AQA · GCSE · Business

    Course version: 8132 · Version from Sept 2017

    Expanding a business: Methods of expansion

    Methods of expansion cover how a business grows.

    Checked against the AQA 8132 specification (opens in a new tab) on .

    • Point 1 of 10
    • 4 key terms

    Study notes

    From the checked teaching notes for this specification point.

    The idea

    Methods of expansion cover how a business grows. Internal (organic) growth uses a firm's own resources, such as opening new outlets or expanding via e-commerce to reach global markets. External growth involves integration through mergers or takeovers. Expansion can also occur through franchising, where a franchisor allows franchisees to trade under its brand for a fee, enabling rapid growth with less capital. Outsourcing involves paying another firm to perform tasks (e.g. manufacturing), allowing the business to focus on core activities and expand capacity. You must explain these methods, apply them to contexts, and evaluate their benefits (e.g. economies of scale) against drawbacks (e.g. loss of control in franchising or outsourcing).

    What earns the marks

    • Explain internal growth methods, including e-commerce and opening new outlets.
    • Explain external growth through mergers and takeovers (integration).
    • Analyse franchising as a method of expansion, noting the balance of rapid growth against loss of brand control.
    • Analyse outsourcing as a way to expand capacity by delegating non-core tasks to third parties.
    • Evaluate the suitability of expansion methods for a given business context, weighing benefits against costs and risks.

    Common mistakes and how to put them right

    • Confusing franchising with a merger.

      Put it right: Franchising involves selling the right to use a brand, not combining ownership.

    • Forgetting e-commerce as an expansion method.

      Put it right: Explicitly mention selling online as a way to reach new markets organically.

    • Assuming outsourcing is only for cost-cutting.

      Put it right: Recognise it as a method to expand capacity without heavy capital investment.

    Exam tips

    • When evaluating franchising, contrast the rapid, lower-cost expansion for the franchisor with the risk of franchisees damaging the brand's reputation.
    • Use connectives like 'because' and 'therefore' to build chains of reasoning when analysing the impacts of e-commerce or outsourcing.

    Try the lesson

    The start of the Expanding a business: Methods of expansion lesson, made from checked teaching notes for this specification point.

    Have a go first

    Which of the following is a method of expansion for a business?

    Listen

    Methods of expansion cover how a business grows. Internal (organic) growth uses a firm's own resources, such as opening new outlets or expanding via e-commerce to reach global markets. External growth involves integration through mergers or takeovers. Expansion can also occur through franchising, where a franchisor allows franchisees to trade under its brand for a fee, enabling rapid growth with less capital. Outsourcing involves paying another firm to perform tasks (e.g. manufacturing), allowing the business to focus on core activities and expand capacity. You must explain these methods, apply them to contexts, and evaluate their benefits (e.g. economies of scale) against drawbacks (e.g. loss of control in franchising or outsourcing). A strong answer earns marks for these points. Explain internal growth methods, including e-commerce and opening new outlets. Explain external growth through mergers and takeovers (integration). Analyse franchising as a method of expansion, noting the balance of rapid growth against loss of brand control. Analyse outsourcing as a way to expand capacity by delegating non-core tasks to third parties. A common slip: Confusing franchising with a merger. Instead, franchising involves selling the right to use a brand, not combining ownership. Exam tip: When evaluating franchising, contrast the rapid, lower-cost expansion for the franchisor with the risk of franchisees damaging the brand's reputation.

    See it

    A top-down flowchart. The top node is 'Methods of expansion', branching into four nodes: 'Internal (organic) growth', 'External growth', 'Franchising' and 'Outsourcing'. 'Internal (organic) growth' branches into 'Opening new outlets' and 'E-commerce to reach global markets'. 'External growth' branches into 'Mergers' and 'Takeovers'. 'Franchising' branches into 'Franchisor allows franchisees to trade under its brand for a fee'. 'Outsourcing' branches into 'Paying another firm to perform tasks'.
    It classifies the methods of expansion into internal growth, external growth, franchising and outsourcing, with the sub-methods named in the teaching note.

    Key words

    Say what each word means before you turn the card.

    Internal (organic) growth

    Try answering aloud or in your head before turning the card.

    External growth

    Try answering aloud or in your head before turning the card.

    Franchising

    Try answering aloud or in your head before turning the card.

    Outsourcing

    Try answering aloud or in your head before turning the card.

    See every definition
    Internal (organic) growth
    Growth that uses a firm's own resources, such as opening new outlets or expanding via e-commerce to reach global markets.
    External growth
    Growth that involves integration through mergers or takeovers.
    Franchising
    A method where a franchisor allows franchisees to trade under its brand for a fee, enabling rapid growth with less capital.
    Outsourcing
    Paying another firm to perform tasks, allowing the business to focus on core activities and expand capacity.

    Label the diagram

    Some boxes have lost their names. Pick the right name for each number.

    The diagram again, with 3 boxes numbered instead of named. A top-down flowchart. The top node is 'Methods of expansion', branching into four nodes: 'Internal (organic) growth', 'External growth', 'Franchising' and 'Outsourcing'. 'Internal (organic) growth' branches into 'Opening new outlets' and 'E-commerce to reach global markets'. 'External growth' branches into 'Mergers' and 'Takeovers'. 'Franchising' branches into 'Franchisor allows franchisees to trade under its brand for a fee'. 'Outsourcing' branches into 'Paying another firm to perform tasks'.
    • 1Box 1

    • 2Box 2

    • 3Box 3

    0 of 3 labelled

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