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3.1 Business Growth - Coggle Diagram
3.1 Business Growth
- Shareholders = benefit from
increased profits and dividends but
may face risk if growth fails
- Employees = may gain from better
job security and higher wages, but
may suffer from job dissatisfaction
- Customers = can benefit from
lower prices due to economies of
scale but may face higher prices is
market power leads to
monopolistic behaviour
- Suppliers = could benefit from
larger contracts but might be
squeezed for lower prices by large
firms exercising their market power
- Government = large firms
contribute more in taxes and can
be a source of national prie but
monopolies and monopolistic
behaviour may require regulation.
- Small or niche markets may not
provide enough opportunities for
growth
- may struggle to secure the funds
needed for expansion
- governments may impose
regulations to prevent
monopolistic behaviour or too
much market power
- business owners may prefer to
keep their firms small - aim is not
profit maximisation
- as firms grow they may experience
rising average costs,
communication breakdowns or
increased beaurocracy
- firms grow to achieve economies of
scale which lowers their average
costs = increase in profit margins
- expansion allows firms to dominate
their markets allowing them to set
prices and reduce competition
- diversified products + services =
leess risk associated with market
changees or downturns
- managers might pursue growth to
increase the prestige of the firm,
job security or personal gain e.g.
bonuses tied to revenue growth.
- Technical = larger firms can afford
more efficient machinery which
increases productivity
- Managerial = larger firms can hire
specialist manigers which increases
efficiency
- Financial = larger firms often
secure loans at lower interest rates
due to their percieved lower risk
- Marketing = larger firms can
spread the cost of advertising over
a larger output
- Purchasing = bulk buying can
reduce input costs
- External: arise when the growth of
the industry as a whole benefits all
firms within it.
- e.g. improvements in infrastructure,
technological advancements may
reduce costs for all local businesses
- Diseconomies of scale can occur
when firms become too large
leading to inefficiencies
-
- reducecd employee motivation
due to an impersonal work
environment
- Slow decision making processes
- Advantages: flexibility, strong
customer relationships, less
beaurocracy, innovation due to
fewer layers of decision making
- Disadvantages: lack of economies
of scale, limited access to finance,
vulnerability to market changes
- Advantages: access to economies
of scale, greater financial power,
market dominance
- Disadvantages: potential
diseconomies of scale, difficulty in
managing large workforces and
slower response to market changes
- In some industries the survival of small firms is more
feasible, such as in creative industries or service sectors
where customer relationships and specialisation are critical.
- Organic Growth: growth of a firm
from within, using its own resources
- typically involves increasing output,
expanding the customer base,
developing new products, entering
new markets. :
- less risky, the firms retains control,
expansion is steady and
managable
- slower compared to external
growth, may require significant
upfront investment
- External Growth: when a firm
grows by merging with or acquiring
other firms
- merging with a firm in the same
industry at the same stage of
production
- merging with a firm at a different
stage of production
- forward = toward consumers
- backward = toward suppliers
- merging with a firm in a completely
unrelated industry = diversifies
products and markets
- Advantages: faster expansion, access to new
markets or resources, economies of scale
- Disadvantages: high cost of mergers, potential
for diseconomies of scale, difficulties in
integrating different business cultures