3.2: Keywords

diseconomies of scale

diseconomies of scale

rising long-run average costs as a business expands beyond minimum efficient scale

economies of scale

reductions in average costs experienced by a business as output increases

external economies of scale

cost reductions available to all businesses as the industry grows

indivisibility

physical inability of running a machine below its optimal operational capacity

inorganic growth

business growth strategy that involves two (or more) businesses joining together to form one much larger one

internal economies of scale

cost reductions experienced by a single business as it grows

minimum efficient scale

output that minimises long-run average costs

organic growth

business growth strategy that involves a business growing using its own resources

sole trader

business organisation which has a single owner

venture capitalist

provider of funds for small- or medium-sized companies

franchising

a business model where a business owner (the franchisor) allows another person (the franchisee) to trade under their name

retained profit

profit put back into the business after tax

stake

financial interest in a business entitling the investor to part-ownership

acquisition

purchase of one company by another

backward vertical integration

joining with a business in the previous stage of production

conglomerate

very large single business organisation made up of many different businesses producing unrelated products

forward vertical integration

joining with a business in the next stage of production

globalisation

markets become so large that products could be sold anywhere in the world

horizontal integration

joining of businesses that are in exactly the same line of business

integration

joining together of two businesses as a result of a merger or takeover

merger

occurs when two (or more) businesses join together and operate as one

regulatory intervention

control by the relevant authorities

synergy

combining of two or more activities or businesses which creates a better outcome than the sum of the individual parts

takeover

process of one business buying another

vertical integration

joining of two businesses at different stages of production

overtrading

situation where a business does not have enough cash to support its production and sales