Chapter 3

Question 1

What methods are there for measuring business size?

Answer 1

• Number of employees
• Revenue
• Market Share
• Market capitalisation
• Capital employed
• Outlets

Question 2

Advantages of being a small business

Answer 2

• Can be managed and controlled by owner/s
• Offers personal service to customers
• If family-owned, the business culture is often normally informal and employees can be well-motivated and family-members can perform many roles

Question 3

Advantages of being a family business:

Answer 3

• Knowledge continuity
• Commitment
• Reliability and pride

Question 4

Disadvantages of being a small business:

Answer 4

• It may have limited sources of finance
• Few opportunities for economies of scale
• The owner/s have a large responsibility if they cannot afford specialist managers

Question 5

Disadvantages of being a family business

Answer 5

• Succession/ Lack of continuity
• Informality
• Traditionalism
• Conflict

Question 6

What is the important and role of small or micro businesses in the economy?

Answer 6

1. Many jobs are provided by small businesses and collectively, it employs a high percentage of working population in many countries
2. Small business are often run by dynamic entrepreneurs; they’d come up with new ideas which will create variety. This variety of choice benefits consumers.
3. Large firms all started as small firms- the small firms of today are also the large firms of the future.
4. Small firms create competition for larger businesses. They do this through lower prices and personal, good service; this makes larger firms also higher up their qualifications.

Question 7

What is the role of small businesses as part of the industry structure in some industries?

Answer 7

Small business provide jobs 
Promote entrepreneurialism (not necessarily on a large scale)
Grow into bigger businesses in future

Question 8

Why might a business grow externally?

Answer 8

• Increase profits through achieving higher sales
• Increase market share for profile and bargaining power
• Reduced risk of being taken over by another business

This is normally because a business doesn’t wish to remain small

Question 9

How might a business grow internally?

Answer 9

Opening more outlets, so shops, branches and factories

Question 10

What is the calculation for market share?

Answer 10

Total business revenue/
Total industry revenue
X100

Question 11

Why might some people not want their business to grow?

Answer 11

• To remain in control
• To avoid heavy workloads
• To have some free time

Question 12

Explain conflict in family businesses

Answer 12

Conflict between the family might affect the decision making and running of the business.

Question 13

Explain informality as a disadvantage to family-owned businesses.

Answer 13

Because the business is informal and between family members there isn’t always clear setting of rules for practices and procedures and as the business grows, this could lead to inefficiency .

Question 14

Explain lack of continuity as a disadvantage to family-owned businesses.

Answer 14

Many family businesses aren’t sustainable long-term because of lack of skills, ability, want, or motivation to keep the business afloat.

Question 15

Explain traditionalism as a disadvantage to family-owned businesses.

Answer 15

In these businesses there is a frequent reluctance to change systems and procedures and there is a lack of innovation which could be disadvantageous to the business.

Question 16

Explain knowledge continuity as an advantage to family businesses.

Answer 16

Necessary tools to run the business are learnt when family businesses pass on their accumulated knowledge from running the business themselves

Question 17

Explain commitment as an advantage to family owned businesses

Answer 17

Family owners often dedicate themselves to seeing the family business grow, prosper and get passed on to younger generations.

Because of this, lots of the family might consider this an incentive to work harder and this might allow the business to grow in the long term.

Question 18

Explain reliability and pride as an advantage to family owned businesses

Answer 18

Family businesses usually have their name associated with their products and because of this, would strive to increase the quality of their output and maintain a good relationship with their stakeholders.

Question 19

What is the difference between internal and external growth?

Answer 19

Internal growth can be slow and involves creating more outlets and branching out the business.

External growth is buying our the competition or merging with them, assuming their outlets and taking over other to grow.

Question 20

Why can some methods of measuring size be unreliable?

Answer 20

They might not be relevant to the business.

For example, a business that uses mainly machinery cannot be judged by the number of employees

Question 21

How would a business grow internally?

Answer 21

Internal growth can be slow and involves creating more outlets and branching out the business.

Question 22

How is revenue calculated?

Answer 22

Sales x price

Question 22

What is the name of a business that has 25% of the market share?

Answer 22

Monopoly

Question 23

What is the name for more than one business that has over a 25% market share?

Answer 23

Oligopoly

Question 24

What are the advantages to large business?

Answer 24

• can afford specialist managers
• can access more sources of finance
• more likely to be able to afford better research and development for new products

Question 25

What are some disadvantages to a large business?

Answer 25

• suffers from divorce between ownership and control and cause conflicting objectives
• may be harder to manage (especially if geographically spread)
• potential higher costs for mass production