1.3 Enterprise, Business Growth And Size Flashcards
Limitations of methods of measuring business size
Some businesses can be big by one measure and small by another measure
How to measure size of business
Number of employees Size of capital investment Number of branches Value of sale revenue/ income The market share of the business Value of the capital employed - value of what the business owns Value of output
Describe business growth
Busi may be able to gain advantages over competitors by growing
-> Cut cost and win grater share of market
-> develop new products or sell to new markets
Growth may be internal (inside the business) or external (joining together with existing businesses)
Describe internal growth
Also called organic growth
Takes place within a business
Money to finance the expansion can come from ploughing back profits or asking the owners to put more capital in
Can take place by investing in new products or selling more of existing products
Advantages of internal growth
Cut costs and win a great share of the market
Develop new products
Sell to new markets
Do not need to take risk
Disadvantage of internal growth
Slow way of growing a business
Missed opportunity in the market
No profit available
Describe external growth
Involves the takeover or merger of another business
Advantages of external growth
Able to buy new and exciting brands where sales are likely to be high
Acquire new invention and technology
Break into new markets
Merging makes the company more powerful
Disadvantage of external growth
More chances to take risk
Buy things that aren’t valuable
Customer have less choice
Lack of competition
Why some businesses remain small
Less risk and less stress
Don’t have the ability to grow big or do not have enough capital
Less competition and not much to lose
Why the owners of a business may want to expand the business
Benefit from economies of scale - lower unit cost due to an increase in size
A larger market share
To compete with other growing business
Why some new or established business fail
Poor management, lack of expertise
Changes in a reef condition
Natural disaster
Lack of finance
