Business Expansion Flashcards
(7 cards)
why may a business expand?
Personal ambition
Diversification
Economies of scale
Eliminating Competition
Financial strength
why is personal ambition a reason for business expansion
: Ambitious individuals often seek to reach new milestones. Expanding a business represents progress and success, aligning with their personal goals. Entrepreneurs often grow their businesses to increase profits, build personal financial security, and create long-term wealth for themselves and their families.
why is ECONOMIES OF SCALE a reason for business expansion
A s a firm expands the average cost falls when buying things in bulk, saving in transport, lower storage costs etc. It can produce goods or services at a lower cost per unit which can increase sales eg if a bakery spread their bakery over many locations which leads to higher prices.
why is diversification a reason for business expansion
It helps reduce risk by spreading investments across different products, markets, or industries, making the business less vulnerable to market changes or downturns.
Eg A company that only sells winter clothing might struggle during summer. To reduce this risk, it expands by offering summer wear too. This diversification helps maintain steady sales year-round, even if one product line underperforms.
why is eliminating competition a reason for business expansion
By merging with ot taking over anther business, a business may eliminate a threat to its market share. It will also give it more control of pricing and customer base
A coffee chain might open new branches near smaller local cafes to attract their customers, eventually driving the competitors out and dominating that area.
why is financial strength a reason for business expansion
Expansion will increase the financial strength of the enterprise through sheer size. A largr business commands prestige, influence and power with for example banks and other small businesses.
