1.3 Size of Business Flashcards
What are the ways you can measure a business?
- Business’s revenue
- No. of employees
- No. of assets the business carries
- Market value
- How many stores the business has
Advantages of a small business
- Easy to set up
- More flexible as decisions can be made quickly
- Individual owning and running the business must be motivated as they want the business to succeed
- More creative as individuals involved in the small business can communicate and share ideas
Disadvantages of small businesses
- Less market power
- Not as experienced compares to established firms in the market
- Struggles to raise finances which often leads to the small business failing
What do governments try to do to help small businesses from failing?
- Lower taxes
- Offer advice
- Lowering regulations
Strengths of a family business
- Families share values and strong ties which leads to less disagreements
- Families can gain sources of finance and expertise from each other
- Individuals who are very hardworking in the family may lead the business to prosper; this makes an emotional and finance connection to the business and will motivate members to work hard and lead the business to survival and success
- Family members will be willing to work for less than outside employees which decreases costs
- Individuals are supportive
- Family members are willing to plan for the long term because it will benefit future generations
Weaknesses of a family business
- decisions being made may be more emotional than rational
- handing over the power of the business to the next gen may be difficult
- family members my lack experience but are reluctant to bring in outsiders
- difficult to manage the relationship between family members due to emotional issues and business factors
What is the important of small businesses in an economy?
- creates jobs and reduces
- provides competition as it ensures established businesses remain competitive
- innovative/creates new ideas
- potential to grow in the future
How to governments provide support to small businesses?
- offer financial support
- offer advice/help
- reduce/remove regulations to lower cost to business and make it less difficult for business to operate
Define niche market
It’s a smaller segment of a broader market
What does a business achieve by growing its business?
- business gains more power through its customers and suppliers and can gain more profits
- business can reach other customers which will help them earn more profits through sales
- business owners can eventually earn something worth more
- business can raise their profile
- owners can gain a sense of achievement and feel proud of growing the business
Define internal (organic) growth
It’s when a business expands its existing operations
How do businesses grow internally?
- grow sales from selling existing products in existing markets
- selling existing products in new markets
- develop new products for customers
Define external (inorganic growth) and internal
This is when a business expands by taking over or joining with another business. This is also called integration where the business is a merger or takeover
Define horizontal integration
This is when a business joins with another business at the same stage of production (Eg: a car manufacturer joining another car manufacturer)
Define vertical integration, backward, and forward
When a business joins with another business at different stages of production
- Backward: when a business joins with a supplier
- Forward: when a business joins with a business closer to the customers (like a distributor/retailer)
