Methods of Expansion
How a business grows: organic methods such as new stores, franchising and e-commerce, and external growth through mergers and takeovers, together with the benefits and drawbacks of expanding.
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How a business grows bigger
A successful business often wants to grow, to reach more customers and earn more. There are two broad ways to do it: grow itself step by step, or join with or buy another business. Each route has benefits and drawbacks. This module looks at the methods of expansion and at when growth helps and when it hurts.
Growth words to know
Learn these before you sort the methods.
Organic against external
A business can grow itself or grow by joining with others.
Name the growth, weigh it up
In the exam, name the type of growth and then judge it. Organic growth is steadier and keeps control, but it is slow. External growth through a merger or takeover is fast and adds size at once, but it costs a lot and two firms can clash. Always give both a benefit and a drawback rather than one side only.
Match the method
- opening new stores
- franchising
- e-commerce
- a takeover
- organic growth into new places
- others run branches under your brand
- selling online to reach more people
- external growth by buying a firm
Match the point
- reaching more customers
- spreading the risk
- the high cost of a takeover
- a clash of company cultures
- a benefit of expanding
- a benefit of expanding too
- a drawback of expanding
- a drawback after a takeover
What is organic growth?
What does organic growth mean?
- A business growing itself, such as by opening new stores.
- Buying control of a rival business.
- Two firms joining to become one.
- Closing down some of its shops.
Spot the external growth
Select the TWO methods that are external growth.
- A merger with another company
- A takeover of a rival
- Opening more of its own stores
- Starting to sell online
Count the stores
A coffee chain has 12 stores and opens 6 more this year through organic growth. Add the two figures to find how many stores it now has. What is the answer?
Order the organic growth
Put the steps of a business growing organically in order, earliest first.
- The business earns a profit
- It reinvests the money
- It opens a new store
- It reaches new customers
Complete the summary
When a business grows itself, step by step, this is _____ growth. Letting others run branches under your brand is called _____. When two businesses join to become one it is a _____. Expanding can bring more customers, but a drawback is that it can be harder to _____.
Spot the organic methods
Tap the TWO methods that are organic growth.
- opening new stores
- starting to sell online
- merging with a rival
- taking over a competitor
Which growth is it?
Read each case and choose the type of growth.
- A bakery uses its profits to open three more of its own shops. Which type of growth is this?
- A supermarket buys a smaller rival chain to gain its shops overnight. Which type of growth is this?
- After a takeover, the two firms have very different ways of working and staff are unhappy. What is this an example of?
Explain business growth
Explain the difference between organic and external growth, giving examples, and give one benefit and one drawback of expanding.
- Describe organic growth with two examples
- Describe external growth with two examples
- Give one benefit and one drawback of expanding