Benefits and drawbacks of expansion - Expanding a business - AQA - GCSE Business Revision - AQA - BBC Bitesize (2024)
Benefits and drawbacks of expansion
The size of a business can be measured in terms of its sales, its value, or the number of employees it has. In order to expand, the business needs to increase one or more of these elements.
Businesses may wish to expand for the following reasons: Benefit from economies of scale – lower unit costs due to an increase in size. A larger market share (selling more products than before) means they can charge higher prices and gain more profit.
there maybe be a long period between investment. For example, a company might invest in the purchase of new machinery, stock, workforce and processes. ...
growth may be limited and is dependent on the reliability of sales forecasts.
Easy access to European markets: Though the UK completed their exit from the European Union in 2020, they've still maintained strong trade ties. Expansion into the UK gives companies access to nearly 450 million consumers in Europe. Highly skilled talent pool: The UK workforce makes up 78% of the population.
What are the disadvantages of an expansion strategy? Adding product items or product lines increases costs of inventory, marketing, transportation, and storage. If the new products are more complex or sophisticated, the sales staff may require additional training to sell them.
A successful strategy helps give the business intimate knowledge about customers and competitors. Benefits of business strategy like this include greater revenue for the business, better predictions of future needs, faster actions than competitors, and a stronger brand that can weather changes more easily.
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