Business expansion short answers

Study Notes

A business can minimize risk by expanding product lines or markets.
Reliance on a single product or market can lead to vulnerability during economic downturns.
Example: Dyson diversified from only vacuums to a range of electrical products, paving the way for resilience against new competitors.

Businesses may acquire suppliers to secure a consistent supply of products or raw materials.
This strategy enhances competitiveness by controlling crucial sourcing channels.
Example: Amazon transitioned from a retailer to a publisher to increase profit margins and reduce dependence on other publishers.

Expansion often leads to reduced average production costs through bulk purchasing and lower transportation and storage expenses.
Lower costs result in higher profit margins or competitive pricing against rivals.

Acquisition of Potential Threats: Instead of competing, firms can buy competitors to acquire their products and assets, as seen with Google's acquisition of Motorola for its patents.
Competition Elimination: Mergers can remove direct competition; example: Ryanair's blocked takeover of Aer Lingus due to EU competition laws.
Asset Stripping: Buying a company solely to sell its assets for profit, demonstrated by BC Partners taking over Phones4U.
New Markets: Firms often expand into new sectors through acquisition; Google entering the online video market by buying YouTube.
Synergy: Merging creates heightened value through combined efficiencies, benefiting both entities beyond individual performance.

Organic growth is achieved by reinvesting profits to develop internally, requiring no external acquisitions.
Growth methods include increasing sales, licensing arrangements, and franchising.

Increasing Sales: Expanding sales through new products, marketing strategies, or new markets; example: Cadbury introducing new flavors or sizes.
Licensing: Agreements allow local businesses to manufacture products with royalties, enhancing market reach without heavy investment.
Franchising: Franchisors grow via franchisees; this model transfers financial risks and investments to franchisees while maintaining brand management.

Requires lower capital investment from franchisors, as expansion costs are borne by franchisees.
Enables rapid growth by leveraging franchisee resources, establishing more outlets swiftly.

Different financing methods affect control, repayment timelines, security, and tax implications:
- Equity finance allows flexibility with dividend payments.
- Debt financing may impose repayment schedules, maintaining business control while requiring asset securities.

Increased production leads to more jobs, bolstering domestic employment.
Expansion necessitates additional service providers, stimulating related sectors’ growth.
Economies of scale can result in lower consumer prices, thus improving overall living standards.

Exports boost employment by generating more production in Ireland.
Enhanced international trade improves the balance of payments, building national wealth.
Foreign currency earnings diversify risk and facilitate imports.
Exporting enhances international relations, potentially attracting further foreign direct investment (FDI).

Both organic and inorganic growth affect organizational structures and employment levels over time.
Changes may include restructuring operations to handle increased activities and complexities associated with expansion.