3.1.1 - Sizes and types of firms Flashcards
Why do some firms remain small?
- Size of market is very small
- Limited access to finance (banks may seem small firms as large risk)
- Individual personalised services
- Lack of economies of scale and therefore no incentive to grow
Explain the principal-agent problem
Shareholders (principals) own the businesses and they appoint managers (agnets) to control the business
Managers might want to increase sales whereas shareholders want to increase profits to maximise dividends. Therefore there is a divorce of ownership
What is the difference between public and private sector organisations
Private sector firms are when the assets are owned by individuals or groups
Public sector is the part owned by society as a whole and regulated/provided by the government.
What is the distinction between profit and non profit organisations
Profit ones aim to maximise profit and non profits are any company that’s primary motive is not profi.
Non profits usually still have to pay for their costs and any surpluses are pumped back into the economy
Examples of non profits for 25 Markers
WWF (environment), Motor neurone disease association (Health)
