Buisness Size And Growth Flashcards
How do you measure the size of a business?
1) Number of employees (50 = small, 250+ = large)
2) Number of factories , shops and offices
3) turnover and profit
4) stock market value (current share price x shares issued)
5) capital employed (total value of assets)
What are the factors affecting the size of a business?
1) market size
2) nature of product
3) ability to access resources eg finance
4) personal preference
5) legal structure - type of business
What are the reasons for a business wanting to grow?
1) entrepreneur wants a greater challenge
2) owner wants higher return on investment
3) diversification can help spread risk
4) bigger stronger business better places to fight economic or competitive threats
5) opportunity to reduce cots through scales of economy
What are the effects of a large business size on its employees?
Advanatges:
1) grater job security
2) specialist HR dep so will ensure compliance with legislation
Disadvantages:
1) remote from those making the decisions —> feel little input and can cause poor morale and motivation —> affect productivity
2) issues with effective communication and co-ordination
What are the effects of a large business size on its suppliers?
Advantages:
1)regular orders
2) large orders
Disadvantages:
1) could be offered take it or leave it approach
2) over dependence on large suppliers dangerous if they change suppliers
What are the effects of a large business on the local community?
Advantages:
1) creation of jobs
2) multiplier effect - boots local economy
Disadvantages:
1) pollution and congestion
2) could drive out local existing firms from market reducing choice and variety
What are the effects of a large business on shareholders?
Advantages:
1) market power = higher degree of control over prices —> inc profits and dividends
2) gain managerial economies of scale to imported performance
Disadvantages:
1) managers making wrong decisions can largely effect on profits and dividends
What are the effects of a large business on customers?
Advantages:
1) economies of scale - lower costs so lower prices
2) treated well to maintain business image
Disadvantages:
1) diseconomies of scale may raise costs which can be passed onto customers through higher prices
What is organic growth?
Growth within the business by increasing the firms sales
What is external growth?
Growing from outside the business
What are the types of external growth?
Mergers and acquisitions
Joint ventures
Strategic alliance
What are the advantages and disadvantages of organic growth?
Advantages:
Usually lower risk
Builds on strengths
Can be financed internally
Disadvantages:
Growth dependent on market size/ growth
Hard to grow if leader in market
Franchises hard to manage effectively
What are the advantages and disadvantages of external growth?
Advantages:
Spreads risk by entering new market
Inc customers
Eradicate competition
Disadvantages:
Loss of control
Inc costs
What is a merger?
Two businesses joining together to form completely new business
What are the reasons to merge?
Increase market share
Economies of scale
Enter new market
Shared ideas + finance
