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Expansion of Business

When a businessman turns out to be successful in his operation, he may think of expanding the scale of this existing business. While implementing the expansion programme, he has also to choose between tow alternatives, namely: (a) to continue the existing form of organization and (b) to change the form of organization. The entrepreneur has to consider these alternatives because of the following implications of the expansion programme.

(i)    Need for larger financial resources.
(ii)    Need for internal reorganization.
(iii)    Need for specialized services like accounting, financing, marketing,
(iv)    Increase in the problem of control and co-ordination.
(v)    Increase in the risk and personal liability.
(vi)    Increase in tax liability.

The nature of these problems will depend upon the nature of existing business, form of ownership organization, and type of expansion proramme to be undertaken. The entrepreneur has to consider the form of organization which will help in tacking these problems. The sole proprietor of a business may have to choose between employments of a manager of taking a partner. When the business is in the form of partnership, the partners have the choice of increasing the number of partners upto 20 or converting the partnership into a private limited company. Similarly, a private company may have  to decide whether to convert or not to convert into a public limited company. A brief discussion of the various alternatives is given in the following section of the chapter.

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