Question

2. Discuss the major reasons why one should expand beyond what your business is by: pursuing vertical integration, being diversification, manage a multi-business corporation, or pursue a merger or acquisition (1page allocation)

Answer 1

2. Discuss the major reasons why one should expand beyond what your business is by pursuing vertical integration, being diversification, manage a multi-business corporation, or pursue a merger or acquisition (1page allocation).

Business Expansions

Business expansion is the strategy of the organization to expand or increase the market by adding a new product in the market, by entering the international business, modifying the business, etc.. in other words we can say every business wants to grow and profitable. But after some time it becomes stagnant and stays at there current situation. Then Owners take action and prepare a strategy for expanding the business. Example: Mobile shop converted into Mobile Store etc.

Major Reasons: Expand Business

There are lots of reasons why a company cross their limitation and participate in the expansion by taking aggressive action that help to boost the stability and growth of the Business. Let's understand the major reason why every business wants to expand.

1. To Profitability

Profit is the prime and the ultimate aim of every organization, after some time business feels that their profit is limited or not enough for the business expenses and growth. Then the company expands its business to improve profit and the ability to face business expenses easily. Until the company is profitable the company is stable.

2. To Growth

The second most important thing after the profit is the growth of the business, the organization always wants to improve and enhance their skills by taking aggressive action and plan for the improvement and development of business.

3. To Stability

Things changing due to the impact of market activity, now the need for the company to become stable. That's helpful for the business profit and stable market share.

4. To Face Competition

Only a few businesses left, where we can't saw monopoly. But everywhere where we visit and do our business. We observe that the competitor already available in the market. Facing competition effectively we need to expand our business.

5. To Capture Market Share

For capturing market share we need to expand and enter into the new market, which helps us to get and grab the new market share for the business and help to generate more growth.

Mode of Expansion with Reason

• Vertical integration: Vertical Integration means when the company takes over the business of the supplier or any service provider. It helps to minimize the cost of the company and increase control.
• Diversification: Diversification means when the business starts production of new products or enter into the new market. It helps with the generating of more profit and capture market share.
• Multi-business corporation: Multi Business corporation is a group of two or more than two corporations. Small firms join the multibusiness firm for expanding their business. That helps to get expertise and reduce the cost of the company.
• Merger or acquisition: Merger is the process combining with other companies for doing business and capture the market share. The acquisition is the process of purchasing another business firm. That's help for growth and competitive capacity for the business.

All the very best.