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Chapter 13 Notes - Chapter 13 Preparing for and Evaluating...

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Chapter 13 - Preparing for and Evaluating the Challenges of Growth Highlighted Notes are on Exam 3 Study Guide I. Sustained Growth: Sustained growth – is growth in both revenues and profits over an extended period of time Relatively few firms generate sustained growth and not all businesses have the potential to be aggressive growth firms. Despite this numbers, most firms try to grow and see it as an important part of their ability to remain successful. Not all firms have the potential for aggressive growth nor see growth as an objective A business can grow too fast. II. Six Reasons for Firm Growth: 1. Capturing Economies of Scale – is when increasing production lowers the average cost of each unit produced Economies of scale can lead to sustained growth esp. in industries/markets where customers value low price. Economies of Scope – primarily refers to reductions in average cost (cost per unit) associated with increasing the scale of production for a single product type . 2. Capturing Economics of Scope – ability to transfer core competencies or share activities from one business unit to another at little or no additional costs. Executing a Scalable Business Model – is when increased revenues cost less to deliver than current revenues, resulting in increased profit margins sales increase. 3. Market Leadership – is a firm that is the number one or the number two firm in an industry or niche market in terms of sales volume. Becoming a market leader provides additional benefits that can further increase revenues and sale 4. Influence, Power, and Survivability – are larger businesses are generally better able to influence, for ex., the
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