Test: Enterprise Growth Strategies- 1 - Commerce MCQ

• Initial investment is the amount required to start a business or a project. It is also called initial investment outlay or simply initial outlay. It equals capital expenditures plus working capital requirement plus after-tax proceeds from assets disposed off or available for use elsewhere.
• Initial investment equals capital expenditures or fixed capital investment (such as machinery, tools, shipment and installation, more) plus a change in working capital, minus proceed from the sale old asset, plus tax adjusted profit or loss from the sale of assets.

Correct steps are:
(iii) Opportunity spotting by analysing the needs and problems that exist in the environment.
(i) Evaluating the ideas received from different sources to find a creative solution.
(ii) Identifying a product or service through innovation.
(iv) Setting up a project and nurturing it to success.

• Amalgamation: An amalgamation is a combination of two or more companies into a new entity. Amalgamation is distinct from a merger because neither company involved survives as a legal entity. Instead, a completely new entity is formed to house the combined assets and liabilities of both companies.
• Absorption: Absorption is defined as the process when one thing becomes part of another thing, or the process of something soaking, either literally or figuratively. An example of absorption is soaking up spilt milk with a paper towel. A paper towel takes up water, and water takes up carbon dioxide, by absorption.

• The terms mergers and acquisitions are often used interchangeably, but they differ in meaning.
• In an acquisition, one company purchases another outright.
• A merger is the combination of two firms, which subsequently form a new legal entity under the banner of one corporate name.
• A company can be objectively valued by studying comparable companies in an industry and using metrics.

A product extension merger takes place between two business organizations that deal in products that are related to each other and operate in the same market. The product extension merger allows the merging companies to group together their products and get access to a bigger set of consumers.
An example of this idea was the acquisition in 2002 of the American-based Eagle Bancshares Inc by the subsidiary of Royal Bank of Canada, RBC Centura Inc.

• Contract Explanation: Contract, in the simplest definition, a promise enforceable by law. The making of a contract requires the mutual assent of two or more persons, one of them ordinarily making an offer and another accepting. If one of the parties fails to keep the promise, the other is entitled to legal redress.
• Operations Manual: The operations manual is the documentation by which an organisation provides guidance for members and employees to perform their functions correctly and reasonably efficiently. The operations manual helps the members of the organisation to reliably and efficiently carry out their tasks with consistent results.
• Proprietary Statements: Proprietary information, also known as a trade secret, is information a company wishes to keep confidential. Proprietary information can include secret formulas, processes, and methods used in production.

Kroc is credited with the global expansion of McDonald's, turning it into the most successful fast food corporation in the world. Due to the company's growth under Kroc, he has also been referred to as the founder of the McDonald's Corporation.

Manufacturing Franchise Opportunity: It provides an organisation with the right to manufacture a product and sell it to the public, using the franchisor's name and trade mark. This type of franchising is very common.
For example, in the food and beverage industry, bottlers of soft drinks, etc.

1. Synergy: (a) It refers to the difference between the value of the combined firm and the value of the sum of the participants,
(b) Synergy accrues in the form of revenue enhancement and cost savings.
(c) For example, if firms A and B merge and the value of the combined entity—V(AB)—is expected to be greater than (VA+VB), the sum of the independent values of A and B, the combined entity is said to be benefitting through synergy.
2. Acquiring new technology: To remain competitive, companies need to constantly upgrade their technology and business applications. To upgrade technology, a company need not always acquire technology. By buying another company with unique technology, the buying company can maintain or develop a competitive edge. For example is a merger
(a) Logistics company such as a land transport entity with an air-line cargo company.
(b) Blackberry and Treo which can incorporate cell phone capability and e-mail connectivity in one device; palm pilots and tablet laptops can provide benefits to both the entities.
3. Acquiring a competency: Companies also opt for M&As to acquire a competency or capability that they do not have and which the other firm does. For example,
(a) The ICICI ITC alliance made the retailer network and depositor base available to the merging entity.
(b) IBM merged with Daksh for acquiring competencies that the latter possessed.

The acquisition of Mobilink Telecom Inc. by Broadcom is a proper example of product extension merger. 
A product extension merger takes place between two business organizations that deal in products that are related to each other and operate in the same market. The product extension merger allows the merging companies to group together their products and get access to a bigger set of consumers.