Unit 1.7 - Expanding a business Flashcards
Internal business growth (5)
E-commerce Opening new stores Outsourcing Franchising New products
Benefits of internal growth (3)
Inexpensive
Expanding by doing more of what it is good at
Quality shouldn’t suffer
Costs of internal growth (2)
Slow
Time consuming
Define franchising
Where a company expands by giving other firms the right to sell its products
Define franchisee
Someone looking to buy and run a franchise
Define franchisor
The owner of the franchise
Benefits of a franchise for the franchisor (3)
Increased income
Increases market share
Increases brand awareness
Costs of a franchise for the franchisor (1)
Can impact reputation if franchisee lowers quality
External business growth (2)
Merger
Takeover
Difference between a takeover and a merger
A takeover is where a business is bought out whereas a merger is when two businesses join together to become one bigger business
Methods of external expansion (4)
Horizontal integration - joins with a competitor Conglomerate integration (diversification) - joins with an unrelated (completely different) business Vertical integration backwards - join with a firm closer to the supplier Vertical integration forwards - join with a firm close to consumer
Benefits of external expansion (2)
Quick
Increase in size overnight
Costs of external expansion (4)
Expensive
Different management styles - leads to demotivation
Create bad feeling - especially hostile takeovers
Cost cutting and redundancies
Define economies of scale
As a firm grows they experience lower average costs
Define the types of economies of scale (2)
Purchasing - buying in bulk
Technical - buy and operate more advanced machinery - produce more and /or the size of the business increases which means the cost of the space is lower than what can be done in the space.
