Business Studies

  • Created by: Cram24
  • Created on: 01-06-18 23:14

Methods Of Expansion: Internal Growth

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


  • More control
  • Slow but steady growth
  • Cheaper than inorganic
  • Relativeley low risk
  • Less/No arguments
  • Don't have to wait for oppotunity 
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Methods Of Expansion: Internal Growth 2

Internal Growth: Disadvantages

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


  • 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.

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Methods Of Expansion: Internal Growth 3

Franchisee - Person buying rights


  • 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


  • 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. 
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Methods Of Expansion: Internal Growth 4

Franchisor - Business/Store selling the rights


  • 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.


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