hello everyone um i am fyros khan and today i'm back with a brand new class um let's wait for some students to join and in the meanwhile if you haven't liked our page you can simply uh go to facebook type in first education services and like our page for for new videos you can also subscribe to our youtube channel and um again just type in firo's education services and uh we have uploaded uh new videos recently um if i'm not mistaken right now we have around 60 videos they're all synchronized and arranged on playlists so it's quite easier to find uh compared to facebook so i would highly suggest you to subscribe to our channel and you will have access to uh plenty of videos so yeah uh let's wait for um some students and then uh we shall start as soon as possible okay so um look at this picture so this is a picture of a coffee shop and you will find this kind of small coffee shops uh in london uh i know it because i used to live there and study so this is a let's say a coffee shop in london a small coffee shop family owned family styled coffee shop okay and uh you know in the past let's say four or five years they have made a lot of profits ample amount of profit now with that profit the owners have decided the owners have decided um to grow okay the owners have decided to grow and open up branches all over the city open up branches in oxford street in leicester square in hyde park corner and stratford these are different places in london okay so have so they have decided to open up branches so they're growing right by opening up branches and when you open up branches when you grow in this way this growth is called internal growth okay um so uh a company grows like this by opening up branches by using up their internal profit and you're growing internally not externally you're opening up more branches of the same business you can open it up in different cities you can open up multiple branches within the city so this is internal growth okay so the next one uh um you know uh uh let's let's talk about this again uh so uh internal growth is easy to do easy to uh uh do because you are growing from existing business it's easier to manage a restaurant owner may open up several branches that's internal growth okay if let's say take out or match chef open up different branches that's internal growth and and these are quite easy opening up more shops in towns and cities is internal growth uh now think about this so airtel airtel is an indian company indian telecom company they came to bangladesh few years back airtel um you know merged with robbie in 2016 uh because i think uh they were having financial difficulties so that's why they thought of merging because when you merge you become more powerful they merged in 2016 and this process of one company merging with merging together uh forming a new company which is now called robbie airtel so airtel and ruby they merged together to form roby airtel and this is external growth external growth because these two were different companies roby was a different company airtel was a different company and they merged together uh you know uh there were no problems there were no hassle they cooperated together and they form a new business which is roby airtel okay and this kind of growth is usually called external growth right um so uh there you go um so yeah but then let me also give you one more scenario so facebook facebook is a very very famous uh social media website and application the facebook um you know a couple of years back they took over or they acquired instagram for one billion dollars okay they took over uh instagram for one billion dollars and that process is known as taking over taking over means you buy more than 50 of the shares and you literally acquired the company and now facebook has control over instagram of course there's a bit of difference between takeover and acquire i don't want to go to that because that's not mentioned in your syllabus um i don't want to confuse you but then facebook bought more than 50 of the shares they bought the entire company and took control and that is a takeover uh in the previous example this was a merger when roby and airtel they cooperated together and they merged together to work together and they formed a new business which is robbie airtel but this one is different facebook has control they bought instagram for one billion dollars so in this case this is a takeover and not a merger okay now if you think about again whatsapp facebook again a couple of years back uh around the same time when they uh took over instagram they bought whatsapp i didn't know this but but today when i was researching uh for this lesson they bought whatsapp for 19 billion dollars people thought facebook were crazy because whatsapp during that time uh was not so popular in the us yes it was popular with the international clients with international customer but uh us really did not know how to use this app but definitely uh you know facebook knew uh from a very early on that whatsapp was going to be very big in the united states and this is why they took over whatsapp for 19 billion dollars so that's a lot of money again here facebook what they did was they bought more than 50 of the shares and then and they took control okay so they took over or acquired the company now it's not there in the syllabus but i just wanted to show you now facebook has their own app uh you know uh but that we all know they also have messenger they have whatsapp they have instagram now if you look at most downloaded apps in google play and our ios facebook owns the four companies okay it is it is a bit scary situation when one company owns uh you know the the highest the largest four brands of application uh that can be uh you know a bit scary situation because then you can create monopoly you can you can control the market you can do uh uh you know uh malpractices so uh the intention of facebook to acquire instagram and whatsapp was to uh you know take over the market and increase their market share increase their power but increase their you know capability right so now facebook owns they have their own app facebook app they have messenger they have whatsapp and instagram and these are all the highest downloaded apps in ios and uh of course google play uh this is taken from bbc so it's an