Chap 18. BUSINESS EXPANSION. CHAPTER TOPICS 1. Reasons for business expansion: 2. THE 4 Paths to Business Expansion 3. Where can businesses get finance for expansion? 4. Similarities /differences between equity capital/ debt capital 5. Positives/negatives for business expansion
1. Reasons for business expansion:
2. THE 4 Paths to Business Expansion
3. Where can businesses get finance for expansion?
4. Similarities /differences between equity capital/ debt capital
5. Positives/negatives for business expansion
6. Short & Long Term Implications of Expansion
7. How is business expansions controlled?
Organic Growth- (internal to business)
Path 1: Using Existing Products
Path 3: Forming Strategic Alliance
(i.e.) (Where one company will produce a product and the other company may provide more skills in the marketing of it).
A merger is a joining of two or more firms of similar size. They both agree to voluntarily form a single business. An acquisition is often termed a takeover and involves one firm taking the majority control of the shares.
These are seen are high-risk ways of expanding companies as top management can resist change. Businesses can become difficult/sometimes hostile working environments for employees. This can hinder future product developments.
Forbairt, Bord Trachtala, Bord Bia, Udaras na Gaeltachta
EPA – environmental protection agency,
EI – Enterprise Ireland.
Positives to expansion for
A – EU Competition Law
This is concerned with preventing activities that reduce competition or unethical practice. They investigate complaints that involve large international firms that affect stakeholders are within the European markets (SEM). If found guilty theses companies can be fined up to 10% of annual profits.
B- Irish Competition Law
In Ireland the Competition Authority is a state agency set up to PREVENT deals between firms that may be seen to reduce competition or is seen to be conducting unethical business practice. It investigates mergers, acquisitions/takeovers etc. The competition authority has the right to be informed of a merger/takeover if the company involved is gaining over 50% of the market share. It investigates the effect of this takeover on stakeholders (i.e) employees, customers, competitors.
The Competition Authority was established in 1991.
2006 Q6 (B) `20 marks
(i) Describe the implications for the business of expansion?
(ii) Explain two methods of expansion you would advise them to consider?
(b) Discuss, using examples, the factors a manager should consider when selecting sources of finance for expansion. 20 marks
(c) Describe three reasons for business expansion other than to increase profit. 30 marks
(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