3.2 Flashcards
diseconomies of scale
the cost disadvantage that accompanies a business when it expands beyond its minimum efficient scale, the costs per unit of output increase
economies of scale
the cost advantages that a business can exploit by increasing the scale of production, which leads to a lower cost per unit of output
increasing size or speed - lowers the costs - increases efficiency
external economies of scale
the cost reductions available to all businesses as the industry grows
internal economies of scale
the cost reductions available by a single business as it grows on its own
minimum efficient scale
the minimum number of output that should be produced in order to achieve cost reduction per unit of output - form of cost advantages
backward vertical integration
joining with a business in the previous stage of production
forward vertical integration
joining with a business in the next stage of production
horizontal integration
the joining of businesses that are in exactly the same line of business
integration
the joining together of two businesses as a result of a merger or takeover
merger
occurs when two (or more) businesses join together and operate as one
synergy
the combining of two or more activities or businesses creating a better outcome than the sum of the individual parts
takeover
the process of one business buying another
vertical integration
the joining of two businesses at different stages of production
organic growth
a business growth strategy that involves a business growing gradually using its own resources
inorganic growth
a business growth strategy that involves two or more businesses joining together to form a much larger one