3.2 Flashcards
Objectives of growth
Ways a business can grow
EOS internal and external
How can economics of scale be achieved
Calculating unit costs
Limitations of growth
Diseconomies of scale
Diseconomies of scale
Overtrading
Maintaining risk of overtrading
When a business gets too big
mergers and takeovers
types of growth
adv and dis of inorganic growth
organic growth
adv and dis of organic growth
reasons for staying small
Flexibility- a small business can make quick decisions and adapt to the competitive environment, making them more agile, makes it more efficient can increase revenue and successful innovation. Build growth.
Customer satisfaction- fewer customers, so a higher chance to be able to build personal relationships and gain loyal customers.
Survival- smaller firms have lower fixed costs, so can reach break even easier. (Lower running costs).
benefits to staying small
advantages
better customer satisfaction - can build a competitive advantage with this, gain more customers and revenue. larger business find providing this hard.
flexible in responding to customer needs.
Can compete through e-commerce, no need to expand physically, can reach customers through the internet and therefore reach different audiences in age, gender, can also find customers easier who would benefit from their product. Therefore don’t have to invest in retail space.
smaller firms can offer products customers prefer that aren’t mainstream, potential to offer customer specialist advice which adds further value to USP
disadvantage
Smaller customer and possible over independence on single product, risky as it’s subject to market changes, social changes
may not be able to gain enough market share to become market leader
May not reach certain EOS large firms can access, therefore not be able to grow as much
