Expanding A Business

Question 1

What are the possible impacts of competition for a business?

Answer 1

Competitors would have a positive and negative impact on the business

Question 2

How are businesses able to use competition to gain a competitive advantage?

Answer 2

Business can learn from their competitors mistakes

Businesses increase innovation to stay ahead of their competitors

Question 3

What are the two economies of scale?

Answer 3

Purchasing

Technical

Question 4

What is purchasing economies of scale?

Answer 4

This is when larger companies get discounts from their suppliers because they are buying lots of units in bulk.

Question 5

Technical economies of scale?

Answer 5

This happens because larger companies are able to invest in expensive, specialist machinery and equipment.

Question 6

What are the three diseconomies of scale?

Answer 6

• Coordination issue
• Lower employee motivation
• Communication issues

Question 7

What are coordinate issues?

Answer 7

As a firm grows, the way the firm functions or operates becomes more complex.

Question 8

What is Communication issues?

Answer 8

In a larger business, communication becomes more difficult because of the size of the workforce and the number of different divisions in the business.

Question 9

What is economies of scales?

Answer 9

Economies of scale describe businesses benefiting from a reduction (fall) in the average unit cost of their product or service because of increasing production

Question 10

What is diseconomies of scale?

Answer 10

Purchasing economies of scale is when firms making a lot of things get discounts because they buy lots of materials.

Question 11

How can a business expand?

Answer 11

Launching new products
Increase production capacity
Open new stores

Question 12

What is franchising?

Answer 12

Franchising is where a company gives someone the right to sell its products and use its trademarks.

Question 13

What are some advantages of franchising?

Answer 13

The business can expand without needing large amounts of investment.

The business also does not have to be concerned about some of the risks of becoming a larger corporation

Franchising increases brand awareness of the firm’s products or services.

Question 14

What are some disadvantages of franchising?

Answer 14

the franchiser does not have complete control over how they operate.

If a franchise is run badly, then a single franchise or store can negatively affect the brand image.