Unit 3 - Size and growth of a business

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  • Created on: 14-03-13 09:30
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The businesses vary in size, there are small businesses privately owned by one person (e.g. handyman)
and World-wide huge businesses (e.g. FedEx)
Stakeholders - Groups or people who have an interest in the performance and activity of a business.
Banks - give loans so they want to know if the business is going well.
Shareholders - their money might be increased or decreased
Businesses - competitions
Governments - taxes, the countries' employment etc.
To measure the size of a business
Output of goods and services
Sales value and revenue
Number of employees
Capital employed (the amount of money invested into the business by its owners)
+ Problems
Output of goods and services
If the product is more expensive, selling the same type of product makes different profits
Sales value and revenue
Some sell small number but high value, some sell large number but low value.
Number of employees
There are labour-intensive businesses and capital-intensive businesses.
Capital employed
If a business is not capital-intensive, then there's less capital employed.
Good way to measure efficiency, but not a good way to measure size.
Small firms survival
Support from the government
Concentrate on niche markets
Customised products (one-person work)
Better customer service
Growth of a business
Internal growth (organic growth) - expanding the company by itself SLOW
External growth - acquisition or takeover of other businesses FASTER

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Takeover is when one company buys the control of another.
Merger is when two companies join together by natural agreement to develop even more.
Horizontal merger is where two companies in the same stage of production join together. (Daimler
Vertical merger is where two companies in different stage of production join together. (Intel and
Backward vertical merger is mergers prior stage of production.
Forward vertical merger is mergers later stage of production.…read more

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Being close to other similar businesses
Having specialist
Technical - large businesses can afford expensive capital to develop production lines and equipment
can be operated for longer periods of time.
Managerial - Increased production is unlikely to have major effect on the managers and larger firms
can employ specialists and consultants who can improve the efficiency of the business.…read more


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