investment required, risk, control over sales).

Explain what a multinational company is and how it differs from a company that simply exports its products. Give an example of each case and point out two effects, one positive and one negative, that multinationals can have on the countries where they set up.

A Spanish fried tomato sauce company wants to enter an Asian country whose market it does not know and whose legislation requires local partners. It decides to create, with a company from there, a new company owned 50/50, which will manufacture and sell the product in the country. a) Identify this form of cooperation (joint venture) and explain what each partner contributes to the project. b) Point out two advantages of entering the market this way and two possible conflicts of sharing control of the new company.

A biscuit factory produces 100 000 packets a month with fixed costs of $60.000\ \text{€}$ a month and a variable cost of $0,80\ \text{€}$ per packet. a) Calculate the average cost per packet. b) If, after growing, it produces 200 000 packets a month with the same fixed costs, calculate the new average cost. c) Explain, with these numbers, what economies of scale are and why they push businesses to grow.

The bakery chain 'Dulce Expansión' has grown from 10 to 40 locations in four years, quadrupling its revenues. However, it has just filed for insolvency. Upon examining its accounts, it is found that the openings were funded through bank credit facilities and 12-month loans, accumulating a short-term debt of 4 million euros against a current asset of only 1,5 million euros.

1. a) Resolve the apparent paradox: how can a company go bankrupt precisely in the financial year in which it reaches its historic sales record? Use the concepts of operating cycle, Working Capital Needs (WCN), and working capital in your explanation.
2. b) Identify the structural financial error committed and explain how it has violated the principle of financial prudence or financial matching.
3. c) Design an alternative and sustainable financial plan that would have allowed the expansion to be undertaken without strangling the company's treasury, justifying which sources of financing should have been used.

An independent video game development studio started with 6 programmer friends who shared decisions in an open space without defined job titles. Following the international success of their first game, the workforce expanded to 60 employees in just three years. Currently, the founder works 14 hours a day overwhelmed by routine decisions, new projects accumulate weeks of delays, veteran designers resist following instructions from newly hired team leaders, and the work environment has deteriorated.

1. a) Diagnose the causes of the breakdown: explain why an informal and centralized organizational structure, optimal for 6 workers, fails when the size of the company increases.
2. b) Design a formal organizational structure for the company: define at least three key departments, establish the necessary hierarchical levels, and specify which operational decisions should be delegated to relieve the founder.
3. c) By formalizing the structure and establishing a hierarchy of processes, what original competitive advantages (such as agility or creativity) does the studio risk losing? Propose two concrete people management measures to preserve the original innovative spirit.