Why businesses change

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  • Created by: EReynolds
  • Created on: 14-06-15 14:34

Business getting bigger: Internal growth

A business can get bigger through either internal growth or external growth. Internal growth is also called organic growth.

This is when the business grows larger from within, usually at a gradual pace, by increasing sales, using new technology, widening its product range to expand its markets, or winning a larger share of its main market.Changes that come about through internal growth are often slow and may therefore be easily managed.

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External growth

External growth is when a  business grows by joining with other businesses. It can merge with other businesses in an 'agreed marriage'. This is called a merger. Alternatively, it can take over another business in a hostile way. This is called takeover.

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Benefits from growth

Businesses can benefit from growth-e.g. through economic of scale. These include the ability to buy in bulk, or save money on transport. There may asi be problems with change. The busienss might suffer diseconomies, such as breakdowns in communication, or managment being seen as far removed from workers.

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Business may have to change as markets change

Business may have to change as markets change. Products may become obsolete, or be replaced with newer, better products.

Competitors may enter or leave markets.

Flexible businesses plan for change and have policies in place to deal with it. This is called managing change

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How can change occur?

Change may also occur through other chnages to the marketing mix, such as changes in distribution methods. The use of internet retailing, for example, has made many businesses rethink the ways in which they reach customers.

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