Th3.1: Constraints of Business Growth Flashcards
What are the four constraints of business growth?
size of the market
access to finance
owner objectives
regulation
Size of the market
a market is limited to a certain size and so not all businesses are able to make mass produce because their goods would not be bought by consumers - can happen no matter how big
Access to finance: firms use two main ways to finance growth:
retained profits and loans
Owner objectives
some owners may not want their businesses to grow any further as they are happy with their current profits and do not want the extra risk or work that comes with growth
Regulation
in some markets, the government may introduce regulation which prevents businesses from growing
Access to finance: What will happen if firms do not make enough profit?
they will not be able to use retained profits to grow
Access to finance: Banks role in this:
may be unwilling to lend firms money, particularly small businesses that they see as high risk, meaning some firms can’t grow as they can’t finance it
Size of the market: What in particular can make it difficult for businesses to grow?
niche markets and markets for luxury items