Expanding a business Flashcards
Q: What are the two main types of business growth?
A: Organic growth and Inorganic growth.
Q: What is organic growth?
A: When a business grows from within, without a merger or takeover.
Q: What are some methods of organic growth?
A: Franchising, opening new stores, expanding through e-commerce, and outsourcing.
Q: What is a franchise?
A: A business model where an established business (franchisor) sells the rights to its brand, products, and services to another individual or business (franchisee).
Q: What are the advantages of organic growth?
A: - Retains company culture
Benefits from economies of scale
Less expensive than a merger
Lower risk
Q: What are the disadvantages of organic growth?
High risk due to opening new locations
Slow return on investment
Growth is limited by sales forecasts
Q: What is inorganic growth?
A: When a business grows quickly through mergers or takeovers.
Q: What is the difference between a merger and a takeover?
A: - Merger: Two businesses combine to form a new company.
Takeover: One business acquires another by buying more than 50% of its shares.
Q: What are the advantages of mergers?
A: - Economies of scale
Increased revenue and market share
Buying technology instead of developing it
International expansion
Q: What are the disadvantages of mergers?
A: - Culture clashes
Communication problems
Trust issues between businesses
Diseconomies of scale
Q: What are economies of scale?
A: Cost advantages businesses get as they grow, leading to lower average costs per unit.
Q: What are the two types of economies of scale?
Purchasing economies: Bulk buying reduces costs.
Production/Technical economies: Large-scale production allows for advanced technology and efficiency.
What are diseconomies of scale?
When a business grows too large, leading to increased costs and inefficiencies.
What are some causes of diseconomies of scale?
A: - Poor communication
Lack of coordination
Low worker motivation
