Business Growth and E-business

Bigger is not automatically better

Businesses grow for good reasons: lower costs per unit as they spread overheads, a larger share of the market, more profit, and less exposure to one product or one customer failing. But growth has a price, and it is the same price every time: **speed costs control**. A business that doubles quickly may find its communication breaks down, its cash runs out before the profits arrive, or the thing customers liked about it has gone. Every route in this topic sits somewhere on that trade, and an answer that names where is worth more than one that lists advantages.

From the inside or from outside

The first choice is whether to build the growth yourself or buy it.

Which of these is internal growth?

A bakery chain is expanding. Select the TWO things it is doing that count as internal growth.

• Opening three new shops of its own in nearby towns
• Launching a website to sell nationwide by post
• Buying a rival bakery in the next county
• Merging with a cafe chain to form one company

Which of these is external?

A different company, a furniture maker. Tap the TWO actions that are EXTERNAL growth.

• Over two years the firm
• hired fifteen more staff for its own workshop
• ,
• bought the timber supplier it had been ordering from
• ,
• introduced a new range of office desks
• , and
• merged with a competitor to form a single larger company

Four words for external growth

These get used loosely in ordinary speech and precisely in an exam.

Match each type of growth to an example

Why do takeovers so often disappoint?

A firm buys a competitor and expects immediate benefits. What most often goes wrong?

• Joining two businesses is harder than buying one: different ways of working, duplicated roles and unhappy staff can cost more than the market share was worth
• Takeovers are usually blocked by the government
• Customers of the bought firm are legally released from their contracts
• Nothing usually goes wrong; takeovers reliably deliver what was expected

Growing without opening anywhere

Selling online is the one route that lets a business reach a national or international market **without premises in it**. That is a genuinely new kind of growth. A small firm can take orders from anywhere, trade at any hour, and expand sales far faster than its physical size would ever allow. Growth stops requiring buildings. The catch is symmetrical. **Every competitor gets the same reach**, including ones on the other side of the world, so a business that goes online is not only entering new markets but inviting others into its own. And reach is not capacity: orders from three hundred miles away still have to be packed, delivered and returned.

What does selling online change about growth?

A small firm starts selling nationally through its own website. What is the most accurate thing to say about its growth?

• It has gained reach without the cost of premises, but it now competes with firms everywhere and has to handle delivery and returns it did not have before
• Growth is now essentially free, since a website costs very little
• Nothing has really changed, since it is still the same business
• It has achieved external growth, because it is reaching outside its area

Growth in a paragraph

A business that expands by opening its own new outlets is growing _____, while one that buys a competitor is growing _____. When two firms agree to join as one, that is a _____. Buying a business at a different stage of the same supply chain is _____ growth. A firm operating in more than one country is a _____ business.

What a multinational brings, and takes

**"Discuss the impact of a multinational business opening a plant in a country. (8 marks)"** "For the host country the immediate impact is positive: jobs, investment in buildings and equipment, training that leaves workers with skills they keep, and tax revenue. Local suppliers often gain too. Against that, the profits generally leave the country rather than staying in it, local firms may be undercut by a competitor with far deeper resources, and the decisions that matter most - whether the plant stays open at all - are taken in a head office somewhere else. The country gains employment and loses some control over it. On balance the impact depends on what the alternative was. Where there was little other investment, the jobs outweigh the loss of control; where local industry already existed, less so." Both directions, then a judgement that depends on circumstances. "Discuss" is asking for exactly that, and a one-sided answer cannot reach the top band however detailed it is.

Write it balanced

Build a sentence about a multinational that a "discuss" question would reward.

Which way should they grow?

A successful family bakery with three shops wants to be much bigger within five years. Work through the options.

• They could open shops of their own or buy a chain of eight. What is the real difference?
• Their reputation rests on hand-finished bread and knowing their customers. What does that suggest?
• They also want to sell nationally. How does e-business fit alongside the choice they have made?

Your turn: advise on growing

A local coffee roaster with one shop wants to grow substantially. Advise them on how, and on what it will cost them beyond money.

• Explain the difference between internal and external growth, with an example of each
• Recommend one route for this business and justify it against the alternative
• Explain what selling online would add, and what it would bring with it
• Explain one way growth could damage what makes the business successful now