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Growth

Growth brings greater turnover and profits (providing the market allows, and costs do not rise disproportionately as a result of growth); leads to the business being worth more in economic terms. There are several potential benefits associated with growth in general. For example, it can: aid survival – the larger the business, generally the less vulnerable to competition; reduce risk – particularly when it involves diversification into other geographical markets which reduces the business’ dependency on any one market; help gain economies of scale (reduction in fixed cost per unit). However, as a business grows it becomes harder to maintain control, particularly when it involves diversification into new markets. This is because the business is not just faced with dealing with more customers, employees, paperwork, levels of hierarchy, locations, etc but different types of customers, employees and administration requirements, etc. Consequently, despite the obvious attraction of growth in terms of revenue and profit, the increase in complexity of a growing business, particularly one that grows through diversification into new markets, makes coordination and control more difficult and diseconomies of scale may occur. See diseconomies of scale. NB There are also negative social effects (externalities) associated with growth in economic / business activity such as increased noise, congestion and pollution.

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