and become the dominant firm in a particular industry
Benefit from greater profits
a firm aims to maximise profits and may
be able to achieve through expansion
Increase sales
Through lager brand recognition and more sales outlets
Increase EoS
Driving down LRAC = approaches productive efficiency
Gain power
So as to prevent potential takeovers by larger predatory businesses
Takeovers
Horizontal
Merger between two firms at the same stage of production
Vertical
Forward
Next stage of production process
Backward
Previous stage in the production process
Conglomerate
Unrelated = Spread risk
Why do some firms break up?
Too large, diseconomies of scale, LRAC increase.
"demerge" e.g British gas into Centrica (gas) Lattice
Group (transportation of gas) and BG (gas production
Why do firms remain small?
Barriers to entry
Legal barriers
Overt Barriers
Sunk costs
Must consider when entering a market, unrecoverable
Niche market business
Lack of expertise
Optimum efficiency has been achieved
Benefits of remaining small
Training grants + Government financial support, e/g firms
with profits of less than 10,000 are not liable for corporation
tax