3.2 – Business Growth
3.2.1 – Growth
Growth An increase in the scale of operatons of a business
Economies of scale The advantages enjoyed by a frm when unit costs fall as it
(EoS) increases the scale of producton
Internal economies of The benefts enjoyed by a frm due to an increase in the scale of
scale its productonn leading to a fall in unit costs
External economies of The benefts enjoyed by a frm due to an increase in the scale of
scale producton within the industry in which the frm operates
leading to lower unit costs
Market share The proporton of total market sales that a partcular frm has
Brand recogniton An objectve of growth whereby the identty of the business that
distnguishes it from other businesses is known and understood
on a natonal or global scale
Proftability The ability of a business to generate profts in relaton to other
variables e.g. revenue
Diseconomies of scale The problems experienced when unit costs (or average cost per
(DoS) unit) rise as a frm increases the scale of producton
Internal The transferring of informaton between interested partes
communicaton within an organisaton
Overtrading A business has expanded too rapidly resultng in it operatng at a
level beyond its resources leading to potental liquidity problems
Synergy The combinaton of two or more agents leads to greater value
than the individual inputs of each agent
Measuring Business Growth
Revenue Value
Volume Market share
Sales
Objectves
To achieve economies of scale (internal and external)
Increased market power over customers and suppliers
Increased market share and brand recogniton
Increased proftability
Why Would You Want EoS?
Lower unit costs are important in making a business more compettve. This allows a
business to:
Reduce pricesn therefore selling more while keeping the same proft margin
Maintain the same price and earn more proft per unit
Internal Economies of Scale
TECHNICAL – when a business invests in machinery that makes the business more efcientn
leading to a fall in average costs.
PURCHASING – when a business gets discounts with suppliers for bulk buyingn leading to a
fall in average costs.
3.2.1 – Growth
Growth An increase in the scale of operatons of a business
Economies of scale The advantages enjoyed by a frm when unit costs fall as it
(EoS) increases the scale of producton
Internal economies of The benefts enjoyed by a frm due to an increase in the scale of
scale its productonn leading to a fall in unit costs
External economies of The benefts enjoyed by a frm due to an increase in the scale of
scale producton within the industry in which the frm operates
leading to lower unit costs
Market share The proporton of total market sales that a partcular frm has
Brand recogniton An objectve of growth whereby the identty of the business that
distnguishes it from other businesses is known and understood
on a natonal or global scale
Proftability The ability of a business to generate profts in relaton to other
variables e.g. revenue
Diseconomies of scale The problems experienced when unit costs (or average cost per
(DoS) unit) rise as a frm increases the scale of producton
Internal The transferring of informaton between interested partes
communicaton within an organisaton
Overtrading A business has expanded too rapidly resultng in it operatng at a
level beyond its resources leading to potental liquidity problems
Synergy The combinaton of two or more agents leads to greater value
than the individual inputs of each agent
Measuring Business Growth
Revenue Value
Volume Market share
Sales
Objectves
To achieve economies of scale (internal and external)
Increased market power over customers and suppliers
Increased market share and brand recogniton
Increased proftability
Why Would You Want EoS?
Lower unit costs are important in making a business more compettve. This allows a
business to:
Reduce pricesn therefore selling more while keeping the same proft margin
Maintain the same price and earn more proft per unit
Internal Economies of Scale
TECHNICAL – when a business invests in machinery that makes the business more efcientn
leading to a fall in average costs.
PURCHASING – when a business gets discounts with suppliers for bulk buyingn leading to a
fall in average costs.
