Small business advantages:
Greater focus: focus where they want; in places with greater profitability; in specific markets
Greater cachet: greater sense of exclusiveness so they can charge more for their output, leading to higher profit margins
Greater motivation: more prestige can motivate managers/employees
Competitive advantage: giving a more personalized service and being more flexible
less competition: focusing on a niche gives limited competition
Internal growth: slowly, steady and out of the existent operations of the business. They don't take many risks. Expands by selling more products or by increasing its product range. Usually self-financed
External growth: quick and riskier methods. Expands by entering into an arrangement with another business. It usually needs financing
Types/methods: Merger and acquisition: 2 businesses integrate by joining in a bigger business or by an acquisition
horizontal integration: B. In the same line and chain of production. Disney bought pixar
Backwards vertical: integrate from another at an earlier stage in the chain of production to protect its supply chain. Starbucks buys coffee manufacturer
Forward vertical: business integrates with another of a later stage in the chain of production to ensure a secure outlet.
Conglomeration (diversification): 2 B. In unrelated lines integrate
Joint ventures: 2 businesses combine resources for a specific goal over a finite period of time. They don't lose their legal existence or identity. It is like a partnership
Strategic alliances: business collaborate for a specific goal different to joint ventures because: more than 2 businesses
Franchises: a franchisor (business) sells the right to offer their concept and sell their products. It has to be consistent/identical to the business concept
responsibilities: Franchisor: the stock, global advertising and promotion, legal financial help, staff training. Franchisee: set prices and wages, pay royalty on sales, advertise locally, sell only the products of the franchisor.
advantages franchisee: the product is usually well known,set-up costs reduced, has a secure supply of stock. Disadvantages franchisee: has no control of what to sell or over the supplies, has to pay royalties to the franchisor, unlimited liability for the franchise.
Advantages franchisor: quick access to wider markets, makes use of local knowledge and expertise, gains more profit and the sign-up fees. Disadvantages franchisor: loses control of day-to-day operations, can suffer if the franchise fails or does not perform properly.