Business Studies - AQA - GCSE - Business Expansion

Internal Growth
1. Advantages
  1. More manageable
2. Disadvantages
  1. Slower
External Growth
1. Merger
  1. When two businesses join together
2. Takeover
  1. When a (usually larger) business buys out a (usually smaller) business
3. Disadvantages
  1. Less manageable
  2. Costs
4. Advantages
  1. Quicker
  2. Already set up
Reasons for Expansion
1. Market Share
2. New Market
3. Profits
Difficulties when Expanding
1. Costs and Risks
2. Personal Services
3. Increased Workload
4. Control
Integration
1. Backwards integration
  1. When a business buys a previous stage of the production process e.g. Food factory ---> Farm
2. Forwards integration
  1. When a business buys a previous stage of the production process e.g. Food factory ---> Retail
3. Conglomerate integration (Diversification)
  1. When a business expands into a different production process e.g. Food retail ---> Travel
4. Advantages
  1. Share ideas/experience/resources/skills/status
  2. Spreads risk
  3. More opportunity to make a profit
  4. Guarantees quality for other areas (Backwards and Forwards integration)
  5. Widens target market
  6. Removes cost of third parties - Only pay what is needed (Backwards and forwards integration)
  7. Increase market share
  8. Allows economies of scale - Buying larger quantities for a lower unit price.
5. Disadvantages
  1. Possible conflicting ideas/lack of control
  2. Possible lack of expertise
  3. Unemployment - Redundancies
  4. Increased workload
  5. Short term expenses
  6. Diseconomies of scale - Paying workers that aren't working efficiently

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Business Studies - AQA - GCSE - Business Expansion

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