Business Studies - Section Six - The Business Organisation

Effects of Expansion on Stakeholders

  • Shareholders - Shareholders are likely to benefit from any increased profit that expansion brings. However, they might be asked to buy more shares and invest more money to help the business expand in the first place. 
  • Employees - Employees should benefit from greater job security as larger businesses are less likely to fail than small firms. On the other hand large firms tend to be more hierarchical, so employees may feel less involved in the running of the business.
  • Suppliers - Suppliers should benefit from increased sales as a larger firm needs to buy more supplies. However, they will be in a weaker position when negotiating prices as more of their competitors will be keen to supply the large firm.
  • Local community - Any negative impact the business causes locally, such as noise pollution or traffic congestion, is likely to be made worse as the business expands. However, it may make larger profits and be able to invest on the community,create jobs.
  • Customers - Customers will benefit if the larger firm passes on any economies of scale in the form of lower prices. But the larger firm may have fewer competitors and so be able to charge higher prices. On their owen, individual customers are often powerless.

Business Ownership Structures

  • Private limited companies can only sell new shares if all of the current shareholders agree. A public limited company is formed when a private limited company is 'floated' on the stock market, allowing any member of the public to buy shares in the company
  • Pros to becoming a plc - 1) Still retain the main advantage of all limited companies - having limited liability 2) Can raise much more capital as a plc by selling shares through a stock exchange (since there are more potential buyers)
  • Cons to becoming a plc - 1) Shareholders own the company, but…


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