1.3.3 Why some Businesses Grow or Remain Small
Instruction :
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Go through all instructions and course details thoroughly before starting each lesson or activity.
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Watch the attached video lessons attentively and take clear, organized notes in your notebook.
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Write all answers for the attached worksheets in your notebook. Make sure your work is neat and properly labeled.
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Revise your notes and completed worksheets after each lesson to reinforce understanding.
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If you face any difficulty or have questions, note them down and contact your instructor or course coordinator for guidance.
Click to download the Video Lecture Handout.
Good morning class. Today, we’re going to explore an interesting question:
Why do some businesses grow bigger and bigger, while others remain small? Let’s break it down with everyday examples you can relate to.
First, why do business owners want to expand? Growth often means success and brings several advantages.
A bigger business can increase its sales and profits. For example, a clothing brand opening new stores in different cities will reach more customers and earn more money.
Growth also brings economies of scale. This means the business can lower its average costs by buying in bulk, using machines more efficiently, and making better use of workers.
A larger business can also gain a bigger market share, which gives it more influence over prices and customers. And growth can reduce risk by diversifying products.
For example, a bakery that also starts selling packaged snacks spreads its risk – if bread sales fall, snacks may still do well.
So how can businesses grow? There are two main ways: internal growth and external growth.
Internal growth happens when a business expands using its own resources. This could be opening new branches, launching new products, increasing production, or investing in marketing.
Think about a coffee shop chain opening new outlets in different cities – that’s internal growth.
External growth, on the other hand, involves joining with or buying another business. This can be through mergers, takeovers, or franchising.
For example, a large supermarket chain buying smaller local grocery stores is external growth.
McDonald’s, which allows others to run branches under its name, is a classic example of franchising.
External growth is usually faster, but it can also be riskier and more expensive.
But growing isn’t always smooth. There are problems linked to business growth.
One issue is lack of control – as businesses get bigger, managing employees and operations becomes harder.
Another issue is financial risk – expansion often needs big investments, which can lead to debt.
Mergers and takeovers can also face integration problems, like conflicts between different company cultures.
And if a business becomes too large, it may face diseconomies of scale – higher costs because of poor communication, wasted resources, or demotivated staff.
Now, why do some businesses remain small? Sometimes it’s by choice, and sometimes by necessity.
Some owners prefer to stay small so they can keep control and avoid stress.
Others operate in niche markets that don’t need large-scale production – like a handmade jewellery seller focusing only on local craft fairs.
Finance can also be a barrier, as many small firms struggle to get loans for expansion.
And in some cases, tough market conditions stop growth. For example, a small grocery shop may not expand because it can’t compete with big supermarkets.
So class, let’s recap. Businesses grow to make more profit, gain economies of scale, increase market share, and reduce risk.
They can grow internally by expanding their own operations, or externally through mergers, takeovers, and franchising.
But growth also brings challenges such as control issues, financial risks, and diseconomies of scale.
On the other hand, some businesses stay small due to the owner’s preference, niche markets, lack of finance, or tough competition.
By the end of today’s lesson, you should be able to explain why some businesses grow, the methods they use, the problems they face,
and the reasons why others remain small.
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