1.5 Growth and Evolution | Quizlet

Economies of Scale

Refer to the cost advantages that businesses can achieve due to increased production levels. As a company produces more units of a good or service, the average cost per unit decreases.

Internal economies of scale

Efficiencies that a business itself can make

Types of internal economies of scale

technical

managerial

financial

risk bearing

marketing

purchasing

External economies of scale

Efficiencies that the business achieves because someone else has expanded.

Types of external economies of scale

consumers

employees

Diseconomies of scale

Occur when a company grows so large that its per-unit costs begin to increase instead of decrease.

Internal diseconomies of scale

Inefficiencies that the business itself can make.

Types of internal diseconomies of scale

technical

managerial

finanacial

risk bearing

marketing

purchasing

External diseconomies of scale

Inefficiencies that the business achieves because someone else has expanded.

Types of external diseconomies of scale

employees

Advantages of being a big business

survival

economies of scale

higher status

market leader

increased market share

Advantages of being a small business

focus

status

motivation

competitive advantage

less competition

respected

Internal growth

sometimes referred to as organic growth, this occurs when a business grows by relying on its own resources and capabilities.

External growth

Expansion of a business by relying on external resources, typically with another organisation

Vertical intergration

a strategy where a company expands its operations by taking control of multiple stages in its supply chain.

Horizontal integration

a business strategy where a company expands its operations by acquiring or merging with other companies that operate at the same level in the same industry.

Merger

A form of external growth where two businesses combine to form a new business; the new business replaces the two that existed before the merger.

Takeover

A form of external growth where one company purchases another company; typically hostile, or not wanted by the company being taken over.

Aquisition

A form of external growth where one company purchases another company; it is usually friendly or desired by the company being taken over.

Joint venture

a business arrangement where two or more companies collaborate to pool resources for a specific project or goal, often creating a separate entity for a limited period.

Strategic alliance

a formal partnership between two or more companies that agree to collaborate in achieving common goals while remaining independent organizations.

Franchise

a business model in which an original business grants another party the rights to operate under its brand, selling its products or services, often with the same standards and practices.