Business Expansion Flashcards
All 11 cards in this deck
What is the difference between organic (internal) growth and external growth?
Organic growth is a business expanding using its own resources; external growth is joining with or buying another business.
What is franchising as a method of growth?
The business sells others the right to trade under its name and business model; the franchisee pays for the new location.
What is outsourcing?
Paying another business to carry out work or produce goods that the business would otherwise do itself.
True or false? A business that expands sales by using e-commerce is growing externally.
False. Selling online uses the business's own resources, so it is organic (internal) growth.
What is a merger?
Two or more businesses join together to form a new business.
What is a takeover?
One business buys control of another business.
A restaurant chain wants outlets in many new towns but has little spare capital. Which method of growth suits it best, and why?
Franchising — the franchisee pays for the new outlet, so the chain grows quickly without large costs of its own.
Give one benefit of growth to a business.
Higher market share, which may allow the business to charge higher prices.
Give one drawback to a business of expanding.
Loss of control, therefore decision making becomes slower.
A coffee shop chain grows by franchising its outlets. Give one disadvantage of this method to the franchisor.
Loss of control over how each outlet is run; poor standards in one franchise can damage the whole brand's reputation.
Two bus companies grow by merging. Give one disadvantage of growth by merger.
Conflict between the employees and managers of the two businesses, which leads to low morale.