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Why do firms grow?

How is growth measured?

Sales turnover
Numbers employed
Market share
Stock market value (market capitalisation ­ value of shares)
Value of its assets

Not all the five measures above give the firm the same size ­ they vary between firms.

How do firms grow?

Internal growth:…

Page 2

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Secondly, they may want to grow to increase sales via larger brand recognition and more sale outlets.

Thirdly, a reason that firms may want to grow is to exploit economies of scale. This is because as a
firm grows it will be able to exploit their increased size by driving…

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The owner of the firm may lack the knowledge or expertise to expand.
This may mean they lack access to the necessary funds to expand.

Low optimum efficiency:

The minimum efficient scale of production is low in many industries ­ no significant economies
of scale for such firms.
Once a…




This 4 page set of notes explains the benefits to firms of growing and why some do not. Comprehensive and well written.

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