Benefits of growth

Question 1

Describe different measures that can be used to measure the growth of a business.

Answer 1

• Sales turnover (or sales revenue)
• Number of employees
• Share capital (the number of shares times the price of each share)
• Market share
• Number of outlets (e.g. shops)

Question 2

Suggest reasons why some businesses may want to grow larger.

Answer 2

• Bigger businesses benefit from economies of scale which gives then competitive advantage over smaller businesses
• Economies of scale means lower unit costs of production
• Lower unit costs enables the business to charge lower prices and increase sales and market share
• Increased sales and lower costs means that larger businesses enjoy a higher profit margin
• Larger businesses have more influence over market price