Revision Notes

Organisation and growth

One aim of a business may be growth i.e. an increase in size.
Size may mean profits, sales revenue, actual assets (buildings) and/or an increase in employment.
If a business grows it will still try to keep the stakeholders onside: these are the shareholders, customers, employees, suppliers, retailers, government, creditors and society.
Useful exercise: what does each stakeholder want? Profit? Increase in volume of trade?
Growth may be organic: internal - or external.
Internal growth could be by increasing efficiency; reducing costs; improving output by training.
External growth could be by merger, allowing other firms to make theory product under licence; franchising (e.g. McDonalds); corporate venturing (investing in another small company) and merger.
There are four types of merger: horizontal (pub to pub); vertical (pub to brewery); lateral (pub to wine bar) and diversifying (pub to unrelated business e.g. Mothercare).
When a firm becomes larger its average total costs may start to fall - emphasis AVERAGE not TOTAL. This fall in average total costs is evidence of economies of scale.
Economies of scale: the firm gets big, buys in bulk and therefore makes savings per unit.