Expanding a business
- Created by: AmeliaCooper
- Created on: 10-06-18 14:38
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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
- It is cheaper to make more products at once as fixed costs won't increase very much.
- Purchasing economies of scale
- Buying in bulk to get cheaper deals
- This means you can buy more products for less money
- Buying in bulk to get cheaper deals
- 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
- Production economies of scale
- ECONOMIES OF SCALE
- For market leadership
- 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
- It is cheaper to make more products at once as fixed costs won't increase very much.
- Purchasing economies of scale
- Buying in bulk to get cheaper deals
- This means you can buy more products for less money
- Buying in bulk to get cheaper deals
- 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
- Production economies of scale
- 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
- Find new markets
- 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
- Merger
- Organic growth
- 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
- Advantages of franchising
- 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
- Poor communication
- 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
- Many large oragisations outsource non-essential functions
- E-COMMERCE = Any business activity conducted electronically
- Communication
- Advertising
- Online payment
- M-COMMERCE = Any business activity on a mobile device
- WHY WOULD A BUSINESS WANT TO GROW
- 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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