3.2 Business Growth

Which of the following is a key objective of business growth?

• To decrease market share

• To increase economies of scale

• To reduce customer base

• To avoid competition

Economies of scale refer to:

• A reduction in long-term average costs as output increases

• An increase in profits without increasing output

• A decrease in output but an increase in costs

• The company becoming too large to manage

Which of the following is NOT an objective of business growth?

• Increased market power over suppliers

• Improved communication systems

• Increased market share

• Enhanced brand recognition

A major disadvantage of growth is diseconomies of scale, which occurs when:

• Firms experience higher costs as they reduce production

• Firms experience higher average costs as output increases

• Firms fail to achieve any market power

• Firms reduce prices to gain market share

What is overtrading?

• When a business expands beyond its financial capacity

• When a business buys too many shares

• When a business offers too many products

• When a business engages in too much advertising

Internal communication issues are common in growing businesses because:

• It’s difficult to maintain a clear structure in larger firms

• Managers become less involved in day-to-day operations

• Employees struggle with increased workloads

• All of the above

Which of the following is NOT a typical reason for mergers and takeovers?

• Increasing market share

• Gaining new technologies

• Reducing business size

• Achieving economies of scale

A merger refers to:

• A business purchasing another to gain control

• Two companies voluntarily joining together to form one company

• A business reducing its size to improve efficiency

• A company selling off its divisions

What is horizontal integration?

• A business expanding into different geographical markets

• A business acquiring another at the same stage of the supply chain

• A business acquiring another company in a completely different industry

• A business acquiring suppliers or distributors

Vertical integration occurs when:

• A business takes over another business at a different stage of the supply chain

• A business merges with a competitor

• A business takes over a foreign firm

• A business takes over a smaller business in the same market