Internal growth

• Internal growth, or organic growth, is when a business decides to expand on its own. Methods of internal growth include franchising, opening new stores, e-commerce and outsourcing
• Franchising

  A business that gives the right to another person or business to sell goods or services using its name, they do this by providing them with a license. To become part of a franchise, a new business must pay a fee. In return, they get to join the franchise and benefit from using the business name and products, training, marketing and equipment A franchisor sells a franchise in return for a fee and royalties. A franchisee is someone who purchases a franchise and is able to use an established brand name and their products
•  Advantages of a franchise include that is it already an established business, it can be easier to make money, and it allows for rapid growth of a business. For a franchisee, this will provide lower risk, whilst a franchisor benefits from being able to expand their business
• Disadvantages of a franchise include a loss of some decision making control, along with lower levels of profit for both a franchisee and franchisor. Franchises can also be expensive to set up and manage
• Opening new stores

  This is a great way to expand a business; this can be done either nationally or internationally. Businesses must be able to find a suitable location for a new store and have access to enough finance to pay for it
• E-commerce

  This involves selling products online. This provides businesses with a much larger market and the ability to make sales at any time, though it can be expensive to set-up and manage
• Outsourcing

  This occurs when a business pays another firm to produce its products. This allows the business to increase its capacity quickly with minimal investment. However, the business will lose control and their reputation could be damaged if the products are not the same quality
• Advantages of internal growth include:

  • a business can maintain its own values
  • lower risk
  • higher production means the business can benefit from economies of scale and lower average costs
• Disadvantages of internal growth include:

  • return on investment could take a long time
  • slower growth
  • growth may be limited and is dependent on the reliability of sales forecasts