Business Studies

A business can expand in 2 ways:

• Internal growth, also known as organic in which a business expands its own operations instead of merging or taking over another business.
• Or external growth, also known as inorganic in which a business grows by intergrating (joining) with another business.

Internal Growth

Advantages

• More control
• Slow but steady growth
• Cheaper than inorganic
• Relativeley low risk
• Less/No arguments
• Don't have to wait for oppotunity 

Internal Growth: Disadvantages

• Slow
• Limit to the new markets, new products, new locations.
• Experience not gained from other business(joining).

Methods

• Open more stores.
• Wider range of products. Increase portfolio
• Expand premises
• Selling online (Stock Exchange, Shares)
• Franchise your business

A franchise is a marketing agreement where a business sells the rights to another business (franchisee) to trade using their name, brand, logo and products/service.

Franchisee is me buying the rights and franchisor is the store selling the rights.

Franchisee - Person buying rights

Advantages

• Ready made business idea - instant sales
• Lots of customers gauranteed (Immediate TM)
• Good Reputation
• Less Promotion required - cheaper
• Franchisee gets assisstance to start business.
• Free training
• Less Risk

Disadvantages

• Only get percentage of profits not ALL. - Royalty payments - shared profits (some to franchisor)
• Can't make any decisions
• Initial fee - for rights
• Never own the store officially. 

Franchisor - Business/Store selling the rights

Advantages

• Percetage of profits goes to them - royalty payments
• Free store set up with money of franchisee
• Spreading brand name - popularity
• Growing business
• Franchisee provdes finance to fund growth - expanding for free
• Initial fee and Royalty payments.
• Workload passed onto franchisee.
• Highly motivated owners - they want to make profits.

Disadvantages

• Reputation could be damaged/ruined. (Risk to brand image)
• Provide training
• Potential loss of control/quality
• Shared profits (franchisee keeps most)