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