Examples of internal expansion are:

(a) Increasing production capacity

(b) Franchising

(c) Issue of more share capital

(d) Diversification

(e) Mergers 

Choose the most appropriate answer from the options given below:

(a) and (b) only

Internal expansion results from the gradual increase in the activities of the concern. The concern may expand its present production capacity by adding more machines or by replacing old machines with the new machines with higher productive capacity. The internal expansion can also be undertaken by taking up the production of more units or by entering new fields on the production and marketing sides. Internal expansion may be financed by the issue of more share capital, generating funds from old profits or by issuing long–term securities. The net result of internal expansion is the increase in business activities and broadening the present capital structure.

Diversification is the process of expanding into new industries, which may take form of either internal or external expansion.

Internal expansion is the process of growing a business by expanding its operations within the same industry. This can be done through a number of methods, such as increasing production capacity, opening new stores or offices, or acquiring new businesses.

• Franchising is a form of external expansion, where a company grants another company the right to use its brand and business model in exchange for a fee.
• Mergers are the combination of two or more companies into a single entity, which is also a form of external expansion.
• Issuing more share capital is a method of raising funds, but it does not directly expand the business's operations