Traffic Clothing PLC

Traffic Clothing PLC

1) Internal growth is defined as the development of a business through using its own finances and retained profits. Whereas external growth is a business’s growth through acquiring other businesses. In Traffic Clothing PLC’s external growth strategy was through aggressive takeovers of either other clothing producers or material suppliers. While their internal growth strategy was through creating low cost factories in developing nations.

2) Sales revenue is defined as the amount of income a firm receives from selling a good or service during a given time period. The reason why Traffic Clothing PLC’s sales revenue increases but profits stay unchanged for the last 3 years is because there were new competitors entering the market and driving down the prices as well as the rise in the cost of raw materials and both manmade and natural inputs. Lastly the merger between competing clothing retailers which increased their bargaining power when dealing with producers.

3) External integration for traffic clothing PLC comes with many advantages but it also comes with many disadvantages and limitations that could harm the business. Traffic clothing’s finance director proposed a policy of rapid external growth justifying this strategy by showing that is its achievable through aggressive takeovers of either clothing producers or material suppliers. This poses as an advantage towards the firm due to the fact that it will eliminate most obstacles standing in the way of traffic clothing such as the fear of new competitors entering the market and driving down the prices as well as eliminating the pressure affecting the increasing cost of materials. It will also threaten other merging retailers and be able to compete with their bargaining power. The company will also gain larger market share and market dominance as well as being able to reduce unit cost and increase profit margins. But it also comes with some disadvantages such as lack of control and coordination meaning that the business won’t be able to control all aspects of it which could lead to poor communication as well as increase in Bureaucracy. The firm might also increase in complacency thus resulting in a further chance of failure. I believe that traffic clothing should take a chance in integrating externally although it might seem like a risk it will increase their market dominance and eventually increase their profit.