Challenges of Growth

Challenges of Growth and Retrenchment

Though growth is an objective of many businesses, it brings challenges along with benefits and these must be considered by businesses:

Technical economies of scale

Technical economies of scale occur when a business is able to adopt advanced technological approaches to production as a result of their scale and size.
For example, Coca Cola’s production line is likely to be more efficient than a competitor with a much less advanced production system; this reduced Coca Cola’s cost for every unit produced.

Purchasing economies of scale

Purchasing economies of scale occur when a business is able to take advantage of bulk ordering discounts.
For example, Amazon may buy 30,000 units of a product from a manufacturer and will pay less per unit than an independent retailer only purchasing 100 units.

Managerial economies of scale

Managerial economies of scale occur when a business is large enough and able enough to introduce specialist staff for each of its functions.
For example, Tesco will employ a Human Resource director whereas a much smaller retailer may not have the capacity for such a specialist role. Specialist staff members are more efficient, more productive and make fewer mistakes and this reduces cost per unit produced.

Economies of scope

Economies of scope occur when a business is able to spread its costs over several markets or products.
For example, the cost of McDonald’s advertisements can be spread across its portfolio which reduces the cost of advertisement attributed to each product.

Diseconomies of scale

As businesses grow, communication becomes more difficult; decision making becomes slower which can increase overall costs.
As businesses grow, it becomes much harder to motivate staff as relationships are harder to manage; demotivation can affect productivity and therefore increase unit costs.
As businesses grow, it becomes harder to control and co-ordinate and this can cause mistakes and errors, therefore increasing unit costs.

Challenges of Growth (Experience Curve, Synergy, Overtrading)

Though growth is an objective of many businesses, it brings challenges along with benefits and these must be considered by businesses:

The experience curve

The experience curve suggests that businesses with better knowledge, resulting from experience, can inform a better decision which offers a cost advantage.

Synergies

Synergies occur when two or more businesses combine and are worth greater than the individual sum of each.

Overtrading

Overtrading occurs when a business experiences liquidity problems associated with the cost of growth.

1What is Business?

