IB Business and Management Business Organisation and Environment 1.7 G

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IB Business and Management Business Organisation and Environment 1.7 Growth and Evolution I


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IBBusinessandManagement.com IB Business and Management The IB Diploma Business and Management course delivered IN STYLE, ONLINE. ©

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z Growth & Evolution i 1.7

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z introduction Driving & restraining forces for growth Continual aim Definition: Expansion in size of its operations Reap the benefits of larger scale production – economies of scale Larger market share to get better market standing & market power Means of survival in competitive environment To spread risks

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z Measuring growth Value of sales turnover (revenue) Market share Sales % of industry total Value of capital employed # of employees hired

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z Greater financial strength to withstand changes in external environment Growth is good, right? Greater risks to pursue much higher rewards can be taken Profitability brings security + investors & capital (reinforcing spiral of success)

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z Thinking 1 owner = 5,000 kg wheat 10 owners = 50,000 kg wheat Who’s likely to be more profitable? Costs are key! Same sale price/kg

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z Economies of scale Lower average costs of production per unit the larger a firm gets productivity efficiencies 50 cows 5000 cows A Business has to pass costs on

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z Lower average costs of production per unit the more a firm produces productivity efficiencies $25K Quantity produced Cost per unit AC Q1 Average cost1 Q2 Average cost2

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z Internal e.o.s. technical small large

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z Internal e.o.s. financial small large

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z Internal e.o.s. managerial small large marketing finance Human resources

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z Internal e.o.s. specialization large small

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z Internal e.o.s. marketing large small

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z Internal e.o.s. small commercial large

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z Internal e.o.s. small Risk-bearing large

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z Economies of scale Not just Buying in bulk!!! Even small businesses can do this

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z External e.o.s. Technological progress Improved transportation & communication networks Better trained labour Regional specialization How would a new technology company benefit from basing itself in silicone valley?

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z Why Remain small? diseconomies of scale Harder to control & manage effectively Mistakes & quality problems Communication problems Confusion, isolation → errors & quality problems outsourcing Subcontract production Keep control of intellectual property satisficing Personal reasons to forego growth

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z Why Remain small? Benefits of being large e.o.s already done & dusted Benefits of being small Discussion map p. 117-118 Can a small firm survive & prosper? Reasons for Reasons against Conclusions & justifications Key points highlighted & then written out & explained in full Question 1.7.1: p. 119

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