business growth Flashcards
what is econmies of scale
economies of scale means that as the scale of production increases the costs of producing each unit decreases.
what is economies of scope
economies of scope is when a business has a large product portfolio and produces a wide reange of products, due to the wide product range the costs get spread out across all of the units bringing down the indevidual unit costs
what is diseconomies of scale
diseconomies of scale si when unit costs actually increase as the scale of production increases
- this could be because larger business’s are more difficult to manage
what is the experience curve
the experience curve is the basic principle of the more one does something the better they become at it - so as the business grows in will increase in efficiency
what is retrenchment
retrenchment is when a business does the opposite of growth and strinks
what is organic business growth
organic business growth is when a business grows from the inside - usually works through profits being reinvested back into the company - organic growth is also usually slower than externam growth
what are the advantages of organic growth
-with organic growth a firm can maintain their own mangement style and culture without the interferal of other business’s cultures
what are the disadvantages of organic growth
a disadvantage of organic growth is it takes a much longer time and has minimal effect upon market share
what is greiners grwoth model
greiners growth model depicts different issues that a business woll face as it grows
what are the five different stages of greiners growth model
- leadership crisis- as growth begins there is a need for a strong lead to provided the firms with struture and direction
-autonomy crisis - business has grown too much to be controlled by seniour managers alone and more deligation is nessesary
-deligation crisis - as responcability is delelgated down to middle management the firm becomes more decentralised
-red tape crisis - as a business grows EVEN MORE then the firm becomes alot more burocratic, with many rules and regulations which furthure limits growth
-growth crisis - to further continiue growing the business must look towards external methods of growth
what are the different types of external business growth
- horizontal vertical and conglomerate
what is horizontal intergration
this happens when a firm combines through take over or merger with another business in the same industry at the same stage of the production process - this is usually jsut a business merging or takingover one of its competitiors
what is vertical intergration
vertical intergration is when a business combines with another firm, in the same industry but at a different stage of the production process e.g retailer taking over a supplier
what is conglomerate intergration
this is when a business combines with an unrelated business
what is product innovation
making new goods/ services or improving existing ones
