growth_and_evolution_flashcards
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Content
Growth and Evolution
Businesses should aim to grow in order to satisfy the growing demand for their products.
Economies of Scale Vs. Diseconomies of Scale
Economies of Scale: Business average cost decreases as production volume increases.
Diseconomies of Scale: Business average cost increases as production volume increases.
Optimum Production Output
Middle ground between economies of scale and diseconomies of scale (‘Q’).
Internal Determinants of Economies of Scale
Technical: Employees become experts, enhancing productivity and lowering costs.
Managerial: Qualified managers enhance resource allocation, improving efficiency.
Financial: Sufficient resources from sales minimize borrowing, reducing costs.
Marketing: Effective campaigns attract customers, increasing sales at low costs.
Purchasing: Bulk purchasing reduces costs.
Risk Bearing: Product/market diversification stabilizes demand.
External Determinants of Economies of Scale
Consumers: Locating near customers attracts more at lower costs.
Employees: Availability of local workforce reduces hiring costs.
Internal Determinants of Diseconomies of Scale
Technical: Unproductive employees waste resources, increasing costs.
Managerial: Poor resource allocation by managers leads to waste.
Financial: Lack of funds leads to borrowing, increasing costs.
Marketing: Poor strategies harm brand image and sales.
Purchasing: Excess raw materials lead to losses if demand is low.
Risk Bearing: Expansion into new markets may lead to losses.
External Determinants of Diseconomies of Scale
Employees: Lack of local workforce leads to hiring abroad at higher costs.
Large Vs. Small Businesses
Advantages and disadvantages of being large or small.
Advantages of Large Businesses
Higher likelihood of survival.
Economies of scale.
Higher status and brand value.
Market leadership and increased market share.
Disadvantages of Large Businesses
Lower flexibility.
Less personalized service.
High competition risk.
Advantages of Small Businesses
Greater focus and personalization.
Specialized product cachet.
Higher employee motivation.
Unique selling points.
Less competition in niche areas.
Disadvantages of Small Businesses
Higher risk of failure.
Limited economies of scale.
Lower brand recognition.
Limited market influence.
Narrow customer base.
