Unit 1.5: Growth & Evolution
Clue: This is when a business increases scale by using its own resources without involving other companies.
Answer: What is internal growth?
Clue: Growth achieved by merging with or acquiring another business.
Answer: What is Mergers and Acquisitions?
Clue: One major advantage of growth is that the business may benefit from this type of cost reduction per unit as production increases.
Answer: What are economies of scale?
Clue: The “S” and “W” in SWOT refer to factors that are inside the business.
Answer: What are Strengths and Weaknesses?
Clue: The strategy where a business sells existing products in existing markets to increase market share.
Answer: What is Market Penetration?
Clue: Two categories of economies/diseconomies in scale: those caused by within the firm, and those caused by factors external to the firm.
Answer: What are internal and external economies (and diseconomies) of scale?
Clue: A growth method where businesses operate under one brand/owner but many different locations (often license-based).
Answer: What is Franchising?
Clue: A disadvantage of growth where communication becomes more difficult, decision‐making slows, and management becomes complex.
Answer: What are diseconomies of scale (or managerial diseconomies)?
Clue: The “O” and “T” in SWOT are factors that come from this environment type.
Answer: What is the external environment?
Clue: Introducing existing products into new markets (geographic or new segments).
Answer: What is Market Development?
Clue: A growth method in which one business buys enough shares in another business to have control but not necessarily full ownership.
Answer: What is a takeover?
Clue: A joint venture differs from a takeover in this key way.
Answer: What is that in a joint venture, businesses share ownership and control, whereas in a takeover one business gains control over the other?
Clue: Growth can lead to greater market power, possibly allowing the business to set higher prices or negotiate better terms with suppliers.
Answer: What is increased market power / bargaining power?
Clue: A company’s strong brand reputation or loyal customer base would fall under this part of SWOT.
Answer: What are Strengths?
Clue: The Ansoff strategy of launching new products for the firm’s current customers.
Answer: What is Product Development?
Clue: A growth strategy in which two companies agree to share resources, cost, risk, but remain separate legal entities.
Answer: What is a strategic alliance?
Clue: External growth method where businesses coordinate but keep separate legal identities; often to share risk or technology.
Answer: What is a Strategic Alliance?
Clue: Growth might require large investments, which increases this kind of risk tied to financing.
Answer: What is financial risk / increased debt / higher fixed costs?
Clue: Emerging market trends or new technologies that a business could exploit would be placed here in a SWOT.
Answer: What are Opportunities?
Clue: The riskiest growth strategy, involving new products in new markets.
Answer: What is Diversification?
Clue: One reason why some businesses choose to remain small, even though growth could bring many benefits.
Answer: What are reasons such as avoiding diseconomies of scale, maintaining flexibility, better customer relationships, or avoiding management complexity?
Clue: Disadvantages businesses may face by growing externally via mergers/takeovers.
Answer: What are integration problems, culture clashes, high cost, regulatory issues, or loss of control?
Clue: While growth can offer many benefits, it may reduce a business’s ability to do this (which is often more feasible when small).
Answer: What is maintaining flexibility / being responsive to customer needs / innovation?
Clue: This part of SWOT analyses potential issues outside the business that might harm it, such as rising costs or new regulations.
Answer: What are Threats?
Clue: When using Ansoff’s Matrix, this is one benefit of choosing market penetration over diversification.
Answer: What are lower risk, less investment in new product development, or relying on familiar products/markets?