Growth

Question 1

Reasons for businesses to grow

Answer 1

• Higher market share
• Desire to reduce costs by benefitting from economies of scale
• Opportunities for product diversification

Question 2

What is economies of scale

Answer 2

As a business grows, it can increase its scale of output generating efficiencies that lower its average costs

Question 3

Diseconomies of scale

Answer 3

When a company grows too large, there are challenges in coordinating various departments, cost per unit increases.

Question 4

Internal Communication

Answer 4

Rapid growth may strain communication channels or result in miscommunication.

Question 5

Overtrading

Answer 5

Occurs when a company take on more business than it can handle.