EOS Flashcards
why do businesses grow?
change of status for business (ST to partnership) occurs as a part of natural progression
firm objectives change so the desire to achieve greater profits encourage growth
firms grow to achieve:
- greater profits
- increased market share
- higher chance of survival
- cost reductions
types of growth
internal (organic) growth
external growth
internal (organic) growth
where a firm grows naturally over time
does this simply by increasing in size
external growth
where a firm is able to grow quickly by merging with/taking over another business - local/national competitor
works well if a firm can finance the expansion in an economical way - but hard to manage this type of sudden growth
EOS concept
as output RISES , cost per unit FALLS
bigger scale = cheaper cost
internal EOS
TECHNICAL
^^ can afford better technology and better equipment
^^ full utilising the space and equipment
PURCHASING
^^buying in bulk
MARKETING
^^ less amount of money per units i.e. for adverts
MANAGERIAL
^^ as you get bigger, you can employ specialist managers
FINANCIAL
^^bigger = safer = lend money usually at a lower interest
RISK BEARING
^^ bigger you get means more diversity and SPREADING THE RISK
external EOS
economies being located near a similar firm
- LABOUR - specialist workers at a college
- COOPERATION - other businesses in a similar field to yourself
- SUPPORT SERVICES - takeaways, cafes
