17 Questions MEMORISED Flashcards
Financial Economies of Scale
The advantages larger firms have when trying to raise finance as they have a wider range of sources to choose from and they can often gain better interest rates.
Economies of Scale
When average unit costs fall as total output increases in a business
Growth
Expanding the sales revenue of a business, probably in hopes that profits will increase too.
Purchasing/Marketing Economies of Scale
Large firms are likely to get better rates when buying raw materials in bulk.
Risk Bearing Economies of Scale
As a firm grows, they may diversify to reduce risk.
External Economies of Scale
The average cost reductions available to all businesses as the industry grows.
Diseconomies of Scale
A rise in average unit costs experienced as a business grows in size
Internal Economies of Scale
When a business invests in expanding production, resulting in lower average unit costs
Technical Economies of Scale
Large businesses can often be more efficient through the use of capital equipment.
Specialisation/Managerial Economies of Scale
As a firm grows, they can afford to employ specialist managers such as in marketing, this links to human resources
Vertical Integration
The joining of two businesses at different stages of production
Merger
When two businesses join together to operate as one
Horizontal Integration
The joining of two businesses that operate in the same market
Takeover
When one business acquires a majority shareholding of another business to gain control
Organic (Internal) Growth
Expansion from within a business. For example, by expanding the product range, number of business units or locations. It does not involve another business taking over or merging with it.
