Expanding a business key terms

Acquisition

The purchase of one company by another, resulting in the acquiring company gaining control over the target’s assets, operations, and market presence.

Franchising

A business model where a franchisor grants a franchisee the right to operate a location using the franchisor’s brand, systems and support, while the franchisee pays fees and royalties.

takeover

A takeover is the acquisition of one company by another, usually through the purchase of a majority of its shares, resulting in the acquiring company gaining control.

Economies of scale

A reduction in the per-unit cost of production that occurs when a firm increases its scale of production.

Economies of scale

Economies of scale refer to the cost advantages that a business obtains due to expansion, where the average cost per unit of output decreases as the scale of production increases.

Diseconomies of scale

A situation where a company’s average cost per unit rises as it grows, due to factors such as communication breakdowns, coordination difficulties, and declining employee motivation.

Average unit cost

The total cost of producing a quantity of goods divided by the number of units produced.