Business Growth and Expansion

Flashcards for reviewing business activity concepts including diversification, takeovers, business size measurement, internal and external growth, integration types, economies of scale, franchising, and business success measurement.

Diversification

Allows a business to enter a different market in addition to the one they are already involved in, enabling the business to spread its risks should the original business fail.

Takeover (or Acquisition)

When one business gains control of another.

External Growth

Involves increasing the size of a business by buying other businesses.

Merger

When two or more businesses join together to form a new business.

Internal (Organic) Growth

Where the business grows by increasing the size of a business by increasing its sales, revenue, profits and workforce.

Conglomerate Integration

Occurs when a business joins with another in a different type of production process.

Horizontal Integration

The buying or merger of other businesses producing the same or similar products.

Vertical Backwards Integration

Occurs when the suppliers of a business are taken over by that business.

Vertical Forwards Integration

Occurs when a business takes over another business to control the direct distribution of a business’ products.

Internal Economies of Scale

The benefits a business gains as a result of being large; costs can be spread between the large number of goods produced so the cost per good is lower than for smaller businesses.

Franchise

The right given by one business to another to sell goods or services using its name.

Franchisor

A business which allows a franchisee to sell using their processes, experience and name in return for royalties.

Franchisee

A business which pays royalties for the right to sell goods or services using established processes and under the name of another business.