21. Size of Business Flashcards
How would you measure the size of a business with no. of employees?
A large business may be one with lots of employees
or one with a small number of employees but is capital intensive
How would you measure the size of a business?
Number of employees Revenue Capital Employed Value of output Market Share
What is Revenue?
Total sales made by a company in a period of time
What is Capital employed?
The total value of finance in the business
What is Value of Output?
The total value of a companies production
What is Market Share?
The sales of a business as a proportion of the whole market
How do you calculate Market Share?
MS = Total sales of a Business
Total Sales of Industry
What are the advantages of a small business?
Can be easily managed
Easily adapt to consumer needs
Business culture is more personal
What are the advantages of a large business
Can afford specialists
Have economies of scale
Set low prices that the entire market has to follow
Has access to more sources of finance
What are the disadvantages of a small business
Limited access to finance
Risk of failure is high
No economies of scale
Cannot afford specialists
What are the disadvantages of a large business
Difficult to manage
Large costs
Slow decision making
What is internal growth
When a business expands its operation
What are examples of external growth
Mergers
Takeovers
What is merging?
Two or more businesses come together to form a new business
What is a takeover?
When one business buys out another business
What is horizontal integration
When a business who operates in the same industry and at the same stage of production as another, merges with or takes over the other.
What is vertical integration?
When a business who operates in the same industry but at a different stage of production as another, merges with or takes over the other.
What is conglomerate integration
When a business merges with or takes over another business from a completely different industry
What are the benefits of horizontal integration
Reduces competition
More market share
economies of scale
What are the benefits of Vertical integration
Guaranteed place to sell your products
Guaranteed supply of materials
