Change in Scale

What are the two types of business growth?

Organic growth and external growth.

What is organic growth?

Occurs when a business expands its own product portfolio or its number of retail stores.

Provide an example of organic growth.

Tesco introducing Tesco Mobile.

What is external growth?

Occurs when a business expands by purchasing or taking over other businesses.

Provide an example of external growth.

Morrisons purchased Safeway.

What is one impact of growth on a business?

Increased demand for goods and services.

How does growth affect management motivation?

Growth increases motivation for management through a sense of achievement.

What financial needs can growth create for a business?

Investment for growth increases the need to secure capital.

What is retrenchment?

Occurs when a business reduces the scale of a specific business area or element within the business operation.

How can retrenchment help a business?

It can allow a business to re-focus on growing a core activity within its operation.

What is an example of retrenchment?

Morrisons removed a layer of supervisors from its hierarchy to reduce costs.

How does retrenchment affect human resources?

It affects workforce planning, redundancy, and redeployment.

What operational benefit can retrenchment provide?

Retrenchment can offer economies of scale by addressing diseconomies of scale.

How does retrenchment impact marketing?

Promotional campaigns may be refocused on the refined business offer.

What financial challenges does retrenchment pose?

The business will need to fund the short-term increase in the cost of redundancy payments.