Case Study: Davis Service Group

1281 Words6 Pages
In response to the case study of Davis Service group, this essay will describe organic and inorganic growth, two major ways in which a company can grow. Next, the acquisition of Berendsen will be discussed. Thirdly the EU market will be discussed in terms of opportunity for horizontal and organic growth. Finally, a recommendation regarding the location for international expansion will be presented.

1. Two major ways in which a company can grow are organically and inorganically (Davis, n.d.). Organic growth is growth that is achieved within an existing business, by increasing sales and number of clients to increase profitability. Organic growth can be achieved many ways. The easiest way is if a firm’s product is in high demand
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Davis Service Group were a market leader, meaning they were the best at what they did in the market that they operated in (Davis, n.d.). A problem impeding further growth was that Davis was operating in a mature market, ie, their market share was not increasing and the market itself was not expanding. In order to expand Davis identified their most profitable line of business, which was their subsidiary Sunlight textile services (Davis, n.d.). Having selected a line of business to expand, Davis needed a new market to enter. Davis (n.d.) tells us that language, currency, culture, legal and administrative differences and skill levels are all considerations when entering a new market. Davis considered the EU to be a good market to enter given that at the time there were 27 member countries, meaning the one market provided broad exposure and that trade in that market was expanding. The EU had skilled labour and shared a common currency, the Euro, which allayed skill and currency…show more content…
Engaging in Horizontal growth, or growing within the same stage of production (Davis, n.d.), was attractive for Davis Service Group within the EU for a number of reasons. Firstly, the company had proven experience and resources within its level of production. Davis would be exposed to unfamiliar skills and processes by attempting vertical integration. Secondly, there was an attractive inorganic growth opportunity in Berendsen, where Davis could leverage the combined companies’ resources, immediately gaining a market, contacts, clients and operations. Thirdly, Davis already had superior management systems and so could gain cost savings in the combined group by applying its management systems to the new operation (Davis,
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