Expansion

Question 1

Unit cost equation

Answer 1

Total cost/output

Question 2

What is economies of scale

Answer 2

when the average unit cost of a product falls.

Question 3

What is the main cause of diseconomies of scales

Answer 3

Diseconomies of scale occur when average unit costs begin to increase, often as a result of business growth. This is one of the main risks that an expanding business may face.

Question 4

Methods of internal business growth

Answer 4

. Franhising
. Opening new stores
. E commerce

Question 5

What is franchisng, and what does the franchisee gain

Answer 5

A franchise is a business that gives the right to another person or business to sell goods or services using its name, they do this by providing them with a license. To become part of a franchise, a new business must pay a fee. In return, they get to join the franchise and benefit from using the business name and products, training, marketing and equipment.

Question 6

Advantages of a franchise

Answer 6

Advantages of a franchise include that is it already an established business, it can be easier to make money, and it allows for rapid growth of a business. For a franchisee, this will provide lower risk, whilst a franchisor benefits from being able to expand their business. Also it is limited costs for a business.

Question 7

Dosadvantages of a franchise

Answer 7

Disadvantages of a franchise include a loss of some decision making control, along with lower levels of profit for both a franchisee and franchisor. Franchises can also be expensive to set up and manage. The franchisee may lack the skills of keeping a business running and tarnish the business’ reputation

Question 8

What is Outsourcing

Answer 8

Outsourcing occurs when a business pays another firm to produce its products.

Question 9

Methods of external expansion

Answer 9

A merger or a takeover

Question 10

How does a take over occur

Answer 10

When a business buys over half the shares of a company