Define "economies of scale" and explain how it can be a motivation for business growth.

Economies of scale refer to lower average costs as production increases. It motivates business growth because by producing more, a company can reduce its per-unit cost, leading to higher profitability.

Explain the fundamental difference between internal growth and external growth.

Internal growth involves a business expanding its own operations, such as developing new products or entering new markets, while external growth occurs when a business merges with or takes over another existing business.

A local bakery decides to add a new line of gluten-free pastries to its menu. Is this an example of internal or external growth? Justify your answer.

This is an example of internal growth. It involves the business expanding its own operations by developing new products (gluten-free pastries) without merging with or acquiring another company.

Business Growth And Staying Small Lesson Plan for 9th Grade | Free Career & Technical Education Lesson

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Objective

I can explain the reasons why some businesses grow and others remain small. I can describe the different ways a business can grow both internally and externally. I can explain the advantages and disadvantages of different methods of growth: internal growth, horizontal integration, and vertical integration.

Part 1 of 3

Key concepts

3 concepts

1
Businesses often grow to achieve economies of scale or gain a larger market share, while some prefer to remain small to serve a specific niche market.
2
Internal growth involves a business expanding its own operations, while external growth occurs through integration with another business.
3
Horizontal integration is when a company merges with a competitor at the same production stage in the same industry, whereas vertical integration involves acquiring a firm at a different stage of production in the same industry, such as a supplier or distributor.

Part 2 of 3

Practice

12 questions

Name two common reasons why a business might choose to pursue growth.

What is one reason a business might choose to remain small instead of pursuing significant growth?

Part 3 of 3

Exit ticket

Quick comprehension check

“Explain two reasons why a business might choose to grow. Then, describe either horizontal integration or vertical integration as a method of external growth, and explain one advantage and one disadvantage of the specific method you chose.”

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Business Growth and Staying Small

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