The two ways of expansion are :
1. Internal Expansion
2. External Expansion Internal Expansion: It refers the gradual increase in the activities of the concern. It can be in the form of:
1. Increase its present production capacity by adding more machines or by replacing old machines with the new machines with higher productive capacity.
2. It can also be undertaken by taking up the production of more units.
3. By entering new fields on the production.
4. Adding new market and marketing sides.
5. It may be financed by the issue of more share capital.
6. Generating funds from old profits/ retained earnings.
7. By issuing long-term securities.
The net result of internal expansion is the increase in business activities and broadening the present capital structure.
External Expansion: It refers to business combination where two or more concerns combine and expand their business activities. It can be in the form of:
1. Combining two or more units engaged in similar business or related process or stages.
2. Sometimes stages of the same business join with a view to carry on their activities.
3. Giving shape, their polices on common basis.
4. In coordination for mutual benefit.
5. To earn maximum profits.
The combination may be among competing units or units engaged in different processes. After combination, the constituted firm pursues some common objectives or goals.
