is franchising internal or external growth

What is external growth in business?

External growth (also known as inorganic growth) refers to growth of a company that results from using external resources and capabilities rather than from internal business activities. External growth is an alternative to internal (organic) growth.

What is the difference between internal and external growth strategies?

For instance, developing internal capabilities can be slow and time-consuming, expensive, and risky if not managed well. External growth (or inorganic growth) strategies are about increasing output or business reach with the aid of resources and capabilities that are not internally developed by the company itself.

What does it mean to be a franchisee?

A franchisee is someone who purchases a franchise and is able to use an established brand name and their products. Selling a franchise can have disadvantages, such as losing control of the business and the risk that one store could damage the reputation of the whole brand.

Is organic growth better than external growth?

However, organic growth is widely regarded as a better measure of a company’s performance than external growth. Strategic Alliances Strategic alliances are agreements between independent companies to cooperate in the manufacturing, development, or sale of products and services. .

What type of growth is a franchise?

Internal growth is slower than external growth, but the business is in control at all times. Franchising is when one business sells the right to another to use its name, logo and to sell its products. A franchisor sells a franchise in return for a fee and royalties .

What is an example of internal growth?

Example: Shorty's Shoes wants to grow its business through internal means. It decides to increase the production of its toddler shoe line to meet growing demand and maximize the growth opportunity.

What is an example of external growth?

Mergers and takeovers External growth usually involves a merger or takeover . A merger occurs when two businesses join to form a new (but larger) business. A takeover occurs when an existing business expands by buying more than half the shares of another business.

What is internal growth and external growth?

On the other hand, a company engages in merger and acquisition deals to grow in external growth. Internal growth focuses on improving the existing operational efficiency and cost efficiencies. On the other hand, external growth emphasizes branding, marketing, advertising, etc.

Is franchising organic or inorganic growth?

Internal growth, or organic growth , is when a business decides to expand on its own. Methods of internal growth include franchising, opening new stores, e-commerce and outsourcing.

What are the examples of internal business growth strategies?

I. Internal Growth StrategiesA. Expansion:Business can be expanded through:-a. Market penetration strategy:b. Market Development strategy:c. Product Development strategy:B. Diversification:i. Backward integration:Example:More items...

What is external growth of a business?

External growth focuses on the areas you don't have direct control over, including capturing new customers. Generally, this means acquiring another business, merging with another competitor, or looking at strategic alliances and partnerships to achieve your overall growth goals.

Which of the following is not external expansion of business?

Manufacturing is NOT an external factor since manufacturing is referred as an internal factor as it belongs within the complete control of the organization.

Which two of the following are methods of external growth for a business?

There are five ways of External Growth: Mergers, Acquisitions, Takeovers, Joint Ventures (JV) and Strategic Alliances (SA).

What is the difference between internal and external growth in business?

External growth (also known as inorganic growth) refers to growth of a company that results from using external resources and capabilities rather than from internal business activities. External growth is an alternative to internal (organic) growth.

Is merger an internal growth strategy?

Mergers with or acquisitions of other firms are considered a means of external growth. The focus of this work is to present the different strategies of internal and external growth, to identify their advantages and disadvantages and to compare these two strategies with each other.

Why do businesses choose to grow internally rather than externally?

An advantage of internal growth is that it is low risk: a business can maintain its own values without interference from stakeholders. higher production means the business can benefit from economies of scale and lower average costs.

What is internal growth?

Internal growth, or organic growth , occurs when a business decides to expand its own activities by launching new products and/or entering new markets. Businesses do this in order to improve their chances of increasing their customers, revenues and profits.

What is internal growth in biology?

The process of increase in size, mass or height of an individual is known as growth. It can occur by cell division or cell expansion. Intussusception and accretion are the two types of growth. When there is addition of material and formation of the cells inside the organism, the growth is known as intussusception.

Why is internal growth important?

The internal growth rate is an important measurement for startup companies and small businesses because it measures a firm's ability to increase sales and profit without issuing more stock (equity) or debt.

What is internal expansion?

