Cambridge IGCSE Business Studies

3 Enterprise, business growth and size

Answers to Worksheet 3
A Growth of firms (review)
1 a takeover; b external; c a diseconomy; d diseconomies.
2 Horizontal In same industry at same stage of production process
Organic Grow through internal expansion of the business
Conglomerate In different industries
Vertical In same industry but at different stages of the production process
3 a forward vertical; b organic; c lateral; d horizontal; e conglomerate.
4 Three from: economies of scale, increase in market share, spread risk, reduce risk of takeover, greater
power to control market.
5 Personal preference – want to remain small; lack of finance – so cannot afford to expand; size of market
so lack demand; competitive reasons.
6 Lack of finance/cash-flow problems so run out of money sooner; no brand awareness so difficult to
attract customers; lack experience so unable to resolve issues that arise.

B Vale Mining
1 Primary
2 Permit delays and inefficient mines.
3 Benefit from reduced costs as a result of its size (based on Coursebook explanation at this stage).
4 See Coursebook for list, pages 42–43.
5 Quicker way to grow, access to reserve of ore, increase market share, economies of scale, eliminate rivals.
6 Student’s own answer based on points above.
For Chapter 16
1 Managerial – can afford specialist managers, unlike smaller rivals. Purchasing economies of scale
so able to benefit from discounts leading to lower average costs. Technical – can afford the cost of
specialist equipment. Financial – due to its size, seen as lower risk to lenders so more likely to benefit
from favourable interest rates.
2 Less wastage of resources, which can help reduce costs so could lead to better profitability; lower costs
could mean able to charge lower prices so more competitive. Increased capacity so able to produce more
within a given period of time.

© Cambridge University Press 2014 Cambridge IGCSE Business Studies Chapter 3 Answers to Worksheet 3 1