Growth and Evolution: Why Size Isn't Everything in Business

Growth and Evolution: Why Size Isn't Everything in Business

Let's go back in time for a sec: It's January 2024, and you're sitting on Alaska Airlines Flight 1282, scrolling through Instagram at 16,000 feet. Suddenly - BANG - a massive door panel just... flies off the plane. Phones get sucked out, the wind is screaming, and you're staring at the night sky through a person-sized hole in the fuselage. What can I say? It happens.

That Boeing 737 Max incident wasn't just an unusual accident. It was a £20 billion lesson in what happens when a company gets so massive that the left hand doesn't know what the right hand is doing. And that, is the perfect introduction to kick off our chat about IB Business Management business growth and evolution.

A Big IB Business Management Question: To Grow or Not to Grow?

Every business faces the same dilemma that you probably face when eyeing that massive Domino's pizza deal: bigger always better? Straight answer: not always.

Let's start with the good stuff - because who doesn't love a good success story?

When Being Massive in Size Actually Works: Economies of Scale

Remember the last time you ordered something off Amazon and it arrived the next day? (Or maybe even the same day if you're lucky?) Not many companies can operate with such efficiency and it does not happen by accident, that's economies of scale in action.

Economies of scale are basically the money-saving superpowers you unlock when you operate on a large scale. It's like buying your Meal Deal from Tesco versus buying each item separately from a corner shop - the bigger operation can do it cheaper per unit.

The Five "Versions" of Internal Economies of Scale You Should Learn

Think of these as the Infinity Stones of business growth:

1. Financial Economies - The "We're Too Big to Fail" Discount

Let's imagine for a sec that you walk into a bank asking for a £100 loan. Now picture Jeff Bezos walking in asking for £100 million. Who's getting the better interest rate? (not you, mate.)

Larger firms get finance more easily and at lower interest rates because banks see them as less risky. Amazon can borrow billions at rates that would make a small startup weep into your Sencha cup of high grade green tea. In 2025, while small businesses are dealing with higher borrowing costs, tech giants are still getting preferential treatment because of their size and stability. Does size matter? In this case yes.

2. Managerial Economies - More and better Bosses, Efficient Results

When you're running a side hustle from your bedroom, you're the CEO, CFO, marketing department, and tea maker. But Tesco? They've got entire teams of specialists for everything from supply chain logistics to working out which biscuits to put on offer. They have the best of the best employees.

Tesco, as the UK's largest supermarket chain with £68 billion in revenue, can afford squads of specialised managers who each focus on what they do best - boosting productivity across the board.

3. Production Economies - Spreading the Love (and the Costs)

Right, maths time - but the fun kind, I promise.

Say you open a YouTube channel and spend £2,000 on camera equipment. If you make one video, that's £2,000 it costs you per video. Make 100 videos? That's £20 per video. Make 1,000? Just £2 per video. The fixed costs get spread thinner as you produce more.

Amazon's warehouse robotics and automation systems represent massive upfront investments, but when you're processing millions of orders, the cost per package becomes tiny, insignificant as a matter of fact.

4. Marketing Economies - One Ad to Rule Them All

When Coca-Cola runs a Christmas advert, they're not just flogging one product - they're marketing their entire range. The cost of that expensive telly ad gets spread across billions of cans, bottles, and variations. Your local café posting on Instagram? They're paying the same price for social media ads but selling way less product.

5. Purchasing Economies - The Costco Effect

Ever wonder why your nan insists on buying 48 toilet rolls at once from Costco? Same principle that makes big businesses successful. Amazon's massive purchasing power means suppliers offer them discounts that smaller retailers simply cannot access. When you're buying components for a million phones, you get a very different price from your supplier than when you're buying parts for ten terminals.

External Economies of Scale: When Your Postcode Matters

Sometimes, growth benefits come from your location, not just your size. These are external economies of scale - advantages that all firms in an industry or area share.

Think about Silicon Valley. Why do all the tech giants flock there? Because when you're surrounded by other tech companies, you get:

• A talent pool of software engineers everywhere you look

• Suppliers who specialise in exactly what you need

• Universities pumping out graduates with the right skills

• Coffee shops where you can "accidentally" network

Similar tech hubs exist globally - London's Tech City, Bangalore's "Silicon Valley of India," or Shenzhen's hardware manufacturing ecosystem. When everyone's playing the same game in the same place, everybody benefits from the infrastructure, the contacts, and expertise around them.

When Bigger Becomes... Worse? The Dark Side of Growth

Right, story time again. Let's talk about Boeing, because their 2024 was an absolute car crash (or should I say, plane crash?).

The Boeing Disaster: A Masterclass in Diseconomies of Scale

Boeing experienced severe communication breakdowns and coordination problems between different departments and suppliers. When a door plug blew off a 737 Max mid-flight in January 2024, investigations revealed "a disconnect between Boeing's senior management and other members of the organisation on safety culture."

Here's what went wrong:

Communication Breakdown - Remember that game of Chinese whispers you played as a kid? Now imagine playing it across multiple countries, time zones, and corporate hierarchies. Boeing had major issues coordinating with Spirit AeroSystems, its supplier for the door plug that failed. The companies struggled with communication and conflict, showing Boeing got its "make-or-buy decision wrong."

Too Many Cooks - Boeing got so large that quality control became a nightmare. Workers were reporting safety issues, but the message wasn't getting through to people who could actually do something about it. Expert reviews found that Boeing employees doubted the company's systems could ensure open communication, and several said they were briefed by Boeing's legal department before speaking to investigators.

The result? Two fatal crashes, a £20+ billion scandal, and a reputation in tatters.

