REVIEW 3.3
GROWTH OF FIRMS
How do firms grow?

Internal Growth- Increasing sales

External Growth – Merger or Takeover

INTERGRATION - This occurs when two firms come together through either a
merger or takeover
Benefits of Growth

Benefits OF Growth:

Increased profits

Increased Market share

New Ideas from other business

Reduced competitors

Economies of Scale

May not need all the workers.
Costs of Growth

Two managers- disagreements

The businesses may have different objectives

Costs money to merge/takeover

Possible higher prices to pay

Possible diseconomies of scale

Possible job losses

Less choice/ variety
Past paper questions

2010 Q 1d (8)
REVIEW 3.4
ECONOMIES AND DISECONOMIES OF SCALE
Economies of Scale

Internal Economies of scale
External Economies

Risk Bearing
Occur when an industry grows

Financial
Transport links improved

Marketing
Local training

Technical
Education opportunities

Managerial

Purchasing
Diseconomies of Scale

These come about because the firm is ‘too big’.

Loss of control

Lack of co-ordination

Lack of co-operation
Past Paper Questions

Specimen paper – Q10 (3) Q11 (6)

2010 – Q1a (2)