1.1Understanding the Nature of Business

1.1.1Why Businesses Exist

1.1.2Business Aims & Objectives

1.1.3Revenue & Costs

1.1.4A-A* (AO3/4) - Cost Leadership

1.1.5Profit

1.1.6End of Topic Test - The Nature of Business

1.2Understanding Different Business Forms

1.2.1Sole Traders

1.2.2Limited Liability

1.2.3Non-Profit

1.2.4Franchising

1.2.5A-A* (AO3/4) - Franchising at Blockbuster

1.2.6Key Business Terms

1.2.7Shareholders

1.2.8End of Topic Test - Different Businesses

1.3External Environments

1.3.1External Environments

2Managers, Leadership & Decision Making

2.1Understanding Management

2.1.1Managers

2.1.2(2024 EXAMS ONLY) Blake Mouton

2.1.3Management Theories

2.1.4End of Topic Test - Management

2.2Understanding Management Decision Making

2.2.1Scientific Decision Making

2.2.2Intuition Decision Making

2.2.3Influences on Decision Making

2.2.4A-A* (AO3/4) - Taylorism & Jack Welch

2.2.5End of Topic Test - Management Decisions

2.3Understanding Stakeholders

2.3.1Stakeholders

3Decision Making to Improve Marketing Performance

3.1Decision Making to Improve Marketing Performance

3.1.1Setting Marketing Objectives

3.2Understanding Markets & Customers

3.2.1Market Calculations

3.2.2Market Research

3.2.3Market Mapping

3.2.4Methods of Market Research

3.2.5Interpreting PED & YED

3.3Market Segmentation, Targeting & Positioning

3.3.1Segmentation

3.3.2Niche & Mass Markets

3.4Marketing Mix

3.4.1Marketing Mix

3.4.2Product Decisions

3.4.3Pricing Decisions & Price Skimming

3.4.4Pricing Decisions & Price Penetration

3.4.5A-A* (AO3/4) - Pricing & Competition

3.4.6Promotional Decisions

3.4.7Promotional Decisions 2

3.4.8Promotional Decisions 3

3.4.9Distribution Decisions

3.4.10Distribution Decisions 2

3.4.11Digital Marketing

3.4.12Evaluating Digital Marketing

3.4.13A-A* (AO3/4) - The Marketing Mix & Promotion

4Decision Making to Improve Operational Performance

4.1Setting Operational Objectives

4.1.1Setting Operational Objectives

4.2Analysing Operational Performance

4.2.1Operations Data

4.2.2A-A* (AO3/4) - The Problem with Operations Data

4.3Increasing Efficiency & Productivity

4.3.1Capacity

4.3.2Productivity & Efficiency

4.3.3Technology & Efficiency

4.4Improving Quality

4.4.1Importance of Quality

4.4.2Measuring & Identifying Quality

4.4.3Total Quality Management

4.4.4Evaluating Total Quality Management

4.4.5A-A* (AO3/4) - Toyota Production System

4.5Managing Inventory & Supply Chains

4.5.1Improving the Supply Chain

4.5.2Inventory

4.5.3Outsourcing

5Decision Making to Improve Financial Performance

5.1Financial Objectives

5.1.1Setting Financial Objectives

5.1.2Influences on Financial Objectives

5.2Analysing Financial Performance

5.2.1Cash-Flow & Budgets

5.2.2Break-Even & Profitability Analysis

5.3Sources of Finance

5.3.1Internal Sources of Finance

5.3.2External Sources of Finance

5.3.3Factors for Financing

5.3.4A/A* (AO3/4) - Debt

5.4Improving Cash Flow & Profit

5.4.1Improving Cash Flow & Profits

6Improving Human Resource Performance

6.1Human Resource Objectives

6.1.1Setting Human Resource Objectives

6.1.2Human Resource Management

6.2Analysing Human Resource Performance

6.2.1Analysing Human Resource Performance

6.2.2Analysing Human Resource Performance 2

6.2.3Analysing Human Resource Performance 3

6.3Improving Organisational Design

6.3.1Job Design

6.3.2(2024 EXAMS ONLY) Hackman & Oldham's Model

6.3.3Organisational Design

6.3.4Human Resource Flow

6.3.5A-A* (AO3/4) - Amazon & Netflix Org Design

6.4Improving Motivation & Engagement

6.4.1Motivating & Engaging Employees

6.4.2Taylor's Theory

6.4.3Maslow's Theory

6.4.4Herzberg's Theory

6.4.5Different Incentives

6.4.6Evaluating Incentives

6.5Improving Employer-Employee Relations

6.5.1Improving Employer-Employee Relations

6.5.2A-A* (AO3/4) - The Winter of Discontent

7Analysing the Strategic Position of a Business

7.1Mission, Corporate Objectives, Strategy

7.1.1Business Mission & Corporate Objective

7.1.2Mission, Corporate Objectives & Strategy

7.1.3SWOT Analysis

7.1.4A-A* (AO3/4) - SWOT Analysis

7.2Financial Ratio Analysis

7.2.1Financial Ratios

7.3Overall Performance

7.3.1Non-Financial Data

7.3.2Core Competences

7.3.3(2024 EXAMS ONLY) Kaplan and Norton's Balanced Sco

7.3.4Assessing Business Performance

7.3.5A-A* (AO3/4) - Assessing Financial Performance

7.4Political & Legal Change

7.4.1Political & Legal Change

7.5Economic Change

7.5.1Economic Environment

7.5.2Business Considerations from Globalisation

7.5.3A-A* (AO3/4) - Interest Rates in the UK

7.6Social & Technological Environment

7.6.1Social & Technological Environment

7.6.2Lifestyle & Technological Environment

7.6.3Corporate Social Responsibility

7.7Competitive Environment

7.7.1Porter's Five Forces

7.7.2A-A* (AO3/4) - The 5 Forces

7.8Investment Appraisal

7.8.1Investment Appraisal

8Choosing Strategic Direction

8.1Choosing Areas of Competition

8.1.1Choosing Areas of Competition

8.1.2A-A* (AO3/4) - Diversification

8.2Choosing How to Compete

8.2.1Choosing How to Compete

8.2.2(2024 EXAMS ONLY) Bowman's Strategic Clock

9How to Pursue Strategies

9.1Change in Scale

9.1.1Growth & Retrenchment

9.1.2Challenges of Growth

9.1.3(2024 EXAMS ONLY) Growth Models

9.1.4A-A* (AO3/4) - Diseconomies of Scale

9.2Assessing Innovation

9.2.1Assessing Innovation

9.3Assessing Internationalisation

9.3.1Internationalisation

9.3.2Sourcing Resources & Entering Markets

9.3.3A-A* (AO3/4) - Internationalisation in Guatemala

9.3.4Managing Internationalisation

9.3.5(2024 EXAMS ONLY) Bartlett & Ghosal's Model

9.3.6Impact of Internationalisation

9.4Digital Technology

9.4.1Assessing Use of Digital Technology

9.4.2Impact of Digital Technology

10Managing Strategic Change

10.1Managing Change

10.1.1Managing Change

10.2Managing Organisational Culture

10.2.1Managing Organisational Culture

10.2.2(2024 EXAMS ONLY) Hofstede's Model

10.2.3Organisational Structures

10.3Managing Strategic Implementation

10.3.1Managing Strategic Implementation

10.4Problems with Strategy

10.4.1Problems with Strategy

10.4.2A-A* (AO3/4) - Divorce of Ownership from Control

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