Recognising The Challenges Of Growth
Specification:
5.2 Recognising Challenges of Growth • advantages of growth • disadvantages of growth |
Candidates should understand the ways, both internal and external, in which large businesses obtain a cost advantage over smaller businesses.
Candidates should also consider how the disadvantages of growth might occur within a growing business, eg longer chains of communication and complexities within the production process. |
Recognising The Challenges Of Growth
recognising_the_challenges_of_growth.docx | |
File Size: | 13 kb |
File Type: | docx |
Learning Objectives:
- To understand the terms economies and diseconomies of scale (D-E)
- To analyse the advantages and disadvantages of growing a business (B-C)
- To evaluate whether a business should grow or choose to remain small (A*-A)
- To understand the terms economies and diseconomies of scale (D-E)
- To analyse the advantages and disadvantages of growing a business (B-C)
- To evaluate whether a business should grow or choose to remain small (A*-A)
Starter Activity: What benefits does a business enjoy by getting bigger?
Size of a business:
To measure the size of a business you can look at:
You have to look at the type of business to get a proper indication
To measure the size of a business you can look at:
- Value of sales - increased revenue means a bigger business. Also an increase in market share
- Value of business - (assets - liabilities) or value of shares (market capitalisation)
- Number of employees - Some businesses (NHS) don't sell shares
You have to look at the type of business to get a proper indication
Advantages of getting bigger
- economies of scale - cost per unit falls as business expands
- more power in the market (retailers like big brands)
- more status (motivated employees and easier to introduce products)
- more expensive to take over
- staff rewards often linked to growth
Disadvantages of getting bigger (diseconomies of scale is when cost per unit increases)
- decision making becomes slower (levels of hierarchy)
- employees feel isolated ( too many so become demotivated)
- controlling and coordinating can become harder (many locations)
What is happening in this video?
Benefits of a small business
- keep control
- easy to monitor
- quick decisions and changes
- part of a team
How do Apple overcome being the biggest company in the world?