3.9.1 Assesing a change in scale

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  • 3.9.1 Assesing a change in scale
    • Strategic methods refer to the different strategies a business might pursue to achieve its objectives
    • Growth can be seen as important because it:
      • Creates momentum
      • Shows progress
      • Can create financial benefits
      • Can create benefits such as market power and lower costs due to great barganing power
    • Forms of Growth
      • Organic
        • Increase sales of exisiting products
        • Launch new products
      • External
        • Mergers
        • Acquisitions
    • Economies of scale occur when unit costs fall as a business expands.
      • Purcahsing economies
        • Purchase more supplies, increases barganing power.
      • Technological economies
        • When a large scale of operations enables technologies to be used efficiently.
      • Financial economies
        • Bigger businesses have more assets, encouraging banks to lend at lower interest rates as the risk is lower.
      • Managerial economies
        • Specialists used to focus on parts of the business.
    • Benefits of growth
      • Economies of scope
      • Experience curve
      • Synergy
    • Problems of growth
      • Diseconomies of scale
        • Communication problems
        • Motivation issues
        • Control and coordination problems
  • Economies of scale occur when unit costs fall as a business expands.
    • Purcahsing economies
      • Purchase more supplies, increases barganing power.
    • Technological economies
      • When a large scale of operations enables technologies to be used efficiently.
    • Financial economies
      • Bigger businesses have more assets, encouraging banks to lend at lower interest rates as the risk is lower.
    • Managerial economies
      • Specialists used to focus on parts of the business.

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