Expanding a Business Flashcards
Define internal growth (organic)
selling more of its own products or launching into new markets
Define external growth (integration)
joining with another business
Examples of internal growth
- opening new shops
- m-commerce or e-commerce
- outsourcing
- franchising
Examples of external growth
- merger
- takeover
What is m-commerce and e-commerce
buying and selling goods and services online or on mobile phones
What is outsourcing?
Outsourcing is when a business uses other organisations to produce its products for it. It is sometimes referred to as contacting out
Why would companies want to outsource?
- make use of cheaper labour
- don’t have to hire full time staff
- new ideas
- don’t have to expand your facilities
What is franchising?
When one business sells the rights to another business/individual to use its name and sell its products
Define Franchisee
they buy a franchise in return for a fee and a percentage of the turnover
Define Franchisor
they sell the franchise
Advantages for a franchisor
- can grow business quickly
- franchisee provides some of the finance
- franchisee is motivated as they’re running their own business
Disadvantages for a franchisee
- less control over business
- danger of problems with one franchisee affecting the whole brand
- sharing profits
Advantages for a franchisee
- established brand (better success)
- access to training and supplies
- share marketing costs
- learn from other franchises
Disadvantages for franchisee
- have to share profits
- may have to work with franchisor’s guidelines
- have to contribute to group marketing
sales may suffer if another franchisee gets a bad reputation
What is a merger?
when two or more firms join together and make a new firm
