2.1 business growth and competitive advantage Flashcards
growth
increase in productive capacity for a business
objectives of growth
- economies of scale
- increased market share and brand recognition
- increased market power
- increased profitability
economy of scale
decrease in average costs caused by an increase in size of a business
internal eos
gained from one business growing in size
external eos
gained from a whole industry increasing in size
diseconomies of scale
increases in average cost experiences when a business grows beyond it’s optimum size
methods of growth
internal (organic)
external (inorganic)
internal growth
- increasing production capacity
- new products
- new markets
- growing customer base (marketing and brand recognition)
external growth
- merger
- takeover
stages of production
primary sector - extracting raw materials
secondary sector - manufacturing
tertiary sector - selling items or providing services
integration
horizontal - merging or taking over a business at the same stage of production (often direct competitors)
vertical - merging or taking over a business at a different stage of production
conglomerate - when businesses merge or takeover unrelated businesses
problems arising from growth
- diseconomies of scale
- internal communication
- potential skills shortages
innovation
putting a new idea or approach into action as a saleable action
- improving existing products or services
- generating new ideas (product innovation)
stages of generating new products
- marketing research
- product development and testing
- distribution of products to outlet
- promotional launch
R&D
research and development
-refers to the activities companies undertake to innovate and introduce new products and services
