Business Size and Growth Flashcards
What factors need to be taken into account when judging a businesses size?
- Number of Employees
- Number of Factories, Shops and Offices
- Turnover and profit levels
- Stock Market Value
- Capital Employed
Number of Employees??
IN the UK a business with less than 50 employees is regarded as a small business - a business with over 250 employees is regarded as a large business.
Number of Factories, Shops and Offices??
The higher the number of factories the business has the ‘larger’ the business is perceived.
Turnover and Profit Levels??
- If a business has a large profit it is seen a large
- However; jewelers have high profits and some large businesses may be going through financial difficultly so this isn’t always 100% true.
Stock Market Value??
- Value of the company is calculated by multiplying the current share price by the number of shares given.
- Higher the number higher the larger the company is likely to be.
- However; Tesco share price fell in 2013 & 2014 due to Lidl and Aldi competition but the company size didn’t change
- Share prices also change daily so figures can be misleading.
Capital Employed??
- Capital Employed is the total value of a businesses assets
- If the figure is high then it is reasonable to assume a business is large.
- However; geographical factors play a part ( factories are more expensive in London than the Cotswolds ) so prices can rise and fall without any changes in the actual number.
What 2 factors does the EU use to measure the size of a business??
- Employees
- Turnover
How does the EU define a Medium Sized Business?
- More than 250 employees
- More than 50 million Euro turnover
How does the EU define a Small Sized Business?
- More than 50 employees
- More than 10 million Euro turnover
Why are these EU definitions important?
- Because an EU regulation of business is that they are ‘all operating on a level playing field’
Define Business Size?
- The EU has a standardised way of measuring size based on the number of employees, turnover and balance sheet value
What 4 factors affect the size of a Business?
- Market Size
- Nature of Product
- Personal Preference
- Ability to access resources for expansion
How does Market Size affect the Size of a Business?
- Where the market is small it is dominated by relatively small firms
- Because big business don’t benefit from economies of scale as much, or don’t get the desired level of profit
How does the Nature of the Product affect the Size of a Business?
- If a product is large and technologically complicated the firms are larger because of the necessary resources needed to make the product
- If a product is Standardised then the companies are large because they can benefit from economies of scale
- If a product has a ‘personal touch’ the business is often small.
How does Personal Preference affect Business Size?
- An Entrepreneur may not want to expand nationally, this could be due to building more offices could lead to loss of control over the company.
- Also the time devoted to expansion may not be worth the time
How does Ability to Access Resources for Expansion affect business size?
Less availability to funds means business can invest into expansion.
