Short Type Questions - Enterprise Growth Strategies, Entrepreneurship, Class 12 | Additional Study Material for Commerce PDF Download

Q1. What do you mean by Internal Expansion ? (4 marks)
Ans. Internal expansion means expansion within the internal boundaries of a company. It includes :
(i) Expansion of production capacity.
(ii) Adding more line of products.
(iii) Replacing old machines with new.
(iv) Financing more with issue of extra shares.
(v) Broadening present capital structure.
(vi) Entering new fields on production and marketing side.
(vii) Increase in business activities.

Q2. Explain External Expansion. (4 marks)

Ans. External Expansion means expension beyond the boundaries of a company. It includes :
(i) Combination of two or more firms for expansion.
(ii) Combining to maximise profit and shape the policies in best may.
(iii) Combining with competitive firms to reduce competion and increase profit, etc.

Q3. Explain in brief the three ways in which an organisation can expand externaly ? (TBQ) (3 marks)
Ans.
(i) Franchising : It is an agreement whereby the manufacturer or sole distributor of a trade marked product or service gives exclusive rights of local distribution to independent retailers in return for their payment of royalties and conformance to standardized operating procedures.
(ii) Mergers : It is a combination of two companies into one larger company. All the combining companies are dissolved and only the new entity continues to operate.
(iii) Acquisition : It is a corporate action in which a company buys most, if not all, of the target company’s ownership stakes in order to assume control of the target firm.

Q4. Name the types of franchising ? (4 marks)
Ans.
(i) Product franchise business opportunity.
(ii) Manufacturing franchise opportunity.
(iii) Business franchise opportunity ventures.
(iv) Business format franchise opportunity.

Q5. Enumerate the importance of franchising ? (TBQ) (4 marks)
Ans. Importance of franchising are as follows :
(i) Proven idea : Business is based on a proven idea. Success of the product can be checked in the market and is also known.
(ii) Profit from brand recognition : Franchisee develop an image in the market place. This save both time and money of advertising, promotion, recognition, etc.
(iii) Recognized brand name and trademarks : Entrepreneur gets a recognized brand name and trademark.
Benefit from any advertising or promotion by the parent company automatically benefits the franchisee.
(iv) Support from parent company : The franschisor gives support in the form of training, help setting up the business, etc.
(v) Exclusive rights of the territory : The franchisor can’t sell any other franchise in the same territory which leads to the creation of monopoly power in the territory.

(vi) Easier financing : Financing the business becomes easier due to the associated brand name. Banks are more likely to lend money to buy a franchise with a good reputation.