Growth and Evolution Worksheet

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<ul><li> 1. UNIDAD EDUCATIVA BILINGUE NUEVO MUNDO WORKSHEET FOR ING 01 VER 15 04 11 Teacher: Alex Arancibia Name: Course: Section: Subject: Business &amp; Management Date: . Activity: Growth and EvolutionRead the case below and answer the questions that follow GROWTH STRATEGY IN DISPUTE AT TRAFFIC CLOTHING PLCTraffic Clothing plc produces suits and dresses and sells them to major retailers in several countries.Sales turnover has grown by around 15% each year for the last decade a slower rate than somecompetitors. Traffics low prices have been possible due to the opening of low-cost factories indeveloping countries. This internal growth strategy was supported by most of the directors. Theybelieved that it had been achieved without excessive external borrowing. There were some realcauses for concern, however. Sales revenue was increasing, but profits were unchanged for the lastthree years. This was due to several factors. First, new competitors were entering the clothing marketand driving down prices. Secondly, raw material prices for both natural and manmade inputs wererising. Lastly, the number of mergers between large clothing retailers had increased their bargainingpower when dealing with producers like Traffic. Major shareholders in Traffic were not happy withthe directors growth strategy. At the last board meeting, the finance director proposed a policy ofrapid external growth. He argued that this could be achieved by aggressive takeovers of either otherclothing producers or material suppliers to achieve cost leadership. The marketing director suggestedfocusing on a smaller, higher-income market segment. This could be reinforced with a merger with aprestige clothing retailer. Our own shops will give us real power in the high street as we will be ableto offer customers a top quality shopping experience this will allow differentiation in a crowdedmarket. The chief executive suggested that both directors prepare a detailed report on theseproposals. Source: Business and Management, Alex Smith. 20111 Use the case study to explain the difference between internal and external growth.2 Explain how the business increased sales revenue, yet gained no increase in profits for the last three years.3 Assess the likely advantages and disadvantages of a cost leadership strategy for this business.4 Assess the likely advantages and disadvantages of a differentiation or a focused strategy for this business.Approved by: ________________________ Date: 31jul2012 # of copies: ____ Pages: 1/__ </li> </ul>


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