Business expansion methods

The three main reasons for an entrepreneur expanding their business are

• Offensive

• Psychological

• Preservative

• Defensive

An example of a psychological reasons is

• Increasing profits

• Challenge

• Asset stripping

• Protecting supplies

An example of an offensive (aggressive) reason for expansion is

• Ambition

• To acquire new products

• Diversification

• Ambition

An example of a defensive reason for expanding a business is

• Diversification

• Challenge

• Increasing profits

• Eliminating competition

Eliminating competition is a

• Defensive reason

• Offensive (aggressive) reason

• Psychological reason

Protecting supplies is a

• Psychological reason

• Defensive reason

• Aggressive reason

Diversification means

• Achieving economies of scale

• Entering new markets to reduce risk of being dependent on one

• Buying a company purely to gain certain assets

• Eliminating competition

Backward vertical integration means

• Expanding by buying the supplier of raw materials

• Expanding by buying the seller of your products

Forward vertical integration means

• Expanding by buying the supplier of your raw materials

• Expanding by becoming the retailer (seller) of your products

Economies of scale means

• Saving money by setting up lower wage economies

• Making cost savings by increasing the numbers of products produced

• Saving money by budgeting to reduce costs