authentic website right uh so this is why uh you you do take over because you want to take over a company because you want to eradicate your competitors you want to you know diminish your competitors you want to create a bigger market share you're to create a bigger company okay so that's a so so external growth is when two or more firms when they come together that is external growth and we know the two kinds of external growth right you can merge and you can take over merging i've given you an example of ruby and airtel coming together there are other thousands of examples where two firms have merged together here they're working together they're not separate businesses they have merged together to form a new business which is roby airtel but here facebook has bought instagram or whatsapp these are all separate businesses and facebook has control over them okay and that is a takeover so external growth is a very good way to uh you know uh to grow and expand taking over different companies however it has problems um and and we will talk about those problems later i don't want to give it out right now so we've talked about merger airtel roby coming together that is a merger okay to form a newly formed business robbie airtel take over when facebook has taken over or bought whatsapp or instagram that is an example of a takeover uh they've bought more than 50 of the shares okay and they have acquired the company it may also be known as acquisition okay so that's that um so you know taking over this process is known as synergy and integration integration means integrate when one or two firms when they come together they're integrating they're combining together and synergy means the whole is greater than some of the parts okay so when roby and eric when they come together they form a bigger picture they form a bigger business and that bigger business is um greater when they're separate so this is why the idea is to come together and become more powerful become a better company become a bigger company okay so uh that's that if you have any question you can put down the question uh write in the comment section and we will take it so that is synergy and that is integration and this is why companies they come together okay and they think that you know when you come together you will become more successful okay when two firms come together they come with advantages they come with a lot of money they come with a lot of power they come with a lot of contacts and they become more successful okay so that's synergy and integration um so so the advantages of of of of you know two firms coming together like ruby and airtel or you know like whatsapp and facebook uh you know uh that is not a merger but that's a takeover that is a form of integration now the advantages is that you know they can exchange ideas so why do you do you want to come together the first reason is you can exchange ideas you can exchange technologies you can share different facilities together okay so that's number one advantage number two advantage is that you can enjoy economies of scale right you can produce more and we know that when you produce more you enjoy lower cost yes so um you will enjoy economics of scale and therefore you can also save on marketing cost uh you can use the same outlet you can use the same lawyers you don't need to have two different marketing teams you don't need to have two different legal teams you don't need to have two hr teams now you can combine them and make them ones and therefore you will save a lot of money you will save a lot of cost okay so that is synergy the advantages of synergy and integration the three advantages okay now you can exchange ideas exchange facilities right uh and then you can enjoy economies of scale because you're producing more and we know when you produce more uh the the price per unit will fall and of course instead of having two different departments you can just have one uh department and you will save cost but however it comes with a lot of challenges it comes with a lot of problems the challenges are sometimes when two companies because ruby think about ruby and think about airtel both were very big companies when they came together they actually became very big to manage right um also sometimes the companies may be different in their approach we know that both of them are telecom companies but then they may be different in structure then what do you do so you will not have a lot of benefit they may do entirely different things they may do it differently and third the culture the way you do things may be different the culture is different the way you behave the way you do things in a company the mindset the managers everything may be different so uh the disadvantages of synergy and integration is sometimes the firm when you merge when you take over after that the firm may be very too big to manage uh sometimes the companies are different are so different that that you don't get any benefit from it number three the business the culture the management the culture the way you do things the mentality the mindset may be very different and and that can create a conflict that can create a clash okay so think about that um so far we've talked about we've talked about uh you know we've talked about this horizontal growth this is known as horizontal road internal growth actually when you open up branches where you're you are actually expanding within the business right and then i have given you an example of merger how ruby and airtel merged together to form a bigger business i've given you an example of a takeover or an acquisition okay how facebook took over instagram and took over whatsapp by buying more than 50 of the share because when you buy more than 50 of the share you will have control okay um and i have shown you why did they buy instagram and whatsapp because they wanted to have a bigger market share they wanted to wanted to have a control over the market they wanted to have more power and they became that right all the first four companies are owned by facebook and then comes snapchat skype tick tock and and so on but in this way uh this is not good because so in some ways it can be an anti-competitive policy one company uh you know owning four different applications uh that may be uh a bit controversial sometimes