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Chapter 18 Business Expansion Powerpoint
Chapter 18 Business Expansion Powerpoint
Chapter 18 Business Expansion Powerpoint
BUSINESS EXPANSION
1.Reasons for business expansion:
Improvement in profit and sales
Self actualisation/Personal fulfilment
Elimination of competitors in market
Gap available in the market
More security available in diversifying into development
of other products
Better ability to spread the risk across the different
product lines (i.e.) (better not to have all eggs not in
one basket)
2. THE 4 Paths to Business Expansion
Organic Growth- (internal to business)
(i.e.) (Where one company will produce a product and the other
company may provide more skills in the marketing of it).
Example:
Examples:
QUINN HEALTHCARE take over of BUPA,
GLAZOR Group majority share in Manchester Utd
GILLETT brothers majority share in Liverpool FC
Summary table of paths to expansion
Internal
External
Control Control can be lost due to outside No direct loss in control. However assets
investment may be used as security for a loan
Cost This can be cheap as company only pays Loan interests must be paid regardless of
dividend when profits are made profit/loss occurring
Risk A company financed by equity is said to A company financed by long term debt is
be a low risk business
said to be a high risk business
5. Positives/negatives for business expansion
2000-Q7
(a) Outline two reasons for Business Expansion OTHER
than increased profit? 20 marks
(c) Contrast Equity & Loan Capital as sources of finance for
expansion? 30 marks