Business Growth | Edexcel A-Level Economics A (9EC0)
Business Growth
- 87 questions
- 6 subtopics
- Theme 3: business behaviour and the labour market
- Paper 1 and Paper 3
Covers why firms are the size they are: the reasons some stay small, the ways businesses grow and the risks each route carries, the principal-agent problem, and why firms sometimes break themselves up..
It covers why firms stay small and why they grow, the principal-agent problem and types of organisation, organic growth and the types of integration, vertical and horizontal integration assessed, conglomerate integration and the constraints on growth and demergers.
Sample questions from Business Growth
Answer each one closed book first, then open the answer.
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Why firms stay small and why they grow
Why do some service-based firms find it difficult to scale up?
Show the answer
The nature of their product or service requires personalised delivery that does not scale easily, limiting growth potential. -
Why firms stay small and why they grow
Why might a firm diversify into different products or markets?
Show the answer
Diversification spreads risk, so poor performance in one area can be offset by success in another. -
The principal-agent problem and types of organisation
State three methods used to reduce the principal-agent problem.
Show the answer
Performance-related pay, share options, and monitoring by non-executive directors. -
The principal-agent problem and types of organisation
What is the aim of a profit organisation?
Show the answer
To generate surplus revenue over costs in order to distribute it to owners or reinvest in the business. -
Organic growth and the types of integration
What is conglomerate integration?
Show the answer
When a business merges with or acquires a firm in a completely different industry with no direct relationship to its existing operations. -
Organic growth and the types of integration
Why does organic growth avoid integration problems?
Show the answer
There is no need to merge different organisational structures, IT systems, or workforces, eliminating the complexities and costs associated with combining two separate firms. -
Vertical and horizontal integration assessed
How does vertical integration reduce flexibility?
Show the answer
The firm becomes tied to its own suppliers or distributors, making it harder to switch to more efficient or innovative external partners if market conditions change. -
Vertical and horizontal integration assessed
What is meant by rationalisation of operations as an advantage of horizontal integration?
Show the answer
The merged firm can close duplicate facilities, reduce overlapping staff, and streamline processes to cut costs and improve efficiency.
The 6 subtopics
One subtopic is one session. Work down the list.
| Subtopic | What it covers | Questions |
|---|---|---|
| Why firms stay small and why they grow | Recall questions on niche markets, access to finance and owner objectives as reasons to stay small, and on cost, market power and diversification as motives to grow. | 11 |
| The principal-agent problem and types of organisation | Recall questions on the divorce of ownership from control, how asymmetric information creates it, and on public, private, profit and not-for-profit organisations. | 13 |
| Organic growth and the types of integration | Recall questions on organic growth and on forward vertical, backward vertical, horizontal and conglomerate integration. | 12 |
| Vertical and horizontal integration assessed | Recall questions on supply chain control, market share and rationalisation, set against integration difficulties, culture clashes and regulatory intervention. | 16 |
| Conglomerate integration and the constraints on growth | Recall questions on risk diversification against the lack of synergies, and on market size, finance, owner objectives and competition policy as constraints. | 15 |
| Demergers | Recall questions on what a demerger is, why firms demerge, and its impact on the separated businesses, on workers and on consumers. | 20 |
How the guide is worked
Answering a question from memory stores it far better than reading the answer again. The guide runs that as a fixed procedure on one subtopic at a time, about twenty minutes a session.
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Step 1 · Closed book
Cover the answers. Work through one subtopic and write down what you can. Leave blanks where you have nothing.
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Step 2 · Open book
Go back to the top. Read each printed answer and write it out in full, including the ones you had right.
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Step 3 · Closed book again
Same questions, same order, from memory. The gap between pass one and pass three is the session result.
Read the full method, the return schedule and the research behind it.
Nearby topics
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