Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Business Studies > Chapter 4- Business size, growth and external growth > Flashcards

Chapter 4- Business size, growth and external growth Flashcards

1
Q

What factors are taken into account when making a judgement about the size of a business?

A
  • Number of employees
  • Number of factories, shops or offices
  • Turnover and profit levels
  • Stock market value
  • Capital employed
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Number of employees

A
  • It would be expected that a large business will employ a large number of employees
  • May not be appropriate to judge by the number of employees as many factories are highly automated and capital-intensive so they produce a lot of output but don’t employ a large number of employees
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Number of factories, shops or offices

A
  • The higher the number of factories, shops or offices a business has the more it will be perceived as large
  • It also depends whether the business has them in other countries
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Turnover and profit levels

A
  • A high turnover is associated with a large business
  • It depends on the value of each product and how many of them are sold. E.g. a jeweller may only own one shop but has a high revenue due to the high value of the products sold
  • The higher the profit level, the larger the firm is likely to be but it may be inaccurate if there having temporary trading difficulties
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Turnover definition

A
  • Value of a businesses sales
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Stock market value

A
  • The higher the figure the larger the company is likely to be
  • A drawback of this is if the share price falls, the value of the company will be reduced
  • Not accurate as if this occurs measurement of size of the business has become smaller even though it has no impact on the number of factories, machines or employees
  • Method is misleading as share prices can change daily
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

How can the value of the company be calculated?

A
  • By multiplying the current share price by the number of shares issued
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Capital employed definition

A
  • The total value of a business’s assets (factories, machinery, offices)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Capital employed

A
  • If the figure is high, a business can be assumed as large
  • But stock market valuation, prices of factories (e.g.) can rise or fall without any changes in the actual number owned
  • Geographical location of assets also affects their value
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

EU definitions of size (chosen factors)

A
  • Number of employees
  • Turnover
  • Balance sheet total
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

EU definitions of business size (employees)

A

Micro- <10
Small- <50
Medium-sized- <250

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

EU definitions of business size (turnover €m)

A

Micro- <2 (equal to)
Small- <10 (equal to)
Medium-sized- <50 (equal to)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

EU definitions of business size (balance sheet total €m)

A

Micro- <2 (equal to)
Small- <10 (equal to)
Medium-sized- <43 (equal to)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is one of the objectives of the EU’s regulation of businesses?

A
  • That they are all operating on a level playing field
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What are the factors affecting the size of a business?

A
  • Market size
  • Nature of the product
  • Personal preference
  • Ability to access resources for expansion
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Market size

A
  • Where the market is small it is often dominated by relatively small businesses
  • This is because larger firms can’t gain economies of scale or level of sales to gain the desired level of profit
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Nature of the product

A
  • If a product is large and technologically complicated the firm will usually be larger because of the resources necessary to make and upgrade it
  • Where a product is highly standardised it is usually made by a large business since it can gain economies of scale from manufacturing it
  • A less standard product made and marketed with a personal touch will often be supplied by a smaller business
18
Q

Personal preference

A
  • An entrepreneur may not want to expand nationally or even regionally as they may not be ambitious
  • Opening a new factory/office could mean a loss of control over the business
  • There may be the consideration whether the time and trouble is worth it in terms of risk
19
Q

Ability to access resources for expansion

A
  • Are there funds available or not ?
  • Would it prevent firms from expanding ?
    E.g. credit crunch (reluctance to lend in the years following the 2008 crash)
20
Q

What are the reasons a business would want to grow?

A
  • Entrepreneur wants a greater challenge
  • Opportunity to gain unit cost reductions through economies of scale
  • Owners want a higher return on their investment
  • Stronger business is better placed to fight any economic or competitive threats successfully
21
Q

Advantages for employees in a large business

A
  • Greater job security
  • A large firm will have a specialist HR department which will ensure compliance with legislation
22
Q

Disadvantages for employees in a large business

A
  • Feeling remote from those who make the decisions that affect them
  • Problems of effective coordination and control that negatively impact upon the business’s operation and profitability
23
Q

Advantages for suppliers in a large business

A
  • Regular orders
  • Large orders
  • Security
24
Q

Disadvantages for suppliers in a large business

A
  • May be offered a ‘take it or leave it approach’ to conditions of supply and payment
  • Overdependance on a large customer can cause problems if the large firm decides to change supplier
25
Q

Advantages for local community in a large business

A
  • Creation of jobs
  • Local ‘multiplier effect’ boosts economic activity
26
Q

Disadvantages for local community in a large business

A
  • Large business may drive the existing local firms out of the market so reducing choice and variety
  • Possible negative externalities like pollution/congestion around the business
27
Q

Advantages for shareholders in a large business

A
  • Large firm may have some market power and so have a degree of control over prices- leading to higher profits, dividends and share prices
  • Large firms can gain managerial economies of scale to improve performance
28
Q

Disadvantages for shareholders in a large business

A
  • If managers make the wrong decisions they can have a significant effect on the business’s profits and therefore share price and dividends
29
Q

Advantages for customers in a large business

A
  • Business can be expected to treat customers well in order to maintain its image
  • Economies of scale lower costs and therefore prices
30
Q

Disadvantages for customers in a large business

A
  • Diseconomies of scale may raise costs which will be passed on in the form of higher prices
  • Customers might be swayed into buying products they don’t want through contact exposure to marketing
31
Q

Definition of organic growth?

A
  • Achieved by increasing the firms sales
  • It comes from selling more to existing customers, finding new customers or both
  • If a business continuously achieves high levels of organic growth it indicates its managers are taking the right actions and are using the businesses resources efficiently
32
Q

Definition of a merger

A
  • Type of business growth strategy
  • It’s where two companies join together to form a new larger business
33
Q

Definition of an acquisition

A
  • It’s where one company purchases another
  • A takeover involves acquiring control of another company by buying it’s shares
  • If the takeover is successful the target company will usually continue to exist as an independent legal entity controlled by the acquirer
34
Q

Example of a takeover

A

Pfizer made a takeover bid for the UK company Astrazeneca but didn’t succeed

35
Q

Joint venture definition

A
  • A formal business arrangement between 2 or more businesses who commit to work together on a particular project
  • Both parties invest money, time and effort in the project
36
Q

How is a joint venture different from a merger?

A
  • There is no change in ownership involved for either firm but mergers combine ownership
  • A joint venture may only be in existence for a particular project but a merger may be long term and permanent
37
Q

Example of a joint venture

A
  • virgin mobile India is a joint venture between tata teleservices and the virgin group
38
Q

Reasons to undertake a joint venture

A
  • The capital cost of a particular project might be very high and may be beyond the resources of a single business
  • A single business may consider the venture too much of a risk
  • Enables businesses to share strengths and increase their competitive advantage against others
  • A joint venture is an effective way of gaining access to markets or resources in another country
39
Q

What is a disadvantage of a joint venture?

A
  • You have to draw up a contract that specifies responsibilities and goals which may be expensive
40
Q

Strategic alliance definition

A
  • Alliance means ‘cooperation’
  • Typically less involved and less permanent than a joint venture
  • Each party hopes that the benefits from the alliance will be greater than those that could be obtained from operating on its own
  • There won’t be a creation of a new company and each party will maintain it’s own identity
41
Q

What are the factors that depend if the growth impacts a businesses stakeholders in a positive or negative manner?

A
  • Venture/ alliance could fail and the expected stakeholders benefits could fail to materialise
  • If one party is more powerful than the other it could demand conditions such as the division of profits
  • Terms of agreement and the wording of contract needs to be clear otherwise it will cause trouble

Business Studies (9 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions