W 2: Up, Up And Away - The Sky's The Limit For Growth?

This worksheet looks at the growth of Cameron Balloons. For more information about the work of the accounts department at Cameron Balloons you may want to look at the accounts explanation section.

A printable version of this worksheet is available for filling in answers.

Step 1 - What sort of growth?

There are various ways a company can grow. Look at the history of Cameron Balloons to see how Cameron Balloons has grown.

• Would you describe this growth as organic or inorganic? Justify your answer.
• What advantages are there to inorganic growth? Why do many companies grow by acquiring other companies?

Step 2 - When is growth growth, and when isn't it?

This rather convoluted title is intended to show that it is not always obvious when a company has grown. How do we define and quantify growth of a company? Has it grown if the profits have grown? Has it grown if the number of employees has grown? Fill in the table below and say whether a growth in one of these variables shows that the company itself has grown:

Try ranking these 5 variables according to how well they measure the size of the business. Start with number 1 as the best measure, to number 5 - the worst measure.

Step 3 - To be bigger, or not to be bigger?

• Many companies spend all their time as small businesses and don't bother to grow. So what advantages are there to growth?
  (N.B. The accounts theories section may be of some help with this.)
• Which of these reasons would have been the most important to Cameron Balloons as they have grown in the last 20 years? Why do you think this is the case?

Step 4 - Bigger - cheaper?

As companies grow they may be able to take advantage of economies of scale. What is meant by an economy of scale?

Economies of scale split into two types - internal and external. Internal economies are ones that arise from the growth of the company itself, while external economies are ones that arise from the growth of the industry (or other industries).

Look up in your course textbook or library to find out what different types of internal and external economies of scale there are.

Try ranking these according to how important they may have been to Cameron Balloons as they have grown in the last 20 years. Number 1 should be the most important, and number 7 the least important.

Write a short justification for the ones you have put first and second. Why have these been so important to Cameron Balloons?