Expanding a business

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  • EXPANDING A BUSINESS
    • WHY WOULD A BUSINESS WANT TO GROW
      • For market leadership
        • This means it is most recognised by customers and is the default choice of most
      • For capital investment
        • Some industries require you to be a certain size before you can even compete against other businesses in the industry
      • Economies of scale
        • ECONOMIES OF SCALE
          • Production economies of scale
            • It is cheaper to make more products at once as fixed costs won't increase very much.
              • This means you can sell your products cheaper, making your goods better deals and in turn selling more of your products because competitors can't compete with your cheap prices
          • Purchasing economies of scale
            • Buying in bulk to get cheaper deals
              • This means you can buy more products for less money
          • Technological economies of scale
            • By being bigger you can afford to buy better technology. e.g a small shopping centre can only afford a lift but a large shopping centre can afford a lift and escalators
            • You can develop products better, you can afford to spend money on research, developments and can bring products out faster
    • ECONOMIES OF SCALE
      • Production economies of scale
        • It is cheaper to make more products at once as fixed costs won't increase very much.
          • This means you can sell your products cheaper, making your goods better deals and in turn selling more of your products because competitors can't compete with your cheap prices
      • Purchasing economies of scale
        • Buying in bulk to get cheaper deals
          • This means you can buy more products for less money
      • Technological economies of scale
        • By being bigger you can afford to buy better technology. e.g a small shopping centre can only afford a lift but a large shopping centre can afford a lift and escalators
        • You can develop products better, you can afford to spend money on research, developments and can bring products out faster
    • METHODS OF GROWTH
      • Organic growth
        • Find new markets
          • Find a new group of customers who might want to buy your products. This could mean selling your products in a different country
        • Plough back your profit
          • Re-investing any money that you make back into the business to buy new equipment, employ more staff or move to a larger premises
        • Develop your product
          • Constantly improving existing products or bring out new products
      • External growth
        • Merger
          • When two businesses agree to join together. They do this because they see the benefits of merging, e.g Disney and Pixar
        • Takeover
          • Aggressive business move. Usually a large business taking over a small business
    • FRANCHISING
      • Advantages of franchising
        • A quick way of expanding
        • All parties will want to be successful
        • As a franchise you will get the support of a successful business. e.g the successful business will provide training, trademarks and resources you will need
        • You can choose your own employees
      • Disadvantages of franchising
        • The franchisee win't have total control over the business
        • The franchiser risks it's reputation, if the franchise is terrible then the franchisers reputation could be ruined
        • Sometime the initial cost to by the franchise is very high
    • Limitations of business growth
      • Poor communication
        • Messages may get lost on the way way down the mangaement chain
        • Messages could change on the way down the management chain. (like in Chinese whispers)
        • It takes time
      • Loss of direction
        • People prioroties are different and go in different directions
        • People have different ways of doing things
          • This can cause conflict and disputes
      • Lack of motivation
        • In a small business everything you do contributes to business success, in a large business you are one of many therefore employees can feel they don't matter
    • OUTSOURCING
      • Many large oragisations outsource non-essential functions
        • This means that rather than paying siomeone full time to be a part of the business, the business will hire a specialist from another business to do it
        • like cleaners, medical staff and suppliers
    • E-COMMERCE = Any business activity conducted electronically
      • Communication
      • Advertising
      • Online payment
    • M-COMMERCE = Any business activity on a mobile device
  • Dis-economies of scale= the drawbacks of being a big business
  • Franchise = A business which sells the right to use it's successful business model
  • Franchiser = The business who sells the franchise
  • Franchisee = The business who buys the franchise
  • Economies of scale = When an increase in production causes a decrease in unti cost
  • What does it mean for the business ?
    • An increase in potential customers
    • You can compete equally with larger businesses through websites
    • E-COMMERCE = Any business activity conducted electronically
      • Communication
      • Advertising
      • Online payment

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