3.2.1 objectives of growth Flashcards
what is growth
the expansion of businesses market share in their market or into new markets
why is growth important
growth will help attract new investors, help a business stand out, allow a business to gain advantages
what are the objectives of growth
-gain economies of scale
-increase market power over customers and suppliers
-increase market share
-increase brand recognition
-increase profit
how will growth allow for economies of scale
many businesses will be able to expand the business overseas where they can produce more for less, also a bigger business will have more power over suppliers in which they can purchase higher quantitys at a lower price .
what types of internal economies of scale are there
-managerial
-purchasing
-technical
-financial
-marketing
what types of external economies of scale are there
-transport links
-skilled labour/ specialisation
-favourable legislation
managerial eos
large firms can employ specialist managers who are skilled they will be more efficient
financial eos
large firms can benefit from lower interest rates on loans
purchasing eos
larger firms can purchase raw materials in higher quanititys at lower prices
marketing eos
large firms can spread advertising costs over a number of sales
technical eos
larger firms can spread cost over its machinery as it produces more
transport links eos
more transport links allow people to get to work quicker
can also improve logistics of moving goods around the country, which will help save costs on fuel and make transport morew efficient
skilled labour eos
universities and apprenticeships have allowed people to specialise in one sector, this will allow them to be very skilled in this job and can produce goods quicker and more efficient. this lowers costs
favorable legislation eos
governments can support some industries with subsidies which can save businesses costs
how can businesses gain power over customers from growth
larger businesses will be able to reduce prices, this can attract customers to buy from them. also a large business can force other businesses out of thr market so the customers have restricted choice
why can problems arise from growth
being large business isnt only good, large businesses can be hard to manage and require careful planning to keep big
what problems arise from growth
-dis-economies of scale
-overtrading
-internal communicatons
why can internal communications be a problem
a large business will have many layers in their heirachy, this can make getting information from the top to the bottom a very long process.
within the way communication can be mis-interpreted and will delay the info
this can reduce a businesses efficiency.
what types of DEOS are there
managerial
communication
geographical
managerial DEOS
a manager may work more for self interest rather than the interest of the business
communication DEOS
communication is slow and hard which can affect efficiency
geographical eos
firms with lots of operations and bases can have logistics problems
