3.2 - Summary Flashcards
What is the difference between organic and inorganic growth?
Inorganic growth involves unnatural and fast expansion of the business, whereas organic growth is steady and gradual and usually involves no significant changes
What are economies of scope?
Operating a wide variety of products in a number of different markets
What are financial economies of scale
The fall of unit costs as the business expands
Identify two diseconomies of scale
Communication Problems/Low Motivation
What are two problems associated with overtrading?
Can lead to business failure and poor management of the timing of cash flows
Why might a business choose a merger over an acquisition?
A takeover involves more risk and more expensive which may be impractical for smaller businesses
Why might a business choose to takeover a supplier?
Allows a business to acquire materials and resources more cheaply which would reduce their overall costs in the long term
Identify three ways a business might grow organically
Launching new products/Entering new markets/Setting up new locations
Identify one limitation of organic growth?
Very slow and possibly less profitable
Why might a small business be more efficient than a large company?
Can be more flexible and operate more efficiently
How could a small business provide better customer service than a large company
Smaller businesses find it easier to provide a more personal service to customers
