3.2.1 Organic Growth

Question 1

define diseconomies of scale

Answer 1

the rising long-run average costs as a business expands beyond its mimium efficient scale

Question 2

define economies of scale

Answer 2

the reductions in average costs enjoyed by a business as output increases

Question 3

define external economies of scale

Answer 3

the cost reductions available to all businesses as the industry grows

Question 4

define internal economies of scale

Answer 4

the cost reductions enjoyed by a single business as it grows

Question 5

define Minimum efficient scale

Answer 5

the output that minimises long-run average costs

Question 6

what are the sectors that Eos can be used?

Answer 6

Resources?
Financial
Managerial
Technological
Marketing
Purchase

Question 7

define organic growth

Answer 7

expansion from within a business

Question 8

how can bus who grow organically raise finance?

Answer 8

reinvesting profits

Question 9

why is it easier to grow organically in rapid growth markets?

Answer 9

more potential customers
-can outperform comp and inc market share

Question 10

why is organic more preferable than inorganic?

Answer 10

easier to adapt to as its slow and more gradual

Question 11

what are some advantages to organic growth?

Answer 11

maintain current management style, culture and ethics of the business
less risk
easier to manage growth and control how much the business will grow
less disruptive -> workers efficiency, productivity and morale remain high

Question 12

what are some disadvantages to organic growth?

Answer 12

take a long time to grow &adapt to big changes in the market
market size isn’t affected, if market not growing business is restricted to the size of market
can miss out opportunities for ambitious growth

Question 13

give some reasons for why a business will want to grow

Answer 13

size is measured by profit, revenue & market share etc -> when grows, these will increase
increase profitability -> inc profit and stimulate more growth
inc market share -> control market prices -> high brand recognition
take advantage of economies of scale

Question 14

what are some issues which can arise with growth?

Answer 14

diseconomies of scale
internal communication can be more difficult due to complex structure -> less efficient
risk of overtrading -> reduced working capital

Question 15

what are some reasons for a business staying small/ not growing much?

Answer 15

maintain culture of small bus
prevent the management of bus getting more complicated
less requirement to acquire secure additional financial resources -> reduces strain on cash flow
stay comp by strengthening kays distinctive capabilities: product diff, flexibility in response to needs and customer service

Question 16

what does the growth of e-commerce and online retaling allow small businesses to do?

Answer 16

survive and operate their businesses from home/smaller locations -> less costs -> more profitable