This is what we call diseconomies of scale - when a company becomes so massive in size that its per-unit costs actually start increasing instead of decreasing.

Types of Diseconomies You Need to Know for your IB Business Management Course

Internal Diseconomies (Problems You Create Yourself):

1. Coordination chaos - Managing thousands of employees across different locations becomes a logistical nightmare

2. Communication collapse - Messages get lost, distorted, or ignored in the bureaucratic maze

3. Fixed costs balloon - When you need more offices, more servers, more everything, and output can't keep up

External Diseconomies (When Everyone's Suffering):

1. Traffic carnage - Ever tried getting across London at rush hour? Now imagine you're a delivery company trying to do it hundreds of times per day

2. Ridiculously high rental prices - When Amazon tried to compete with Tesco and other UK supermarkets in London, they faced intense competition and ultimately closed 19 stores. London's grocery market proved too crowded and expensive.

3. Labour shortage nightmares - When every tech company in Silicon Valley is fighting over the same software engineers stars, salaries go through the roof. High demand? High price.

Two Paths to Growth: The Slow Burn vs. The Quick Score

Alright, so you want your business to grow (or at least understand how businesses grow for your IB Business Management exam). You've got two main options:

Internal Growth (Organic Growth): The Slow and Steady Route

This is like building your Instagram following one genuine follower at a time rather than buying fake followers. You're using your own resources to expand.

Examples:

• Opening new locations using your profits

• Developing new products (think Apple going from Mac → iPod → iPhone → iPad)

• Increasing market share through better marketing

The Good Stuff:

• You keep your brand identity intact (none of that awkward merger culture clash)

• Less risky, especially if you're funding it from profits

• You maintain control and ownership

• You can benefit from economies of scale without the chaos

The Not-So-Good:

• Slower than a Monday morning

• Limited by how much cash you've got

• Competitors might grow faster and overtake you

External Growth (Inorganic Growth): The Fast Track

This is when you team up with, buy, or merge with other companies. Think of it as the business equivalent of forming a supergroup band.

Recent IB Business Management Real-life Examples:

In 2025, we've seen massive deals like Google's proposed £32 billion acquisition of Wiz (cybersecurity), Dick's Sporting Goods buying Foot Locker to expand internationally for the first time, and in the UK, Greencore acquiring Bakkavor for £1.2 billion to dominate the chilled convenience food market.

The Good Stuff:

• Rapid growth - like, really rapid

• Instant access to new markets, customers, and tech

• Eliminates competition (one less rival to worry about)

• Can achieve economies of scale quickly

The Not-So-Good:

• Expensive as hell (we're talking billions)

• Risky - half of all mergers fail to create value

• Culture clashes (imagine mixing Greggs with Waitrose... shudders)

• You might lose some control and ownership

The Million Dollar Question: Should You Stay Small?

In reality not every business wants to be the next Amazon. Some businesses are absolutely thriving by staying small, and it doesn't mean they are missing out - they're strategic.

Why Small Can Be Beautiful

1. Lower Start-Up Costs You can literally start a dog-walking business tomorrow with just leads and a love for dogs. Freelance businesses like virtual assistants, tutors, and personal trainers are among the fastest-growing small business types in 2025, often requiring minimal upfront investment.

2. You're the Boss No shareholders breathing down your neck, no board meetings, no corporate politics. Pure freedom.

3. Agility and Speed When Amazon Fresh tried to compete in London, they struggled against nimble local competitors like Tesco Express and Sainsbury's Local who knew their customers better and could adapt quickly. Small businesses can pivot faster than an England midfielder.

4. Niche Markets Are Gold Why compete with everyone when you can dominate a specific corner? In 2025, specialised businesses like AI literacy workshops for non-tech teams, pet-friendly travel planners, and local experience platforms are absolutely crushing it by serving specific niches that big companies ignore.

5. Better Customer Relationships Your local barista knows you and your order. The Starbucks app... doesn't care if you've had a rough day.

6. Privacy Matters As a small private company, you don't have to publish your financials for everyone to see. Only HMRC needs to know your business (literally).

Real Exam Talk: What Works for You?

Here's the thing your IB Business Management exam board wants you to understand: there's no "correct" answer to whether big or small is better. It depends on:

• The industry you're in (tech scales differently than restaurants)

• Your goals (world domination or comfortable living?)

• Your market (saturated or growing?)

• Your resources (loaded or bootstrapping?)

In 2025, success for small businesses isn't just about profit margins anymore - it's about impact, innovation, and resilience. Many small businesses are leveraging AI, focusing on customer experience, and building communities rather than just customer bases.

The Bottom Line

Growth is complicated, innit? Here's what you need to remember:

Economies of scale = Good. You save money per unit as you grow (think Amazon, Tesco, Costco).

Diseconomies of scale = Bad. You lose efficiency when you get too big (Boeing's communication disaster).

Internal growth = Slow and steady, using your own resources.

External growth = Fast but risky, involving mergers and acquisitions.

Staying small = Sometimes the smartest move, especially for niche markets.

The real skill isn't just knowing how to grow - it's knowing when to grow, how much to grow, and critically, when to stop growing. Boeing learnt this the hard way. Don't be like Boeing.

IB Business Management Exam Pro Tip: Examiners LOVE when you discuss both sides. Don't just list advantages of being large - discuss diseconomies too. Use real companies as examples (you've got loads now!). And remember: context is king. What works for Amazon won't work for your local independent bookshop, and that's completely fine.

Now go forth and smash those exam questions!

Got questions? Share them in class! And if this helped, share it with your mates who are also drowning in IB Business Management revision. We're all in this together.

Stay well,