Types of Business Growth (Cambridge (CIE) IGCSE Business)

The owner's or manager's desire to run a large business & continually seek to grow it

The owner's desire for higher levels of market share and profitability

The desire for stronger market power (monopoly) over its customers and suppliers

The desire to reduce costs by benefiting from lower unit costs as output increases

Growth provides opportunities for product diversification

Larger firms often have easier access to finance 

International Expansion (new markets)
Apple expanded into new markets by opening its stores in new countries, such as China and India, and by partnering with telecom providers to sell its products.

This helped them to organically increase their market share, sales revenue and profitability

Product Innovation
Google introduced new products, such as Google Drive and Google Maps, to complement its search engine and advertising businesses

This helped them to organically increase their market penetration, sales revenue and profitability

Product Diversification
Disney has diversified into several areas, such as theme parks, cruise lines, television networks, and movie studios.

The brand strength has helped them organically increase market penetration in each of these markets, resulting in higher sales revenue and profitability

The pace of growth is manageable

Less risky as growth is financed by profits and there is existing business expertise in the industry

The management knows & understands every part of the business

The pace of growth can be slow and frustrating

Not necessarily able to benefit from lower unit costs (e.g. bulk purchasing discounts from suppliers) as larger firms would be able to

Access to finance may be limited

Reduces the cost of production as middle man profits are eliminated

Lower costs make the firm more competitive

Greater control over the supply chain reduces risk as access to raw materials is more certain

Quality of raw materials can be controlled

Forward integration adds additional profit as the profits from the next stage of production are assimilated

Forward integration can increase brand visibility

Diseconomies of scale occur as costs increase e.g. unnecessary duplication of management roles

There can be a culture clash between the two firms that have merged

Possibly little expertise in running the new firm results in inefficiencies

The price paid for the new firm may take a long time to recoup

Rapid increase of market share

Reductions in the cost per unit due to economies of scale

Reduces competition

Existing knowledge of the industry means the merger is more likely to be successful

Firm may gain new knowledge or expertise

Diseconomies of scale may occur as costs increase e.g. unnecessary duplication of management roles

There can be a culture clash between the two firms that have merged