3.2.1

• What is one objective of business growth related to cost advantages?

  Economies of Scale
• How do economies of scale benefit a business?


  They achieve cost advantages by increasing output.
• What does increased market power provide to a business?


  Increased influence over customers and suppliers.
• What is a benefit of higher market share and brand recognition?


  Higher visibility and reputation.
• How does profitability relate to business growth?


  It involves growing profits by capturing more of the market.
• What is a problem that can arise from growth related to costs?

  Diseconomies of Scale
• What are diseconomies of scale?


  Increased costs when a business grows too large, leading to inefficiencies.
• What internal challenge may larger businesses face?


  Challenges in maintaining clear communication.
• What is overtrading?


  Growing too quickly without sufficient resources, leading to financial strain.
• What is one benefit of growth related to pricing?

  Price-Setting Power
• How does negotiating power benefit a growing business?


  It provides a greater ability to negotiate with suppliers.
• What are internal economies of scale?


  Cost advantages achieved within the firm.
• What are external economies of scale?


  Cost advantages achieved as the industry grows.
• What is a drawback of growth related to regulatory issues?


  Regulatory Scrutiny
• What communication issue do larger firms face?


  More complex internal communication challenges.
• What sustainability issue can arise from over-expansion?


  Financial issues, including overtrading.
• How can diseconomies of scale affect a growing firm?


  They can lead to inefficiencies like poor communication and motivation.
• What are internal diseconomies of scale?


  Issues like poor communication and loss of control as the company becomes too large.
• What are external diseconomies of scale?


  Strains on infrastructure and increased costs of resources as an industry expands.
• What are the main objectives of business growth?

  • Economies of Scale: Achieve cost advantages by increasing output.
  • Market Power: Increased influence over customers and suppliers.
  • Market Share & Brand Recognition: Higher visibility and reputation.
  • Profitability: Growing profits by capturing more of the market.
• What are the problems arising from business growth?

  • Diseconomies of Scale: Increased costs leading to inefficiencies.
  • Internal Communications: Challenges in maintaining clear communication.
  • Overtrading: Growing too quickly without sufficient resources.
• What are the benefits of business growth?

  • Price-Setting Power: Ability to set prices due to market dominance.
  • Negotiating Power: Greater ability to negotiate with suppliers.
  • Economies of Scale: Cost advantages through bulk purchasing and specialization.
  • Increased Profitability: More customers lead to higher revenues.
  • Brand Recognition: Stronger brand identity in the marketplace.
• What are the drawbacks of business growth?

  • Regulatory Scrutiny: Investigations from authorities.
  • Sustainability of Growth: Financial issues from over-expansion.
  • Communication Issues: Complex internal communication challenges.
  • Diseconomies of Scale: Inefficiencies arising from growth.
• What are the types of economies of scale?


  • Internal Economies of Scale: Achieved within the firm.
  • External Economies of Scale: Achieved as the industry grows.
• What are the types of diseconomies of scale?


  • Internal Diseconomies: Issues like poor communication and loss of control.
  • External Diseconomies: Strains on infrastructure and increased costs.