1.6 Growth and Evolution

Economies of scale

When you become a bigger company and more production and more efficient

Diseconomies of sales

When you become larger but unit prices go up so it increases production cost which might make you fail

Fixed cost

Something that doesn’t change and stays constant

Variable cost

Something that changes constantly overtime as production changes

Internal DEOS technical

Sometimes, a company's production process may not scale effectively, causing bottlenecks and increased costs as output increases

Internal DEOS managerial

Often linked to poor management practices, including difficulty in coordinating large teams, lack of oversight, and decreased employee motivation as the company grows

Internal DEOS financial

When internal diseconomies occur, the average cost per unit produced increases, meaning the company becomes less efficient as it expands

Internal DEOS marketing

You may offer things that cost you more money in your advertising

Internal DEOS purchasing

Buying to much stock

Internal DEOS risk bearing

If you buy another business but that business fails you lose money

External EOS consumers

Having your business in a mall allows more customers to come and build loyalty

External EOS employees

Concentrating on a specific sector can allow you to find employers for cheaper

Internal EOS technical

Bigger units of production can reduce cost

Internal EOS managerial

Bigger business can have a specialist manger in one job instead of everything

Internal EOS financial

Bigger business less risky

Internal EOS marketing

Bigger business can put more money into advertisements

Internal EOS purchasing

Bulk buying so buying large quantities

Internal EOS risk bearing

Big business can produced bigger product range to spread risk on all products instead of one

External DEOS employees

If one geographic region becomes too concentrated on one economic activity, typically a shortage of skilled workers in the industry will occur. For an individual business this relative shortage of skilled workers means that the business will have to pay higher wages than before to attract and retain skilled workers.

Advantages for big business

Survival economies of scale higher status market leader status increase market share

Advantage for small business

Can be managed and controlled and adapt quickly to customer needs

Internal growth

Occurs slowly and steadily and occurs out of the existing operation

External growth

Is more risky where the business expands by entering an arrangement to work with another business

Backward vertical integration

When one business integrates with another at an earlier stage

Forward vertical integration

When one business integrates to a later stage in the chain of production

Conglomerate

a business model where a parent company owns a controlling stake in multiple smaller, independent businesses

Joint ventures

When 2 business to combine resources for a specific goal and over a period of time cost are shared. And main goal to make profit.

Strategic alliances

Agreement between firms to commit resources to achieve a set of objectives

Franchiser

Is basically the original business and company

Franchisees

When a person buys a store of that business they run it and gain the franchiser brand and rights and has to pay royalty

Globalization

Growing toward world wide market in products capital and labor and unrestricted by barriers

Multinational companies

Are complies that have their business and product around the world in different countries/regions