Growth Flashcards
What are the objectives of growth?
Economies of scale
Increased market power over customers and suppliers
Increased market share and brand recognition
Increased profitability
Why does EOS happen in growth?
Fixed costs is distributed over more units
Name methods of achieving EOS to grow
Bulk buying
Technical EOS
Specialisation management
Marketing
Why do businesses want increased market power over customers and suppliers
Gain bargaining power of suppliers by looking for new suppliers and backwards vertical integration
Gain bargaining power of customers by making it too expensive for customers to switch and forward vertical integration
How do businesses increase market share and brand recognition?
High quality
Low prices
Gap in market/USP
Partnerships
Why do businesses increase market share and brand recognition
Repuataion
Attract external investors
Increase volumes helping to achieve EOS
What is profitability?
A relative number and expresses the ratio between profit and revenue
Profit/revenue x100
What are some problems arising from growth?
Diseconomies of scale
Internal communication
Overtrading
What happens with diseconomies of scale
Scale of production beyond the minimum efficient scale, avg unit cost rises
What’s problems with internal communication
Size of workforce increases, less face-to-face communication, long time for messages to be relayed
What’s the problem with overtrading?
When a business accepts more orders it can cope with, cash flow problems
