Growth is important for every business. Once an entrepreneur earns enough profit, the next step is to focus on expanding the business. This requires good management skills to help the business grow successfully.
“Growth is the great separator between those who succeed and those who do not.” – John C. Maxwell
Business growth can take shape through adding new activities or by acquiring and controlling other companies. This can happen in two ways:
1. Expanding within the business (internal growth)
2. Growing by merging with or acquiring other businesses (external growth or business combination)
External Expansion: A firm may expand externally by:
- franchising
- mergers and acquisitions
Franchising
Franchising is a business arrangement where a manufacturer or distributor gives independent retailers the exclusive rights to sell their trademarked product or service in exchange for royalty payments.
Types of Franchising
- Product Franchise Business Opportunity
- Manufacturing Franchise Opportunity
- Business Franchise Opportunity Venture
- Business Format Franchise Opportunity
Importance of Franchising for New Businesses
- provides ready market
- gets training from franchisor
- spirit of mutual cooperation and collective gains
- helps in faster growth
Mergers and Acquisitions
A merger is the combination of two or more companies into a single entity, typically to achieve greater efficiency, market share, or competitive advantage.
Forms of Mergers
- Amalgamation
- Absorption
Types of Mergers
- Conglomerate Mergers
- Horizontal Mergers
- Market Extension Mergers
- Product Extension Mergers
- Vertical Mergers
Acquisition
An acquisition is when one company purchases another, gaining control over its business.
Types of Acquisition
- Friendly Acquisition – when acquisition takes place cordially
- Reverse Acquisition – private company acquires public company
- Backflip Acquisition – acquiring company becomes subsidiary of the company it purchases
- Hostile Acquisition – when acquisition is forced
