1.5 Growth and Evolution

These flashcards cover key concepts related to growth and evolution in business, including economies of scale, internal and external growth methods, and other essential terms.

What are economies of scale?

Cost-reducing benefits enjoyed by firms engaged in large scale operations, resulting in decreased average costs of production.

What are diseconomies of scale?

Cost disadvantages that arise when an organization becomes too large, causing productive inefficiencies that lead to increased average costs of production.

What is the minimum efficient scale?

The lowest level of output at which long-run average costs are minimized.

What are internal economies of scale?

Cost savings that occur within a firm, which are under the firm's control.

What are the types of internal economies of scale?

Technical, financial, managerial, specialization, marketing, purchasing, and risk-bearing economies.

What is a joint venture?

A business arrangement where two or more parties agree to pool their resources for a specific project, sharing costs, risks, and rewards.

What is franchising?

A form of business ownership whereby an franchisee buys a license to operate using another firm's name, logos, brands, and trademarks.

What are the advantages of internal growth?

Better control and coordination, relatively inexpensive, maintains corporate culture, and generally less risky.

What are some external growth methods?

Mergers and acquisitions (M&As), takeovers, joint ventures (JVs), strategic alliances (SAs), and franchising.

What is the purpose of Ansoff's matrix in business management?

It is a tool used for evaluating growth strategies based on products and markets.