1.5 Growth and evolution

• Analyse internal and external economies and diseconomies of scale

• Growth can lower average costs but may also create coordination, communication, or motivation problems

• Distinguish between internal growth and external growth

• Internal growth expands existing operations; external growth combines with or acquires other organizations

• Evaluate reasons for businesses to grow

• Growth may increase market share, revenue, profit, survival chances, economies of scale, and market power

• Evaluate reasons for businesses to stay small

• Small size may preserve control, flexibility, personal service, niche focus, and lower risk

• Evaluate mergers and acquisitions (M&As), takeovers, joint ventures, strategic alliances, and franchising

• External growth methods differ in control, speed, cost, risk, and integration challenges