Internal expansion is the process of growing a business through the use of resources within the business, and not involving the use of any type of outside activities to solicit new customers.

What is external growth?

External growth (also known as inorganic growth) refers to growth of a company that results from using external resources and capabilities rather than from internal business activities. External growth is an alternative to internal (organic) growth. However, internal and external growth should not be considered opposites.

Why is external growth strategy so challenging?

The implementation of external growth strategies can be challenging for a number of reasons. For example, a company that wants to acquire another entity may face resistance from the target’s management or shareholders.

What are the two primary vehicles that companies use to pursue external growth?

Companies may pursue external growth using two primary vehicles: mergers and acquisitions (M&A) and strategic alliances. Strategic Alliances Strategic alliances are agreements between independent companies to cooperate in the manufacturing, development, or sale of products and services. . The main difference between the two is in regard ...

What is an acquisition in finance?

Conversely, an acquisition is a financial transaction in which the acquiring company (bidder) purchases a controlling stake in a target company. It can be done with the consent of the management and shareholders of a target company ( friendly takeover.

Is organic growth better than internal growth?

However, organic growth is widely regarded as a better measure of a company’s performance than external growth.

Why is selling a franchise important?

Selling a franchise has many advantages, including: faster growth – stores can be opened faster than if the original business was opening them. economies of scale – the business can achieve cost savings by expanding. more profits – the franchisor gets an initial fee and a percentage of the profit that each store makes.

How can a cereal manufacturer meet an increase in demand?

For example, a cereal manufacturer could meet an increase in demand by asking another cereal manufacturer to produce their products. However, the business will not have as much control and their reputation could be damaged if the products aren’t the same quality.

Why is business growth important?

Business growth is important as it enables businesses to increase the scale of their operation and competitiveness. This may be done either internally (organically) or externally (inorganically). Part of. Business. Business activity. Add to My Bitesize. Share this with. Twitter.

What is e-commerce business?

E-commerce. E-commerce involves the buying and selling of products online. This is another method of internal growth. There are businesses which traditionally only had physical stores (such as Marks and Spencer, Argos and John Lewis), which now have all established successful online stores.

What are the disadvantages of selling a franchise?

Selling a franchise can have disadvantages, such as losing control of the business and the risk that one store could damage the reputation of the whole brand.

What are the disadvantages of internal growth?

higher production means the business can benefit from economies of scale and lower average costs. Disadvantages of internal growth include: it is relatively slow. there maybe be a long period between investment and return on investment.

What is internal growth?

Internal growth, or organic growth, occurs when a business decides to expand its own activities by launching new products and/or entering new markets. Businesses do this in order to improve their chances of increasing their customers, revenues and profits. Internal growth is slower than external growth, ...

What is the deal with FedEx to acquire TNT Express?

US giant FedEx has agreed a deal to acquire their loss-making rival TNT Express for €4.4bn. For FedEx the merger offers a chance to build a much larger European presence and compete more effectively with businesses such as UPS.

What is the purpose of removing suppliers and crucial information from competitors?

Removing suppliers, and crucial information from competitors which helps to make a market less contestable

How much did TNT make in 2014?

The businesses are both well known to consumers but of a different scale. TNT made revenues of $7.3bn in 2014 with around two-thirds generated in Europe; a fraction of the $47bn turnover of FedEx.

What is vertical integration?

Vertical Integration involves acquiring a business in the same industry but at different stages of the supply chain.

How can a business grow organically?

Businesses can grow organically (internally) or externally through a process of merger / acquisition

What is forward vertical?

Forward vertical: Closer to the final consumers of the product e.g. a manufacturer buying a retailer

Why is control important in supply chain?

Control of the supply chain – this helps to reduce costs and improve the quality of inputs into the production process

External Growth Strategies

Uses of External Growth Strategies

• A company can use external growth strategies to achieve a number of different objectives, such as the following: 1. Obtain access to new markets 2. Increase market power 3. Access new technology/brand 4. Diversify a product or service 5. Increase the efficiency of business operations The implementation of external growth strategies can be challengi...

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