3.2.1 Growth (IEOS)

Question 1

Internal Economies of scale

Answer 1

the advantages that a single business obtains due to the use of modern techniques.They
happen inside an organisation.

Question 2

What are the 6
internal EOS

PMTMF

6

Answer 2

-Purchasing economies

-Marketing economies

-Technical economie

Managerial/Specialisation economies

-Financial economies

Question 3

Purchasing economies

Answer 3

Allows a business to buy in larger qualities.This means that they can bulk buy which reduces prices.
-Prices reduced as a business can demand discounts per unit for being a larger and more valued customer.
(You have more bargaining power over suppliers)

OVERALL UNIT COSTS REDUCES AS YOU ARE BUYING IT FOR CHEAPER

Question 4

Marketing economies

how do they occur?

Answer 4

When the cost of promotion is low because of the large quantities that are being sold.

Marketing economies occur when larger firms are able to lower the unit cost of advertising and promotion.

Question 5

Technical economies

Technical equipment can be used how often.

What does this cut?

Answer 5

-larger businesses can invest in new tech + machinery that can produce more products in a given amount of time.

-Technical equipment can be used more frequently.
This cuts production cost as more efficient -less waste & less labour not required

Question 6

Managerial/specialisation economies

Answer 6

When the firm can afford to employ specialist managers.By employing specialist managers in different departments then it increases efficiency and productivity which ULTIMATELY LOWERS COST.

• Improves the quality of decision making too

Small Businesses only have one general manager that is responsible for many different departments-This can be very demanding

Question 7

Financial economies

larger firms will find it easier to what?

Answer 7

Larger firms have a wider variety of access to finance that smaller businesses may not be able to access.

-Larger firms will find it easier to persuade institutions to lend them money since they will have larger collateral & assets to offer as security

Larger firms will often find borrowing large amounts of money can often gain better interest rates.

Question 8

Risk bearing Economies of Scale

Answer 8

When bigger companies can spread their risk by investing in more products and more markets.

This is called diversification