BUSINESS SIZE Flashcards
What is the best form of measurement for business size?
There is no ‘best’ measure
The choice depends on whether absolute or comparative size is of interest.
What is absolute size in measuring business size?
Test using at least 2 criteria and compare
Measures will depend on the industry or specific business.
What are some problems encountered while measuring businesses?
Different methods give different answers and no internationally agreed definition on size exists.
What are the benefits of encouraging development of small and micro-businesses?
- Many jobs created
- Often run by dynamic entrepreneurs
- Creates competition for large businesses
- May provide specialist goods
- Helps businesses grow
- Lower costs due to no diseconomies of scale
What forms of government assistance are available for small businesses?
- Reduced rate of tax
- Loan guarantee scheme
- Information, advice, support
What are the advantages of small businesses?
- Managed by owners
- Flexible
- Personal contact with employees and customers
- Offer personal service
What are the disadvantages of large businesses?
- Diseconomies of scale
- Divorce between ownership and management
- Conflicts
- Poor communication
What defines a family business?
Owned and managed by at least 2 family members
What are the strengths of family businesses?
- Commitment
- Knowledge continuity
- Reliability and pride
- Traditional
What are the weaknesses of family businesses?
- Success/continuity problems
- Informality
- Nepotism
- Conflicts
What are some reasons for business growth?
- Increased profits
- Increased market share
- Economies of scale
- Lower risks
What is internal growth in business?
Expansion by expanding existing operations
What are some ways for internal growth?
- Enter new markets
- Increased marketing activities
- Increase investment
- Use newer techniques
What is a merger?
Shareholders and managers of two firms come together with both owning shares
What is a takeover?
Company buys more than 50% of another company’s shares
What are the types of integration in business?
- Horizontal
- Vertical forward
- Vertical backward
- Conglomerate
What is a friendly merger?
Takeover with consent of the target business
What is a hostile takeover?
Takeover without consent of the target business
What are potential major issues of growth through mergers/takeovers?
- Takeovers can be costly
- More fixed & working capital may be needed
- Can lead to negative cash flow
What are potential solutions to financial problems in mergers/takeovers?
- Usage of internal sources of finance
- Providing capital from share issues
- Offering equity instead of cash
What are potential major managerial issues in mergers/takeovers?
- Diseconomies of scale
- Lack of coordination
- Clash of culture
What are potential solutions to managerial problems in mergers/takeovers?
- Policy of delegation and empowerment
- Motivate managers with clear focus
- Rapid modification in management culture
What can help a new merger/takeover achieve its objectives?
- Sharing of research and ideas
- Achieving economies of scale
- Decreasing expenses through asset rationalisation
Why can a new merger/takeover fail to achieve its objectives?
- Diseconomies of scale
- Varied customs and cultures
- Difficulty in managing rapid growth
What are the importance of joint ventures?
- Costs are shared
- Risks are shared
- Different strengths can fit together
What are the importance of strategic alliances?
- Can create rapid growth
- Leads to innovation
- Share ideas and resources
What are business objectives?
Long-term goals of a business that act as a framework
What is the importance of business objectives?
Direct, control and review any business activity
What must be in place for any aim to be achieved successfully?
Strategies that guide the business
How do business aims and strategies change over time?
They evolve as circumstances change
What are corporate objectives?
Specific goals that support the overall business aims
