Methods of expansion:
A business can grow in size through:
- Internal (organic) growth: the business grows by hiring more staff and equipment to increase its output.
- External growth: where a business merges with or takes over another organisation. Combining two firms increases the scale of operation.
- Franchising: where a business leases its idea to franchisees. This allows new branches to open across the country and internationally.
The proportion of total market sale sold by one business.
Expression from within the business (e.g. by opening more shop branches).
Expression by merging with or taking over another business.
Marketing products through the business's website.
The firm that buys the franchise rights from the existing business.
The Existing firm that sells Franchise right to another business.
An agreement between business owners to combine two businesses and operate as a larger one.
Purchasing another business from its owner.
Joining two businesses in the same industry and stage of production. (e.g. two hairdressing Businesses).
Vertical backward integration:
Joining two businesses in same industry but a different stage of production, towards the supplier (e.g. a computer manufacturer's takeover of a 'chip' maker).
Vertical Forward integration:
Joining two businesses in the same industry but a different stage of production, towards the customer (e.g. a farmer's takeover of a butcher's shop).
Joining two businesses in different industries (e.g. an insurance company merges with a publishing business).
Any business with more than a 25per cent market share.
Payment made to shareholders from company profits- usually made annually.
Divorce between ownership and control:
When directors control a public limited company and thousands of shareholders own it, but the two gropus may have different objectives.
Public Limited Company (PLC) : A company able to sell shares to the general public by being listed on the Stock Exchange.