![]() Not only will your operating costs be higher, but you’ll also have more staff to pay, a marketing campaign to run, as well as new projects that you need if you’re going to grow anyway.įor every additional employee, you’ll have to pay not only their wages but also health benefits, which will amount to quite a hefty sum if you hire a considerable amount of people that you need to grow your business. Yep, expanding a business will require much more money than what you needed to run a small business. #2 Con – Expansion Requires Larger Investments You’ll also get easier access to media – thus improving your marketing efforts. This means that the growth of your business will also enable you to continue with your expansion in the future, but also to potentially get better deals with your distributors, because of the reliability and trust your brand represents. An increased presence on the international stage is bound to affect your reputation, thus making your brand better known around the world. Growing a business into a larger one also means that your targeted market is going to expand too. This is why you need to be informed about pros and cons of a business expansion, and this guide is a good place for you to start. ![]() Growing a business to a global level carries certain risks you need to consider, especially when it comes to growing your manpower and capital. #7 Pro – More Customers Means More Sales.#6 Con – You Might Need a Bigger Office.#5 Pro – Your Business Will be Safer against New Trends.#3 Pro – Growing Your Business Means Less Competition.#2 Con – Expansion Requires Larger Investments.In a similar way, when companies use information and advanced algorithms to provide the best software products and services and thereby become market leaders, this is a triumph for marketplace capitalism, not a sign of its demise. When more productive firms price their products and services at a lower cost and thereby gain market share, this should be considered a sign of the success of competition, rather than its failure. ![]() Law professor James Bessen’s study demonstrates that increased use of proprietary information technology allows more productive firms to capture greater market share. As economist Carl Shapiro says, an increase in concentration could reflect “the forces of competition at work, with the firms providing better value to customers gaining market share.” David Autor’s study suggests that the more concentrated a manufacturing industry is the greater its increase in productivity. Is this increase in market concentration a good or bad thing? The 2016 Democratic Party Platform appears to assume it is bad, adopting a policy “to take steps to stop corporate concentration in any industry where it is unfairly limiting competition.”īut sometimes market concentration results from vigorous competition. From 1982 to 2012 the share of shipments made by the top four firms grew 4.5% in manufacturing, 4.4% in service industries, 15.0% in retail industries, and 2.1% in the wholesale sector. Several studies including one by Harvard economist David Autor have found that market concentration is increasing in the economy as a whole. In contrast, a huge firm such as Kroger with almost 3,000 stores has only 10% of the national retail marketplace, which has a large number of independent, fiercely competitive firms. As antitrust scholar Herbert Hovenkamp points out, in a local market where only two firms supply a product such as pre-mixed cement, there would be high market concentration even though each firm has only several employees and few assets. But size and concentration are very different. In studies going back a generation and spanning several continents, economists have documented that larger firms pay their workers higher wages, driven in part by the higher productivity and stability of the workforce in larger firms.įirm size is often confused with market concentration, as if large firms must necessarily be market leaders. Big firms have advantages for labor as well.
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