right um and of course we've talked about merchant takeover we've talked about why what is synergy synergy and integration means the whole is greater than some of the parts right the whole is greater than some of the parts so um so um there you go so when you come together when two businesses come together uh that is bigger than being separate okay so yeah there you go and and i've we've also talked about the advantages of synergy and integration right uh you can enjoy uh and share different facilities different technologies you will enjoy economics of scale you will save on marketing costs because you know you can use the same store you can use the same hr team you can use the same legal team because now it's the same business you don't need to have two of those things but however the disadvantage is that sometimes it may be too big to manage because roby and airtel they're both big companies okay and sometimes the companies are maybe different and so that uh there may be very little benefit uh and the third uh you know drawback is that the culture the management style the mindset may be entirely different and that can create conflict or clash now how can a business grow horizontal merger okay now we've already talked about horiz uh uh you know a little bit about horizontal merger for example think about a garment company a garment factory a takes over another garment factory carbon factory b now the question is what does a carbon factory do a garment factory uh makes t-shirts make clothes they stitch it right they don't manufacture the raw material they don't do that they're not selling clothes but then they have the raw material already they stitch it and then they send it to the outlet okay that's how it happens so when garmin factory a takes over garment factory b it's the same industry right it's the same stage of production garment factory a taking over garment factory b it's the same industry same stage of production they're not selling clothes they're not making the raw material but they are making the ready-made good they're stitching it right so it's the same industry same stage of production and that is known as horizontal merger okay that is known as horizontal merger when you merge with another company that's in the same industry same production the example is garmin factory taking over carbon factory b in this case the advantage is that why do you want to take garment factory b because you want to reduce the number of competitors okay now you will have less competition because you've taken over that right um and then you will enjoy economics of scale because together you will produce more when you produce more uh the cost per unit will fall okay and you can you you can exchange ideas exchange facilities so that's there so when one company when this garment factory takes over another factory the same kind of factory in the same industry same stage of production okay so that is a horizontal growth you're growing in the same way in the same direction not in the not in different direction you're not selling clothes or you're not manufacturing the raw material but you're making the product making the ready-made product okay and the benefits we've already talked about it it reduces the the number of competitors now you will have one less competitor because you've taken over garment factory b you will enjoy economics of scale and now you have a bigger share of the market right facebook taking over instagram facebook taking over whatsapp means they have a bigger share of the market in the social media market right uh they have more power so that is a horizontal integration now think about vertical integration vertical integration means when one firm takes over another firm in the same industry but at different stage of production now let me explain that to you for example think about again garmin factory a okay takes over a clothing store okay so it's the same industry clothes okay clothes you're in the fashion industry you're in the clothes industry clothing industry right but you're going one step forward right you will make the clothes and then you will sell the clothes in the outlet that you own that you have so that is known as forward vertical integration you're moving one step forward you make this close you stitch it and then you have a place to sell the product so you're going forward okay uh so you're selling the uh you know you have a fixed place you have a store you have an outlet to sell your product now why do you want to do forward integration you want to do forward integration because you have a fixed outlet of your own you don't need to sell through a third party now let's say you didn't have this outlet you had to make the clothes and then find a suitable store a suitable retailer a third-party retailer to sell your clothes you had to negotiate with them because uh that store is owned by someone else there was there will there will be no power uh there will be nothing okay but in this case this clothing store is now owned by you you can set the prices you can control them you can fix the place to sell you can decide how to show off your product how to showcase your product you have all the independence and this is a known as forward vertical integration okay you are going one step forward you're making the clone stitching the clothes and now you have a fixed outlet to sell okay a retail store um not all factories uh have their own store they will find a third-party uh store and sell it but that if you have your own store these are the advantages that you will have okay there we go and then think about this let's say garmin factory a takes over a textile a textile factory right now a textile factory of course means they make the raw materials they will uh you know make the raw materials using thread and yarn okay so uh garmin factory a taking over textile factory is backward vertical integration you're moving backwards now they are making the raw materials uh and they will then send it to garmin factory and then the garment factory will sell it to a retail store right so you're moving back so when you take over a textile factory okay who makes the raw materials the clothes using yarn and thread that is a backward vertical integration okay now why do you want to do backward vertical integration because you