Methods of expansion
Gcse business
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?- Created by: Jess Knights
- Created on: 14-03-13 21:35
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- Methods of expansion
- Organic growth: internal expansion e.g by opening more branches.
- Offering franchises
- Expand through internet selling
- Inorganic growth: expansion by merging or takeover
- Franchises
- Examples: Mcdonalds and The Body Shop
- Benefits
- Franchisee pays franchise fees. Can be important source of finance.
- Motivated franchisee
- Franchisor has fewer staff and management problems as not directly owned.
- Negatives
- Franchisee may not keep to legal agreements. Can ruin franchise reputation
- Most profits kept by franchisee
- Bad performance of one franchise can damage entire business
- Benefits of opening new branches.
- Slow and steady. Less risky as easily managed
- Often paid for by profits. Don't need to sell shares or pay interest
- Risks of opening new branches
- Too slow for some owners - can take several years to double size of firm.
- Market share could fall - if other businesses are expanding more quickly.
- No gains for integrating with another business.
- Organic growth: internal expansion e.g by opening more branches.
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