methods of expansion

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  • Created by: S_Juma332
  • Created on: 16-11-17 20:15

methods of expansion

Advantages

  • First mover advantage (chance to build loyal customer base before competitiors enter the market
  • accessing a large customer base
  • Higher market share this means more profit goes into the business therefore leading to the grow of shares
  • Lower average cost

Disadvantages

  • It could be expensive as it could cash flow as cash out is greater
  • Recruitment will be this means cost will be higher and might also take time to recruit people
  • Workload (productivity) will increase
  • Actions from competitors because competitors might respond my reducing their prices therefore to effectiveness of expansion e.g sales do not reach a taget level

Evaluation

However taking over other companies on the market and market shares will increase economies of scale as average costs reduce and profit margin increases on the other hand having a first mover advantage is beneficial as the business tends to gain trust from the customers before their competitors which could produce a good forecast for the business

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