Question

-Distinguish between internal and external expansion of a firm.

Answer 1

internal expansion; internal expansion is an increase in the companies turnover, assets etc... without takeovers or mergers. It is the point where the company is growing and tends to grow and increases its market share or where it makes an investment and the investment tends to appreciate in value rather than depreciating. it can be also defined as when the company increases its sales or revenue-making without the use of an outside actor such as advertisement or marketing etc...

external expansion; It is the method in which two or more companies combine together to form a company in which the ownership may be distributed to the members of both the companies. the combinations maybe through different methods such as ;

1. Absorption.
2. Consolidation.
3. Mergers
4. Acquisitions or Take-Over

the act is that the combined companies are greater than the sum of the two parts

The Main Distinction Between Internal and External Expansion:

• internal expansion is limited to one company whereas external expansion needs at least two companies
• internal expansion requires less or no other means of costs whereas in the case of external expansion it may require huge funding(in case of acquisition or takeover) and other costs including the transferring and other significant cost involved
• internal expansion may not be of huge scale whereas in the case of external expansion is always of large changes and it tends to create a huge difference in the market.