Enterprise, business growth and size
Enterprise and growth
- An entrepreneur sets up a business and takes the risk — hard-working, innovative, confident, organised.
- A business plan describes the idea, market and money — it makes the owner plan ahead and helps raise finance.
- Governments support start-ups with grants, low-interest loans, training and lower taxes.
Practice
A key use of a business plan is to:
A plan makes the owner think ahead and helps persuade banks/investors to provide finance.
Measuring size & growth
- Measure size by employees, revenue, or capital employed (each has a weakness).
- Internal growth (organic) — grow by yourself (slower, safer).
- External growth — a merger or takeover: horizontal (same stage), vertical (different stage), conglomerate (different industry).
Practice
Match each integration type.
Horizontal = same stage, vertical = different stage, conglomerate = different industry.
Economies of scale
- Economies of scale lower the cost per unit as a firm grows (bulk buying, cheaper loans, big machines).
- Grow too big → diseconomies of scale (poor communication, weak control) raise cost per unit.
Practice
Economies of scale mean that, as a firm grows, the cost per unit:
Economies of scale lower the cost per unit; growing too big brings diseconomies (cost rises).
You've got it
Key idea
- an entrepreneur takes the risk; a business plan helps raise finance
- growth: internal (organic) vs external (merger/takeover — horizontal/vertical/conglomerate)
- economies of scale lower cost per unit; too big → diseconomies