Cambridge International as and a level Economics Ebook

part of banks.
■
The entrepreneur may not want the firm to get bigger 
because extra profit is not the only objective and growth 
might involve a loss of control over the running of the 
business.
■
Recession and rising unemployment can trigger an increase 
in the number of business start-ups as former employees 
try to become self-employed.
■
Small businesses may receive financial help under 
government enterprise schemes because of their 
employment and growth potential.
■
The increased access to technology through the Internet 
and mobile phones has reduced the optimum size of 
business unit and made small businesses more eff icient 
and therefore competitive with larger ones.
The growth of firms
Although the number of large fi rms is small, it is true 
that they dominate both national and international trade. 
Business growth is strongly linked with the pursuit of 
profi t but the motives behind a fi rm’s growth may include 
the following:
■ 
The desire to achieve a reduction in ATC over time through 
the benefits of economies of scale.
 
This allows firms to 
compete more eff ectively with rivals because they can 
aff ord to cut prices without sacrificing profits.
■
To achieve a bigger market share, which would boost sales 
revenue and therefore profits. This is sometimes referred to as 
the monopoly motive, but it could be a defensive strategy to 
maintain market share in anticipation of action by rivals. In the 
global economy there is a strong argument that only big firms 
can compete in markets where multinationals are present.
■ 
To diversify the product range. A multi-product firm has 
the advantage of being able to spread business risks. If one 
branch of its activity is stagnating or going into decline, there 
will still be the revenue from others to keep the firm afloat. 
Firms oft en see new business opportunities in related areas.