Expanding A Business

Question 1

I can identify the ways in which a business can measure its size - I can name 2 ways to measure the size of a business

Answer 1

Revenue - Total income generated from sales.

Number of Employees - Total number of staff employed by the business

Question 2

I can explain the reasons a business might decide to grow - I can name 3 reasons

Answer 2

Increased Market Share - To gain a larger share of the market.

Economies of Scale - Reduce costs per unit through larger production.

Diversification - Reduce risk by expanding into new markets or products.

Question 3

I can explain the risks a business can face when growing - I can name 3 risks

Answer 3

Overextension - Strain on resources and management.

Quality Control Issues - Maintaining product/service quality can be challenging.

Financial Strain - Increased costs and potential cash flow problems

Moral - staff can’t keep up with the extra work

Question 4

I can identify the methods used by businesses when expanding - I can name 4 examples of internal growth and 2 methods of external growth

Answer 4

Internal growth - Developing new products, Entering new markets, Increasing production capacity, Investing in marketing

External Growth - Mergers, takeover

Question 5

I can explain franchising and how a business might be able to use a franchise to expand their business

Answer 5

A business model where a franchisor grants the right to use its brand and business model to a franchisee.

Question 6

I can discuss the advantages and disadvantages of franchising

Answer 6

Advantages - Rapid expansion with lower capital investment. Franchisees manage and operate individual outlets, reducing managerial burden.

Disadvantages - Loss of control over individual outlets. Potential brand reputation risk if franchisees perform poorly.

Question 7

I can explain how a business might be able to use ‘outsourcing’ to expand their business and discuss the advantages and disadvantages of this method.

Answer 7

Outsourcing - Hiring external firms to handle certain business functions.

Advantages - Cost savings. Focus on core activities. Access to specialized expertise

Disadvantages - Potential quality issues. Dependency on external suppliers. Confidentiality risks

Question 8

I can explain how a business might be able to use ‘e-commerce’ to expand their business and discuss the advantages and disadvantages of this method

Answer 8

E-commerce - Selling products or services online.

Advantages - Access to a global market. Reduced overhead costs. Convenience for customers

Disadvantages - Increased competition. Technical challenges. Security concerns

Question 9

I can explain how a business might be able to use ‘opening new stores’ to expand their business and discuss the advantages and disadvantages of this method.

Answer 9

Advantages - Increased market presence. Accessibility for customers. Brand visibility

Disadvantages - High setup and operational costs. Management complexity. Risk of cannibalizing sales

Question 10

I can explain how a business might be able to use ‘mergers and takeovers’ to expand their business and discuss the advantages and disadvantages of this method.

Answer 10

Mergers - Two companies combine to form a new entity.
Takeovers - One company acquires another.

Advantages - Rapid market expansion. Synergies and efficiency gains. Diversification

Disadvantages - Cultural clashes. High costs. Regulatory challenges

Question 11

I can explain the different forms of integration

Answer 11

Horizontal Integration - Merging with or acquiring a competitor.

Vertical Integration - Controlling additional stages of production or distribution.

Question 12

I can explain the benefits of growth (including in terms of unit cost advantages)

Answer 12

Economies of Scale - cost per unit decreases with an increased output

Question 13

I can define economies of scale and state 2 examples

Answer 13

Economies of scale - cost per unit decreases with an increased output

Examples - Bulk buying of materials. Specialized labor

Question 14

I can explain the drawbacks of business expansion

Answer 14

Diseconomies of Scale - cost per unit increases with an increased output

Question 15

I can define diseconomies of scale and state 3 examples

Answer 15

Diseconomies - cost per unit increases with an increased output

Examples - Communication problems. Reduced employee motivation. Overburdened management

Question 16

I can define and calculate unit costs

Answer 16

Definition - Average cost per unit of output.

Calculation - Unit Cost = Total Costs
Total Output

Question 17

I can explain the benefits and drawbacks of expanding abroad

Answer 17

Benefits - Access to new markets. Lower production costs

Drawbacks - Cultural and language barriers. Legal and regulatory differences