Expanding a Business – GCSE Business Studies Revision

But first

  • Sometimes sole traders like doctors or dentists form partnerships
  • This can benefit them because they share expertise and can help each other
  • However, they also share responsibility and disagreements can happen
  • Partners have unlimited liability (see my other post) because they have not technically formed a company

Ways of Expanding

  • Internal growth, or organic growth is where a business gradually hires more staff and makes more products
  • External growth happens when a business merges with another business or takes one over – this means its operations are on a larger scale
  • Franchising is when a business allows people to copy it for a price – see my franchising post

Benefits of Expanding

  • A larger business is less at risk from smaller competitors, and it can take them over
  • Large businesses can become price setters and have a lot of control over what price things are sold at
  • It usually costs a large business less to make something than it costs a small business to make the same thing
  • This is because the large business is making loads of them so it can use the same manufacturing machines and buy the raw materials in bulk to get a discount
  • This is known as having an economy of scale
  • (Small businesses that can’t compete with this cheapness have to do better customer service or quality instead)

The Downside

  • Growing is risky! Your plans could just fail and result in a loss!
  • Sometimes it’s safer to just keep the profit and not use it to expand the business
  • //BTW, if I’ve been writing “compeat” or “tommorrow”, I apologise for the typos
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About Matt

I like writing, filmmaking, programming and gaming, and prefer creating media to consuming it. On the topic of consumption, I'm also a big fan of eating.
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One Response to Expanding a Business – GCSE Business Studies Revision

  1. Pingback: Starting a Business – GCSE Business Studies Revision | Matt's blog

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