Growth and Evolution in Business

Why Businesses Grow (or Don’t)

Ruby Sturt: Hey everyone, welcome back to the IBDP Business Management success podcast! I’m Ruby Sturt, and—yep—hanging out with me in the “virtual studio” is Eric Marquette. G’day Eric! You ready to talk growth and all the wild things businesses do to… well, get bigger or not?

Eric Marquette: Always, Ruby. Always. We had some lively feedback from the last episode on stakeholders and all the behind-the-scenes tug-of-warring that goes into business decisions. Quite a few of you messaged about how stakeholders are a bit like those in-laws who want a say in every family debate. Now today—we’re diving into why growth is such a big deal. I mean, how do businesses get from being just a tiny neighborhood shop to Starbucks or Tesco territory, right?

Ruby Sturt: Totally, and whether they even want to! Like, some businesses are happy to be the local favourite. Actually, let me kick off with an Aussie example close to my caffeine-addicted heart—there’s this café in Melbourne, called Bean Brews. Started out on a single street corner, just pouring flat whites and waving hello to everyone by name. But then—boom! The community got behind them, they started roasting their own beans, ran workshops, and suddenly they needed more space, more baristas… and a whole lot more beans! But here’s the twist: they managed to scale up without losing those friendly, familiar vibes. Total balancing act. Goals, hey?

Eric Marquette: That’s brilliant. I think that nails it—growth isn’t just about numbers. Sometimes it’s staying true to your vibe, your mission. But there are so many routes up that hill, right? We split them into what we call internal, or organic, growth—like investing in research and development or introducing a new product line—and external growth, like mergers, acquisitions, or even joint ventures. There’s even a neat tool for mapping growth strategies, the Ansoff Matrix. Remember that from our objectives episode?

Ruby Sturt: Oh, yeah! You pop your products and markets along the sides and you can see if you’re staying safe or going all out with diversification. I had this bakery in Sydney, actually, the owner showed me she was staring down this choice: expand and risk losing her “secret recipe” or keep things small, so the customers always get her personal touch. For her, “success” was more about control and lifestyle than massive profits.

Eric Marquette: And that’s the thing—not every firm wants to be the next Amazon. Some cherish flexibility or their niche. There’s no one-size-fits-all path.

Ruby Sturt: Exactly. Growth has its perks, but it’s not for everyone. Oh, and with the Ansoff Matrix—don’t forget, there’s always risk as you move further away from your current products and markets. Think about it the next time, say, your local burger joint suddenly starts doing sushi on Thursdays. That’s diversification and, well, sometimes it’s a hit, sometimes it’s just… confusing!

Economies and Diseconomies of Scale

Eric Marquette: So let’s zoom in on what happens when those growth ambitions turn into real expansion. One of the biggest motivations to grow is to unlock what we call economies of scale—essentially, cost savings that kick in as production ramps up. Picture a big supermarket in the UK—Tesco, for instance. They buy bread, milk, and, I don’t know, like, ten thousand packs of Hobnobs at a time. Bulk buying power lets them negotiate better prices. But it’s not just about getting wholesale bargains—

Ruby Sturt: —It’s also stuff like spreading marketing costs over way more customers, right?

Eric Marquette: Yep! Internal economies cover all those operational efficiencies. You’ve also got external economies—like, sometimes entire industries cluster in one city and share resources or suppliers. Silicon Valley for tech is a classic case—that’s the network effect in action. All those Google and Apple folks bumping into each other at coffee shops, sparking creativity. But there’s a catch. Or, well, a few catches.

Ruby Sturt: Got to talk about the flipside: diseconomies of scale. People imagine “bigger is always better”—but, honestly, it can get messy! Like, with Tesco, right? They exploded into new markets so fast that suddenly there were these mega layers of managers, and no one on the checkout seemed to know your name anymore. Decisions slowed down, bureaucracy took over, and suddenly customer service, uh, slipped.

Eric Marquette: I mean, it’s kind of like—you start losing touch with your people. It’s hard to keep that tight-knit culture alive, communication breaks down, and the cost savings get eaten up by, well, all the extra admin. Some companies choose to stay lean on purpose, just to dodge that hassle.

Ruby Sturt: There’s definitely a sweet spot. A lot of firms will grow fast for the economies, like lower costs per unit or sharing logistics, but then they’ll slam on the brakes before things tip into chaos territory. I guess it’s all about knowing your limit—like the difference between sharing a pizza with friends and trying to split it with, I dunno, a hundred people. Gets complicated, real quick.

Sustainable Growth and Circular Business Models

Eric Marquette: So, if we think beyond just “bigger is better,” how do companies grow without blowing up the planet… or themselves? External growth isn’t a single path either. You’ve got mergers and acquisitions—two firms joining forces. Or sometimes there’s a “takeover,” which is, let’s be honest, usually a bit less friendly. Joint ventures—those are collaborative projects, and then there’s franchising. McDonald’s is the poster child, right? Franchises everywhere, but—locally managed.

Ruby Sturt: Totally, and you get other alliances or collabs, like when automakers get together to develop a new battery or something. But what I really love lately is this circular business model trend. Think of IKEA’s push for furniture you can return, recycle, or even rent. Or Loop, the start-up that gets brands like Haagen-Dazs selling ice cream in reusable tubs. It’s growth, but in this “close the loop,” don’t just make-waste-chuck-it way.

Eric Marquette: That’s where sustainability gets interesting. If you’re using fewer raw materials, recycling, and rewarding customers for doing the same—suddenly growth isn’t about more stuff, but smarter stuff. I mean, from the business management perspective, this is quite the shift. Circular models can reduce costs, attract eco-conscious customers, and even boost innovation. But… does the content we study always reflect how fast business is changing?

Ruby Sturt: That’s a killer Theory of Knowledge question, actually. Are these standard models, like economies of scale or the Ansoff Matrix, keeping up with reality? Businesses are getting pressure from everywhere—consumers, governments, even their own staff—to go green and innovate. Fast fashion companies, they’re classic for rapid, linear growth, but aren’t exactly winning prizes for sustainability. Compare that to something like Loop or even IKEA’s new initiatives. Different story.

Eric Marquette: So here’s an action takeaway for anyone studying—pick a big brand. Look at how it grows: is it cashing in on economies of scale, or risking it all on mergers or alliances? And what about the sustainability piece—are they just getting bigger, or also getting better?

Ruby Sturt: And, if you’re higher level, keep Porter’s generic strategies in mind—cost leadership, differentiation, focus. They shape how firms outmaneuver rivals as they scale up. Alright, Eric, I reckon that’s a wrap for today. We got into some juicy debates there. Anything you want to add?

Eric Marquette: Just that growth isn’t always a straight line—and definitely not the same for everyone. Watch what your favourite company does next, maybe there’s a lesson or even a warning in there. Thanks Ruby, as always—and thanks to our listeners for sticking with us for another round of business banter.

Ruby Sturt: Next episode, we’ll be peeking at innovation and change—absolute game changers in business. Can’t wait. Cheers Eric, see ya next time!

Eric Marquette: See you, Ruby. And goodbye everyone—till next time on the IBDP Business Management success podcast.