There are many different types of external growths. Businesses grow externally by joining hands and combining their resources with other businesses. There are many different types of external growth. Here are the most common types of external growths.
1) Friendly Merger
It is a form of external growth in which two or more firms merge into one willingly. It is a type of growth which happens on friendly terms. In this case, two or more businesses combine their resources and start working as one company. They join hands and grow in size.
2) Hostile Takeover
This is not a friendly external growth. A hostile takeover is a form of external growth where one firm forcibly takes over another firm. This usually happens when a business starts buying the shares of another business. They continue buying the shares and eventually get higher shares in the company. Therefore, the business, in this case, takes over another business forcibly, not on friendly terms.
3) Strategic Alliance
Two or more firms are combined into one in such a way that their individual identity is not lost and they have combined their resources for one project or product without compromising their original identity. This means that a business connects with another business on friendly terms for a purpose. They usually connect to a project or a product. They form a project together and carry their own identities. For example, two construction firms decide to join their hands to construct a bridge together.
Integration also stands for the combining resources of two or more firms. There are many different types of integration. The first one is vertical integration. This means that the firms engage in different stages of the same production process. For example, an oil company takes over a petrol station. Both the companies are still in the same production process and that is the oil. They join hands to work together, this will help the petrol station to get the oil without paying fancy amounts to other random oil companies. Another type of integration is horizontal integration. Similar firms engage at the same stage of production and integrate into one, e.g. two banks combine into one. There are many benefits of this type of integration. The firms that combine into one will be able to decrease the level of competition. The level of competition will decrease.