Learn 5.2 recognising challenges of growth

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1. Explain 4 reasons why a business gains cost advantages as it grows...
Larger businesses can: •afford to take over their competitors •demand a discount from their suppliers •afford machinery which improves efficiency and reduces the unit cost •afford effective marketing
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2. What is meant by internal economies of scale?
This is where a business benefits from a lower unit cost due to production economies, managerial economies, marketing economies and financial economies
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3. What is meant by external economies of scale?
This is where a business benefits fro a lower cost per unit due to factors outside the business e.g. suppliers move closer reducing the cost of monitoring quality and time in transit. This happened in the Midland with formula one companies.
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4. What is meant by diseconomies of scale?
This is where the unit cost increases as the business grows. This is due to poor communication, poor motivation and poor co-ordination
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5. State 3 downsides of growing your business...
1. Lots of media attention if you do something wrong 2. Harder to manage employees around the world 3. As you produce more items it is more difficult to maintain quality
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Card 2

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2. What is meant by internal economies of scale?

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This is where a business benefits from a lower unit cost due to production economies, managerial economies, marketing economies and financial economies

Card 3

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3. What is meant by external economies of scale?

Back

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Card 4

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4. What is meant by diseconomies of scale?

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Card 5

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5. State 3 downsides of growing your business...

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