Chapter 4 business size growth, and external growth Flashcards
Distinguish between small, medium and large enterprises
Micro
Employees -10
Turnover -2,000,000
Balance sheet total -2,000,000
Small
Employees -50
Turnover -10, million
Balance sheet total -10,000,000
Medium sized
Employees -250
Turnover -50,000,000
Balance sheet total -43 million
Explain how and why the size of a business is measured
Number of employees-A business with human and 50 employees is regarding is small and a business with more than 250 is large
Number of factories, shops, or offices
Turnover and profit levels
Stock market value
Capital employees -total value of a businesses assets
Evaluate the factors affecting the size of a business
Market size-Where the markets small it’s often dominated by relatively small businesses as larger firms do not think they can gain the economies of scale or the levels of sales to gain the design level of profits.
Nature of the product -if a product is large, the firm will usually be larger because of the resources necessary to make and upgrade it and also it can gain economy scale.
Personal preference -such as whether there’s enough time and trouble that will need to be devoted is worth it
Ability to access resources for expansion -
Evaluate the impact and importance of the size of a business to the stakeholders of a business
Owners
Small business -ownership is concentrated in the hands of a few individuals meaning they have more control over decision-making and can gain more of a close relationship with employees and customers, but the financial risk is higher as they may be personally liable for businesses debt and may struggle to raise external capital
Large business -ownership is spread across numerous shareholders. decisions are made by board of directors reducing the individual influence of owners, but there is greater financial stability and the potential for higher returns with less financial risk and they have better access to capital markets allowing them to raise funds easily.
Employees
Small businesses -they work more intimately and in collaborative environments where they have more direct contact with the owners and decision-makers there is more flexibility and taking on more responsibilities. Opportunities can be limited job security might be lower.
Large business -structured with defined, roles policies and benefits. There are clearer opportunities for progression and professional development, but the size of a business can sometimes create a sense of impersonality where employees feel less connected to the top of management
Suppliers
Small businesses -they have less purchasing power meaning they might pay higher prices for supplies or lack negotiation. Less reliable, making supplies more cautious.
Large businesses-they can negotiate better deals, secure book discounts and receive more favorable credit terms, but they can place pressure on supplies to meet demand for quality, delivery times and cost which can strain supplier relationships
Explain what is meant by a joint venture
It is a formal business arrangement between two or more businesses who commit to work together on a particular project where they both invest many time and effort. joint venture will often result in the creation of a new business to implement the venture, but the two companies forming to not have to be in the same country
Explain what is meant by a strategic alliance
Very similar to a joint venture, but it’s less involved less permanent. Each party hopes that the benefits from the alliance will be greater than those that could be obtained from operating on its own. there will not be a creation of a new company, and each party will maintain its own identity.
Evaluate the impact and importance of joint ventures to a business and its stakeholders
- Owners.
-Access to New markets
-Shared risks and resources
-Profit and loss sharing - Employees.
-Job opportunities and skilled development
-job security
-cultural integration - Customers.
-Access to better products and services
-Expanded reach - Community
-job creation
-Social responsibility
-Environmental and social risks
Evaluate the impact unimportance of a strategic alliance to a business and its stakeholders
- Owners.
-Access to Newmarket and resources
-Risk sharing
-cost efficiency - Employees.
-job security
-cultural integration challenges
-Job creation and skilled development - Customers
-Improve products and services
-Enhanced offerings
-Competitive advantage
Explain what is meant by the term stakeholder
A person or party with an interest in the success of a business
Identify the internal and external stakeholders of a business
Internal stakeholders are found within the business and are the owners employees, including managers and external stakeholders are suppliers, lenders customers, and the local community
Analyze the objectives of the stakeholders of a business
Owners
The owners will want the best possible return on the money that they have invested in the business and they are likely to want to see the business grow so that these returns in increase . A higher return is certainly likely to be a long run objective, but in the short run, a business may pursue the objective of growth via low prices hopefully, meaning it will capture more of the market and customers will stay loyal in the long term.
Employees
They want the highest wage they can get a bonus if possible, and job security . They want the business to offer more than the legal entitlement to holiday, sick pay, and so on. They want managers to organize their work so that it’s interesting challenging and provide job satisfaction. They also want to attend training courses to improve their skills, therefore their pay and promotion.
Customers
They want the best quality products at the lowest possible price . Also good customer service.. they may want credit facilities if the products expensive they are increasingly aware of ethical issues.
Suppliers
If a business sees his trading it suppliers lose a source of income so they would like to see its customers prosper so it has a regular profit . Hope their customers will grow larger, so it can increase its own sells to them.. they would like to be paid as promptly as possible.
Lenders
A bank wants the agreed amount owed to it to be paid at the agreed time they don’t want to receive less than expected .
Community
They are affected by business activity, so are interested in the costs of production . Businesses bring jobs and great spending power, but it can cause property prices to rise and crime levels to fall. People move in the area the authority may improve the roads making it easier for residents to drive around. but business activity can create external costs which aren’t paid by the business itself, but paid by society, pollution, congestion.
Government
It has an interest in the businesses success as if more people are employed. The government will pay out less social security, benefits, and receiving increased tax revenue from the business and its employees.
