Standard Grade Unit 2.2 How do Businesses Grow?

Expanding The Business When a business finds it has established its product, it will need to cope with the challenges of success. Its product will be in demand and a normal reaction is to grow. When a business finds it has established its product, it will need to cope with the challenges of success. Its product will be in demand and a normal reaction is to grow. There is 3 different types of growth: There is 3 different types of growth: Natural – It happens without any attempt to make it happen. Natural – It happens without any attempt to make it happen. Planned – Each stage is controlled and forecast in advance. Planned – Each stage is controlled and forecast in advance. Geographic – The activity is changed from area to area by adding or diverting resources to achieve it. Geographic – The activity is changed from area to area by adding or diverting resources to achieve it.

Why Might a Business Want to Grow? A business may want to grow and expand for a number of reasons. A bigger firm will probably have a larger market share and a wider range of products than if it remains small. A business may want to grow and expand for a number of reasons. A bigger firm will probably have a larger market share and a wider range of products than if it remains small. A large business can borrow more cheaply. Its chances of survival are increased, as is its ability to make a profit. The larger it becomes, the more power and status it will have. This gives it a good negotiating position, if it wishes to expand still further. A large business can borrow more cheaply. Its chances of survival are increased, as is its ability to make a profit. The larger it becomes, the more power and status it will have. This gives it a good negotiating position, if it wishes to expand still further.

What Factors Might a Business Consider When Deciding to Grow? Can the business: Can the business: Make more versions of the product Make more versions of the product Make a better product Make a better product Create a different image or packaging Create a different image or packaging Diversify Diversify Afford the expansion Afford the expansion Increase turnover Increase turnover Employ more people Employ more people Increase the amount of machinery Increase the amount of machinery Increase assets Increase assets Increase profits Increase profits

Internal Expansion Internal Expansion - expansion (growth) of an existing business within itself. Internal Expansion - expansion (growth) of an existing business within itself. Product/service is successful Product/service is successful Sales are good Sales are good Big profits are made Big profits are made Profits are reinvested in the business Profits are reinvested in the business

Continue……. More premises, equipment and workers are paid for More premises, equipment and workers are paid for More sales are possible because more can be produced More sales are possible because more can be produced More profits are made More profits are made And are again reinvested And are again reinvested And it continues…….. And it continues……..

Why Might Businesses Want to Stay Small? There are advantages of staying small, such as: There are advantages of staying small, such as: Management is easier. Management is easier. Workers feel they belong. Workers feel they belong. Flexible working arrangements are easier. Flexible working arrangements are easier. Finance is more directly under control. Finance is more directly under control. Few union problems with staff. Few union problems with staff.