2054776
Description
Mind Map by u28bridgesj, updated more than 1 year ago
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Created by u28bridgesj
over 9 years ago
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Economics Unit 3: Growth
- Why do firms grow?
- Increase market share
- and become the dominant firm in a particular industry
- and become the dominant firm in a particular industry
- Benefit from greater profits
- a firm aims to maximise profits and may
be able to achieve through expansion
- a firm aims to maximise profits and may
be able to achieve through expansion
- Increase sales
- Through lager brand recognition and more sales outlets
- Through lager brand recognition and more sales outlets
- Increase EoS
- Driving down LRAC = approaches productive efficiency
- Driving down LRAC = approaches productive efficiency
- Gain power
- So as to prevent potential takeovers by larger predatory businesses
- So as to prevent potential takeovers by larger predatory businesses
- Increase market share
- Takeovers
- Horizontal
- Merger between two firms at the same stage of production
- Merger between two firms at the same stage of production
- Vertical
- Forward
- Next stage of production process
- Next stage of production process
- Backward
- Previous stage in the production process
- Previous stage in the production process
- Conglomerate
- Unrelated = Spread risk
- Unrelated = Spread risk
- Forward
- Why do some firms break up?
- Too large, diseconomies of scale, LRAC increase.
"demerge" e.g British gas into Centrica (gas) Lattice
Group (transportation of gas) and BG (gas production
- Too large, diseconomies of scale, LRAC increase.
"demerge" e.g British gas into Centrica (gas) Lattice
Group (transportation of gas) and BG (gas production
- Horizontal
- Why do firms remain small?
- Barriers to entry
- Legal barriers
- Overt Barriers
- Sunk costs
- Must consider when entering a market, unrecoverable
- Must consider when entering a market, unrecoverable
- Niche market business
- Lack of expertise
- Optimum efficiency has been achieved
- Benefits of remaining small
- Training grants + Government financial support, e/g firms
with profits of less than 10,000 are not liable for corporation
tax
- Training grants + Government financial support, e/g firms
with profits of less than 10,000 are not liable for corporation
tax
- Barriers to entry
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