Internal/Organic Growth Flashcards
What are the 4 types of internal growth
Franchising
Outsourcing
New Stores
Ecommerce
What are the pros of organic growth
Less risk
Can be financed through internal funds
Allows a business to grow at a sensible rate
What is the con of organic growth
The business will grow at a slower rate
What is franchising
When a business sells the right to use its name and sell its products to another business
What are the pros of franchising
The business can grow faster as it does not need to finance the opening of each additional store
Still benefits from the sales of the products
The franchisor keeps control of key aspects
Less finance is required
There is little to no involvement of the running of the franchise
What are the cons of franchising
The brand can be affected by the actions of the franchisee
The business only receives a percentage of the revenue from the additional sales
Loss of control
May be difficult to recruit good franchisees
If too many franchises are sold they may become located too close to each other which will make the franchise harder to sell
What is royalty cost
The franchisee sells a percentage of profit to the franchisor each month
What is outsourcing
A business practice in which a company hires a third party to perform task, handle operations or provide services
What are the pros of outsourcing
The business can expand without the need to finance additional production facilities
Don’t need to pay training costs
If you don’t have a specific skill within your employees, you can pay another firm to do it
What our the cons of outsourcing
It may cost more than if the business produced the product itself
Can be harder to control the quality
What are the pros of opening new stores
Access to larger market
Increase in sales
Brand awareness increases
What are the cons of opening new stores
You have to pay for everything
You may not have the money
What is ecommerce
The buying and selling of a product using the internat
What are the pros of ecommerce
Access a larger market
Can trade 24/7
Can complement physical stores
What are the cons of ecommerce
Distribution can be expensive
May replace sales at physical stores leaving idle space
Processing orders and returns is expensive
Customers expect a fast and efficient service, loyalty may be lost if this is not the case
