Expanding a business - AQABenefits and drawbacks of expansion

The size of a business can be measured in terms of its sales, its value, or the number of employees it has. In order to expand, the business needs to increase one or more of these elements.

Benefits of expansion include:

• economies of scale
• more power in the market
• increased status and reputation will make it easy to launch new products
• staff may be rewarded, which will increase motivation
• more money

Drawbacks of expansion include:

• slower decision making and communication as the hierarchy grows
• messages may become distorted
• employees may become demotivated as they feel less important to the business
• the business becomes harder to manage as it may be based in a number of different locations

Businesses growth can occur through either internal (organic) growth or external (inorganic) growth.