can ensure quality what kind of clothes to make what quality you can think about the reliability you can think about you know you will get the supplies on time you will get the design on time design on time or you can comment on the designs right so that is a backward integration your government industry are going back now back means you're making the raw material right from the scratch shutter okay and then it goes to a garment factory and from the garment factory you send it to a retail store here you send it to retail store to sell from the garment factory if you buy a retail store if you take over retail store that is forward vertical integration you're moving forward same industry but you're moving forward now if you're taking over a textile industry same industry fashion industry clothing industry but you're moving backward right now if you go back to the definition definition of vertical merger says when one firm merges with another firm in the same industry but at a different stage of production right so different stage clothing industry you know a retail store that is a different stage okay it's not at the same stage they're not stitching the clothes they will it's an outlet which sells clothes textile factory it's a it's a different stage to make the raw materials right so that is a vertical integration and vertical integration can be forward and it can also be backward okay i hope it's not too confusing i tried to make it easy okay i really tried hard um let's go ahead and see what we have now think about this this um you know this screenshot has been taken from tata's website now if you think about a business like data tata have their own consultancy service tata owns tata tea tata has chemicals tata has power tata has cars motors tata has hotels they are in different industry industries that does not relate with each other and this kind of businesses are known as conglomerate conglomerate okay i have the definition here i can show you conglomerate means when one firm merges with or takes over a firm in a completely different industry so tata has different kinds of industries okay and and and and that is conglomerate diversification they're in the chemicals industry power industry hotels steel motors okay that is conglomerate now the question is why do you want to be a conglomerate why do you want to have different kinds of industry tata has tea motors power chemicals hotels consultancy all different businesses different kinds of businesses but the question is why do you want to have businesses uh that are so different to each other the reason is the reason is you are spreading the risk spreading the risk means if your consultancy business is not doing well no problem you have steel industry which is a completely different industry and that may do well if your steel industry is not doing well because of some reason you have hotels which is a completely different industry and they may not impact each other if your hotel is not doing well you have chemicals chemical is again an entirely different industry they're not interdependent on each other right so in this way you're spreading the risk you're diversifying the activities okay so that is a conglomerate and the second is you want to have different businesses because you want to transfer different ideas okay different ideas different technology exchange of different pool of ideas and that is the benefits of conglomerate integration okay if you have any questions do not hesitate to comment down in the comment section and then you can also integrate with university and suppliers without integration sometimes you have strategic alliances like let's say fes works with the university um for new uh you know uh that university will provide uh a new trading course like you know uh a year back we joined hands with square why because we provided english and ielts training with them okay it was not they did not take over us or we did not take over them but it's a strategic partnership strategic alliance only for that uh only for a particular period only for uh you know for a particular job okay so so there we go uh you can you can uh you can also have a strategic alliance with a supplier like apple had a strategic um uh you know partnership with intel intel uh makes you know chips for them computer chips mobile chips okay so it is possible to form partnership even without merging and taking over you can form an alliance a joint venture only working for a specific period of time only for a particular task let's say i will work with uh uh you know i will work with square only for one year or only for two years or for five years to provide ielts training so we are not merging or we're not taking over we we have a specific purpose and that is a strategic alliance a joint venture uh right sometimes you know if you watch films bollywood and hollywood films you will see two or more uh companies come together to produce one movie right uh let's say you know dharma productions and yash raj productions comes together to make this film it's not that these two companies are now one company they're merging together or they're taking over one taking over the other no they're just working together only for that film and for a particular period of time and that is a joint venture a strategic alliance you can also have these kind of alliances and ventures with different companies okay right like we have strategic alliances with idp we have strategic alliances with assumption university we have not taken over them or they have not taken over us we just work for a certain purpose okay so that's that so we finished a chapter which is great if you have any questions do not hesitate to comment down in the comment section i thoroughly enjoyed explaining you the chapter uh in the book there's a summary of integration please go and have a look uh it's all there right um so thank you very much i will see you in the next class do not hesitate uh to like our page to like our facebook page yes uh just press the like button you can also subscribe to our youtube channel you know just type in fire's education services and subscribe to our channel we have now over 60 videos so we are uploading videos um every week so that's that thank you very much i hope you enjoyed my session i will be back again tomorrow thank you