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Expanding a business
Study how businesses expand, why growth can lower unit costs, and why growth can also create coordination and motivation problems.
7
Objectives
10
Flashcards
10
Questions
90 min
Study time
AqaGcseBusinessBusiness in the real world
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Syllabus checklist
What you need to know
7 objective pages available
Methods of expansion3 objectives
- Discuss advantages and disadvantages of business growth methods.
- Explain organic growth through franchising, opening new stores and e-commerce expansion.
- Explain outsourcing and external growth through mergers and takeovers.
Economies and diseconomies of scale4 objectives
- Explain how growth can create unit cost advantages through economies of scale.
- Explain purchasing economies and technical economies of scale.
- Explain how growth can create diseconomies of scale through communication problems, coordination issues and reduced staff motivation.
- Calculate and interpret average unit costs.
Key terms
AcquisitionFranchisingtakeoverEconomies of scaleDiseconomies of scaleAverage unit cost
Exam tips
- Structure your evaluate answer: Begin with a clear statement of your position, list pros and cons in separate paragraphs, then give a balanced judgement that links back to the business context.
- Planning for new store openings: Start with a pilot store to test the market, refine the layout and supply chain, then roll out additional outlets based on the lessons learned.
Common mistakes
- Confusing franchising with licensing: Franchising involves ongoing support, training, and a royalty system, whereas licensing is a one‑time fee with limited support and no operational control.
- Confusing franchising with acquisition: Franchising is a licensing arrangement; the franchisee remains a separate entity and does not become part of the original company’s ownership.
Practice preview
- Which method of expansion gives a business full control over the new operation but requires the greatest initial capital outlay?
- Evaluate the advantages and disadvantages of using franchising as a growth method for an online service business.
- Which of the following is a form of organic growth for a business?
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