Expansion Definition, Factors and Type of Expansion

Expansion is a language often used to show a business's development. The word expansion often appears when we discuss things about the business world or someone's business.

In addition to growing in the business world, the word expansion has various meanings according to the context discussed in the placement of the word. In physics, the word expansion is the process experienced by the vapor and gas elements. In economics, expansion is a process of expanding the circulation of money into circulation.

Expansion is used more often, and we hear it in the discussion of business progress. It happens because the word expansion is suitable to describe a business development carried out by a company or individual. We will review the term expansion in the business world further below for more details.

Business Expansion Is

doing an expansion of the company or the business carried out by individuals will be more developed by the purpose of the expansion. A business carried out by expansion certainly has a big vision for the development business. Besides that, with the expansion, the company will be able to reach a wider range of potential customers and master a marketing area.

Expansion is a process to increase business development to create new markets and expand facilities to meet market needs to increase the economy and grow the business.

Doing the expansion allows the company to expand and can assess in terms of economics whether the expansion is profitable in the future. This matter can be seen from market demand and the production process carried out whether profitable results are obtained or not.

Factors for Expansion

A company mainly expands because the demand for a good service increases in an area, so business actors must increase their production capacity to meet market needs.

However, suppose the calculation of economic value by carrying out expansion will cause bankruptcy. In that case, the company must consider and reassess that the expansion carried out is not an obligation, even though the demand for goods and services increases.

For example, there is a demand for goods in a remote area with a large monthly capacity, but the transportation facilities need to be improved. Access to that area is very difficult because they have to cross rivers, so the company must consider further whether expansion or expansion should be carried out. No.

Of course, the main consideration that must be considered is the economic factors, profits, and risks involved when the process of shipping goods is carried out, whether it can cause the distribution to swell.

Types of Expansion Are

There are several stages in the process of expanding a business. From this process, the direction of expansion carried out by a company will run as far as the profit gained from the expansion process. The following are the types of expansion processes.

1# Acquisition

The first way to do expansion is by acquisition technique. Large, advanced companies widely use this technique. To expand its business in various fields, usually, an advanced company wants to expand its wings to various other fields to get a

bigger profit.

The acquisition process is carried out by buying shares From a company. It takes a large amount of capital for the acquisition process of a company because, indirectly, the company makes acquisitions by buying the acquired company.

2# Merger

The second expansion process is by way of a merger or business combination. Mergers are carried out to combine two businesses that are in line or need each other for collaboration in products and services owned by the company.

One of the purposes of the merger system is to obtain intangible assets owned by the merged company, such as company brands, customer database patents, and so on.

3# Hostile takeover (Forced Takeover)

The third way in the expansion process is the forced takeover system. This method is done because a company experiences an inappropriate business trip that will result in bankruptcy if it continues. Forced withdrawals are carried out by buying shares by force, and there will be a massive overhaul of the company's management.

In addition to the above factors, forcibly taking over can also be done due to other factors such as the occurrence of cases by shareholders company so another company must take it over to save the company.

4# Leveraged Buyout (Purchase Payable)

The last way of expansion is to provide debt to the company to be expanded. Thus, the company or individual debtor will indirectly own the company through the debt capital provided.

Conclusion

From our review of the expansion above, it is hoped that you will understand more about the term business expansion so that it can add insight into you the business world carried out by large companies.

That is the review blog.ilmuskripsi.com regarding the term expansion. Hopefully, the article about the expansion above can be useful for you.

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