Expanding a business

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  • Expanding a business
    • Types of Intergration
      • Horizontal- occurs when one firm joins with another firm at the same stage of the same production process e.g a bank buying another bank
      • Vertical- occurs when one firm joins with another firm at a different stage of the same production process
        • Backward vertical- When a firm joins with its suppliers
        • Forward vertical- when a firm joins with distributors e.g pepsi bought Kentucky fried Chicken, the fast-food chain so it can sells its drinks there
      • Conglomerate- occurs when one firm joins together with another firm in a different type of production process e.g pest control buying a parcel delivery
      • ADVANTAGES- Horizontal integration can lead to economies of scale, vertical integration  can ensure a firm keeps control of its suppliers or distribution and conglomerate integration can spread the risks as a firm is operating more than one market
      • DISADVANTAGES-  Diseconomies of scale and culture classes can occur because firms are used to doing things in different ways
    • Franchises
      • ADVANTAGES
        • The franchisor gets a fee from franchisees and a percentage of their profits
        • The franchisee provides provides most of the finance to set up the new outlet. This means the overall business can grow much faster than if the original business had to provide all the money for new stores
        • The franchisee takes a major proportion of the profits and so should be very motivated to make the business a great sucess
        • Franchisees can learn from each other, which helps the business overall to do better and therefore makes more money
        • All the franchisees can help to finance an overall marketing campaign that can raise awareness of the brand  more effectively than if one outlet had to finance the whole campaign, because there will be more money  to invest
      • DISADVANTAGES
        • The orginal entreprenuers lo longer own the entire business; most of the profits go to the franchisee
        • If there are quality problems which one frnchisee this can damage the whole business
      • A franchise occurs when one business sells the right to another business to use its name and sell its products. The franchisor sells these rights and provides advice and training to the franchisee who buys the franchise- Examples subway, pizza hut, Ms Donalds
  • Conglomerate- occurs when one firm joins together with another firm in a different type of production process e.g pest control buying a parcel delivery
  • A franchise occurs when one business sells the right to another business to use its name and sell its products. The franchisor sells these rights and provides advice and training to the franchisee who buys the franchise- Examples subway, pizza hut, Ms Donalds

Comments

davidsalter

Comprehensive mind map covering franchising and integration with other businesses. Students will need to check that all  of this is required by their exam board. All the information required is on one sheet. Remaking your own mind map based on this would be a useful exercise.

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