Th3.1: Constraints of Business Growth

Question 1

What are the four constraints of business growth?

Answer 1

size of the market
access to finance
owner objectives
regulation

Question 2

Size of the market

Answer 2

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

Question 3

Access to finance: firms use two main ways to finance growth:

Answer 3

retained profits and loans

Question 4

Owner objectives

Answer 4

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

Question 5

Regulation

Answer 5

in some markets, the government may introduce regulation which prevents businesses from growing

Question 6

Access to finance: What will happen if firms do not make enough profit?

Answer 6

they will not be able to use retained profits to grow

Question 7

Access to finance: Banks role in this:

Answer 7

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

Question 8

Size of the market: What in particular can make it difficult for businesses to grow?

Answer 8

niche markets and markets for luxury items