3.1.2c

Question 1

List four constraints on business growth

Answer 1

o size of the market
o access to finance
o owner objectives
o regulation

Question 2

How is size of the market a constraint

Answer 2

• A market is limited to a certain size and so not all businesses are able to mass produce because their goods would not be bought by consumers.
• In particular, niche markets (specific products that few people want) and
  markets for luxury items or restricted prestige markets make it difficult for businesses to grow due to SMALL demand

Question 3

access to finance as a constraint on growth?

Answer 3

• Firms use two main ways to finance growth: retained profits and
  loans.
• If firms do not make enough profit or have to give out too much to shareholders, they will not be able to use retained profits to grow.
• Banks may be unwilling to lend firms money, particularly smaller businesses that they see as high risk. As a result, firms will be unable to grow as they can’t finance it

Question 4

Owner objectives as a constraint on growth

Answer 4

• Some owners may not want their business to grow any further as they are happy with their current profits and do not want the extra risk or work that comes with growth.
• want ot avoid being ntoiced and taken over by large firms
• small firms are more aware and in control of enviro impact, a possible objective for owners

Question 5

regulation as a constraint on growth

Answer 5

• • In some markets, the government may introduce regulation which prevents businesses from growing.
• UK government regulates the
  number of pharmacies in a local area and an existing pharmacy can only expand by
  buying another company.
• Competition law, which prevents monopolies, can restrict growth as any merger which creates a company with more than a 25% market share
  can be forbidden from taking place