18 Business Expansion

Question 1

What are the two main methods of expandind a business

Answer 1

Organic growth
Inorganic growth

Question 2

What is organic growth

Answer 2

Natural,slow expansion of a business
Profits made from one shop are used to buy another shop

Question 3

Two organic strategies a business can use to help it expand

Answer 3

Increase sales
Franchising

Question 4

Organic Growth:
How would a business increase sales

Answer 4

By selling more products
-Better marketing
-Improved product
Exporting products

(Baileys grew by exporting all over world. Launched in Ire in 1974. Sold in over 130 countries today)

Question 5

Organic Growth:
What is franchising

Answer 5

Owner of a business (franchisor) gives ppl permission (franchisees) to set up an identical copy in return for a ONCE OFF FEE and an ANNUAL SHARE OF PROFITS
Franchisers must train franchisees and set down strict rules

Supermacs expanded all over ireland by franchising

Question 6

Organic growth:
Advantages of franchising as a method of expansion

Answer 6

1.Little Capital Required
-Franchisor doesnt need a lot of finance to expand as the franchisees are the one who put up most of the money

2.Economies of Scale
-Bigger business becomes cheaper supplies get as he will get bigger discounts from suppliers since hes buying bulk amounts

3.Less Supervision Required
-Franchisor can expand without getting involved in detailed management. Franchisees have to do all the hiring,motivating, day to day jobs etc

4. Dedicated Franchisees
   -Franchisor can relax in the knowledge that the person operating the franchise will be motivated to make it work as the franchisee invests their own money too.

Question 7

Organic Growth:
Disadvantages of franchising as method of expansion

Answer 7

1.Risk to Reputation
-Can be harmed or ruined by franchisees if they do a bad job

2.Loss of control
-Franchisor loses control over day to day management. Little influence on employees or standard

Question 8

define inorganic growth

Answer 8

Its the quick expansion of a business achieved by merging with, taking over, or forming a strategic alliance with another business

Question 9

3 Inorganic strategies for expanding a business

Answer 9

1.Strategic Alliance
2.Merger
3.Takeover

Question 10

Inorganic growth:
What is a strategic alliance

Answer 10

2 separate,independent businesses make a deal to COOPERATE w eo on a particular business project. No change in ownership as both businesses remain separate corporate entities
They benefit from sharing the costs of the venture and from sharing their expertise and skills
EG Swatch and Mercedes smart car

Question 11

Inorganic Growth:
Advantages of an alliance as method of expansion

Answer 11

1.Cost-Effective expansion
-split costs of venture.equipment can b shared
2.More Successful expansion
-
3.New Markets