3.2 Flashcards
What is business growth
the point at which a business needs to grow to generate more profits
objectives of business growth
1- economies of scale
-increase your output to make production cheaper
2-increase market share + brand awareness
-have more control over the market and its prices
-brand is also more recognisable
3-increase market power with suppliers and customers
-gain cheaper supplies and ass them on to customers
4-increased profits
-increasing output leads to EOS. which increases profits
What is economies of scale
increasing the level of production to reduce the average cost of production
- gain higher profit margins
-pass on low prices to customers, gain a higher market share
benefits of EOS.
-gain competitive advantage
-have more power
-gain a better reputation
-have more funds-invest in stock or specialist staff
Financial EOS
Bigger businesses have more bargaining power so can get supplies cheaper, as well as loans with lower interest rates
Technical EOS
Bigger businesses use more machinery to be more efficient. Reduces cost of production in the long term ,however may be high start up costs
Managerial EOS
As business grows, more specialist staff needed for technical roles
Purchasing/Marketing EOS
Bigger firms benefit from lower costs when buying in bulk.
they can spread out marketing costs over all products
Risk bearing EOS
Bigger businesses reduce risk by investing in new products and markets- diversify
External EOS
Suppliers locate close geographically- can negotiate to get lowest price
Diseconomies of scale
Costs increase as production increases
-Production has increased past minimum efficient scale
Internal DOS:
-communication
-motivation - can lead to lower productivity and higher costs
External DOS:
-Price of land
-Price of labour
