3.2 Business Growth

A set of 35 vocabulary flashcards covering key terms and definitions from the 3.2 Business Growth topic in Edexcel A-Level Business.

Economies of scale

Reductions in average costs of production that occur as a business increases its scale of output.

Diseconomies of scale

Increases in average costs per unit that occur when a business grows too large and experiences inefficiencies.

Internal economies of scale

Lower average costs generated by factors inside the business as a result of internal growth in scale.

External economies of scale

Lower average costs resulting from factors outside the business due to an increase in the size of the industry.

Productive efficiency

The output level at which a business operates at the lowest possible average cost per unit and cannot reduce costs further.

Financial economies

Reductions in loan interest rates offered to large firms because they are perceived as less risky than smaller businesses.

Managerial economies

Average cost reductions resulting from employing specialist managers who are more efficient at specific tasks.

Marketing economies

Reductions in average costs achieved by spreading advertising expenses over larger sales volumes or reusing materials across regions.

Purchasing economies

Lower average costs achieved by buying raw materials in greater volumes and receiving bulk purchase discounts.

Technical economies

Cost reductions achieved by using machinery at higher capacity, spreading fixed machinery costs over more units.

Risk-bearing economies

Average cost reductions achieved by diversifying product ranges to spread the overall risk of business failure.

Geographic cluster

A concentration of ancillary firms moving closer to major manufacturers in a growing industry to cut costs and generate business.

Overtrading

A situation where a business expands too quickly and takes on more work than its resources and liquidity can handle.

Inorganic growth

Rapid expansion achieved through merging with or taking over other existing businesses.

Merger

The combination of two or more companies into a single new business entity, causing the original companies to cease to exist.

Takeover

The purchase of a controlling stake (more than 50%) in another business, often executed against the target firm's will.

Synergies

The added value and benefits, such as cost savings or revenue growth, gained from combining two or more businesses.

Strategic fit

Acquiring a company to achieve specific strategic goals such as expanding into new markets, diversifying, or gaining technology.

Horizontal integration

A merger or takeover involving businesses at the exact same stage of the production process.

Vertical integration

A merger or takeover involving businesses at different stages of the supply chain or production process.

Forward vertical integration

A type of vertical integration where a business merges with or takes over a firm further forward in the supply chain.

Backwards vertical integration

A type of vertical integration where a business merges with or takes over a firm further backward in the supply chain.

Overpayment

A financial risk where an acquiring business pays too much for a target firm and cannot recoup the cost through sales or savings.

Culture clash

Conflicts resulting from merging businesses with differing working habits, management styles, and corporate values.

Organic growth

Business expansion driven internally using reinvested profits or loans rather than integrating with other firms.

Product diversification

The strategy of launching new products to target new customer needs and reduce reliance on a single market.

Unique selling point (USP)

A distinctive feature that differentiates a business's products from competitors in the market.

Satisficing

An objective where business owners aim for a comfortable level of profit to maintain work-life balance rather than maximizing profit.

Lifestyle business

A business set up primarily to support the owner's personal goals and flexible lifestyle rather than rapid expansion.

Increased market power

The ability of a growing business to exercise greater control over pricing and negotiate better terms with suppliers.

Profitability

A performance measure showing how efficiently a company generates profit relative to its revenue or capital invested.

Internal communication issues

Management challenges resulting from rapid growth that cause miscommunication, delays, and poor coordination.

Strain on cash flow

Pressure on working capital caused by rapid expansion costs incurred before new revenue is collected.

International expansion

Selling goods or services in foreign markets to access larger customer bases and drive business growth.

The Cornish Scent Company

A handmade candle and toiletries business that chose to stay small to prioritize work-life balance and creative control.