Expanding a business

• Internal growth (AKA organic growth) occurs when a business gets bigger by selling more of its products.
• External growth (AKA integration) occurs when a business gets bigger by joining or buying other businesses.
• A monopoly is when a business has over 25% market share of a specific market.
• Market capitalisation

  market capitalisation = market price of a share x number of shares

  Measures the value of all the business's shares.
• A franchise occurs when a franchisor sells the rights to its name, products etc. to a franchisee. Eg. McDonalds
• A franchisee buys the rights to a franchise.
• A franchisor sells a franchise.
• E-commerce is the act of buying or selling a product using an electronic system such as the internet.
• M-commerce is the act of buying or selling a product using a handheld device such as a phone.
• Outsourcing occurs when a business uses another business to produce for it.
• A merger occurs when 2 or more businesses combine to form a new business.

  Horizontal merger = occurs when one firm combines with another firm in the same stage of the same production service.

  Vertical merger = occurs when one firm combines with another firm in a different stage of the same production service.

  Conglomerate merger = occurs when one firm combines with another firm in a different type of production service. Eg. Red Bull x Jaguar F1 to form Red Bull Racing
• A takeover occurs when one business buys control of another business.

  Horizontal takeover = when one firm takes over another firm in the same stage of the same production service.

  Vertical takeover = when one firm takes over another firm in a different stage of production of the same production service.

  Conglomerate takeover = occurs when one firm takes over another firm in a different production service.
• EOS = Economies of scale


  When the cost per unit falls as its output rises.
• DOS = Diseconomies of scale


  When the cost per unit increases as the business expands.
• Business expansion

  Pros:

  • May lead to EOS
  • Increase market share
  • More expensive to take over

  Cons:

  • Decision making may slow down
  • Employees may no longer feel special (feel like a number)
  • Harder to control
• Why may a business expand abroard?

  • Lower wages
  • Lower costs
  • Closer to market
  • Less competitive market