Methods of expansion

Gcse business

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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.

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