3.2.1 - Other 3 reasons for growth

Question 1

How will an increase in market power impact businesses

Answer 1

They’ll be able to become more dominant over suppliers and customers

Question 2

What is the effect on rivals as your business gets larger

Answer 2

Rivals are left with a smaller market share and maybe even forced to closed down

Question 3

Reduction of power over customers meaning

Answer 3

• Charge higher prices if competition in market is limited.In the absence of choice customers are forced to pay higher prices.
• Also don’t need to develop new products as there is less competitive pressure.Means no costs incurred in expensive + risky innovation.
  As a result, product choice is limited for customers.You have POWER over what they choose.

Question 4

Reduction of power over suppliers meaning

Answer 4

You can demand lower prices + discounts if large quantities are brought

-Businesses will be in good position if their suppliers rely on them

Question 5

1 issue with having too much power over suppliers and customers

Answer 5

-might attract the attention of authorities leading to an investigation if it is felt that businesses are exploiting suppliers and customers

Question 6

How does an increase in market share and brand recognition impact a business

and what can they do because of it?

Answer 6

As businesses get a larger share of market :

-customers become more aware of the brand name giving it a stronger market position.
-Customers will be attracted to the business as it’s more dominant over competitors

Because of this businesses can:

• can charge higher prices
• create customer loyalty

Question 7

Why is an increase in profitability an objective for a larger business that is expanding?

IN + IN

Answer 7

-If a business grows and increases it’s profitability, it will have more profit for investment + innovation

-Larger businesses will make more profit than smaller owners.As profit grows, profit return to owners also grow

Question 8

Profit

Answer 8

It’s an absolute number.It’s the amount a business gains.It’s a number that remains when you subtract expenses from your revenue.

Question 9

Profitability

Answer 9

• Measures business profits and helps determine success and failure
• not an absolute number.
• looks at what your business profits mean in the form of percentages or decimals.

Question 10

Calculation for total costs

VC
O
FC

Answer 10

Variable costs per unit X output in units + Fixed cost

VC x Output + Fc

Question 11

Calculation for costs per unit

Answer 11

Total Costs/Output

TC/output