3.9 Business Size

igcse 3.5

Methods of Measuring Business Size

1.      # of e__: simplest; easy to see & calculate

>   However, firms can have lots of m__ but little workers and still be a big firm

2.      R__: total sales in a period

>   Popular way to compare firms in the s__ industry & measure own progress over time

>   Not good at comparing firms in d__ industries as 1 could sell high value; other low value

employees, machinery, revenue, same, diff

Methods of Measuring Business Size
>     C__ e__: total value of N__

o   ↑firm size = ↑need for high amt of capital

o   Only useful for comparing firms in s__ industry, as some industries are more capital intensive

>      V__ of output: total value of company’s production

o   Not good for measuring firms producing h__ value products

>      M__ share: sales of business as a proportion of the whole market
total sales firm / total sales industry x100

High market share = market leader = large firm

capital employed, NCA, same, value, high, market

Small Firms

Ø  I__ owned & operated, limited in s__ & revenue depending on industry

Scale is ideally suited to serve l__ communities & provide p__ to the owner

independently, size, local, profit

Small Firms

Adv	Disadv
Ø  Owner can run the firm as they please Ø  Firm can easily adapt to c__ needs Ø  Personal s__ to customers Ø  Staff prefer to work in small firms & owner gets to know them p__ Ø  Business culture more i__ & personal Ø  More i__ bc less to lose & willing to take risks	Ø  Limited access to f__ Ø  Can’t exploit e__ of scale Ø  ↑Risk of f__ if risk not spread w/ diversified products Ø  Hard to attract experienced e__ (unable to afford wage & training) Ø  Harder to s__ if economic conditions change (lack resources to survive)

customer, service, personally, informal, innovative, finance, economies, failure, employees, survive

Large Firms

Adv	Disadv
Ø  Benefits from e__ of scale Ø  Can afford s__ Ø  Set low prices all of m__ has to follow Ø  Increased access to f__ Ø  Ez to s__ risk of failure (↑products in diff. markets) Ø  Can afford in-depth market r__ & development	Ø  Hard to manage if too b__ & spread out Ø  Large scale production = large c__ Ø  S__ decision making Ø  Divorce of ownership: conflict between owners/managers on how it’s run Ø  Too large = d__ of scale

economies, specialists, market, finance, spread, research, big, costs, slow, diseconomies

Internal Growth

When business expands operations w__ itself e.g. purchasing new e__, selling new goods

within, equipment

External Growth
Involves __≥ firms j__to form a l__ business (integration)

2, joining, larger

M__: __≥ firms m__ agree to join to form a n__ business

merger, 2, mutually, new

T__: __ business b__ out another (shares) so they take f__ control

takeover, 1, buys, full

Types of External Growth
1. H__ i__: business who operates in s__ industry & at s__ stage of p__ as another, merges/takes over the other

Adv: ↓c__, ↑market share, ↑internal EoS e.g. bulk-buying
Disadv: risk of DisEoS: larger firm = ↑managerial/operational issues = ↑costs

horizontal integration, same, same, production, comp

Types of External Growth
2. V__ i__: business who operates in the s__ industry but at d__ stage of production as another, m__/takes over the other

Adv: Forward: g__ place to sell good; prevents c__ from being sold
Backward: guaranteed s__ of mats; stops s__ comp
Both: benefit w/ profit, k__, etc of firm taken over
Disadv: risk of d__ (large firm = issues = UPcost)

vertical integration, same, diff, merges, guaranteed, comp, supply, supplying, knowledge, disEoS

F__ vert. integration: firm integrates w/ a firm of a __(earlier/later) stage of production than theirs

forward, later

B__ vert. integration: firm integrates w/ a firm of a __(earlier/later) stage of production than theirs

backward, earlier

Types of External Growth
3. C__ i__: firm merges/t__ o__ another firm from __(same/diff) i__

conglomerate, integration, takes over, diff industry