Growth of business (03)

Question 1

SUMMARY

Answer 1

In summary, the following are covered in this topic:
1. There are different methods to measure the size of a business, and some criteria
include labour force, capitalisation, market share and output.
2. SMEs are important to the economy as they provide employment, create variety
and choice for consumers, provide competition to large businesses and offer
specialised goods and services.
3. Benefits enjoyed by SMEs include being adaptable to the changing preferences of
consumers, and the ability to offer customised services.
4. Some challenges faced by SMEs include limited access to finance, and the exposure
to high risks due to external environmental changes.
5. Businesses can grow either organically or externally.
6. A business can grow organically by setting up more branches, factories and shops.
7. A business can grow externally through joint ventures, strategic alliances, and
mergers and takeovers.
8. Large businesses are important as they help the economy through higher
compensation packages and higher tax revenues.
9. Large businesses enjoy benefits such as being better able to conduct research and
development, hire specialist managers, and diversify and spread risks.
10. Large businesses face challenges such as management difficulties and slow
decision-making.
11. Economies of scale refers to cost savings as a result of business becoming larger,
and can be internal and external. The different economies of scale include
purchasing, technical, financial, marketing and managerial economies.
12. Diseconomies of scale are management problems that cause average costs to
increase even though scale of operations increased.
Examples of management problems include communication problems, workforce
alienation and poor coordination.