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MEASURING BUSINESS SIZE
Transcript of MEASURING BUSINESS SIZE
Goverment might wish to give assistance
to "small" firms, so we need a measure of
There are two problems whit requirements
for measuring business size
1) As there are several ways of measuring
business, a firm might appear large by one
measure but quite small by another.
2) There is no internationally agreed definition
of what a small, medium or large business is.
Different measures of size
1) Number of employees
2) Sales turn over
3) Capital employed
4) Market capitalisation
5) Market share
This is the simplest measure, it is used to believe that a firm with higher number of employees is bigger in size. But this is not true, some larger firms only need a few number of employees.
This are the total value of sales made by a business in a given time period. This is used to compare the size of diferent businesses.
This is the total value of all long-term finance invested in the business
This is the total value of a company´s issued shares. this can be calculated in this way:
current share price x total number of shares issued.
the market share are the sales of the business as a proportion of total market sales.
Which form of measurement is best?
There is no "best" measure. The one used depends on what needs to be established about the firms being compared. This depend on whether we are interested in absolute size or comparative size within one industry.
The significance of small and micro-businesses
It is easy to identify them within your own economy. They employ few people and they have a low turnover. It is common to make a further distinction for very small businesses known as "micro- enterprises".
Many jobs are created. It employs a very significant proportion of the working population in most countries.
New ideas for consumer goods and services run by dynamic entrepeneurs. This helps to create a variety in the market and consumers will benefit from greater choice.
Larger businesses competitors. Without this, larger firms could exploit consumers with high prices and poor service. The cost of air travel has been reduced in recent years due to this competition.
Supply specialists goods and services to important industries in a country. Very often for being able to adapt quickly to the changing needs of large firms, small businesses actually increase the competitiveness of the larger organisations.
The more small firms are encouraged to become established and expand, the greater the chances that an economy will benefit from large-scale organisations in the future.
Small firms may enjoy lower average costs than larger ones. This benefit the consumer too. Costs could be lower because wage rates paid to staff may not approach the salaries paid in large organisations.
These factors explain why nearly all governments are keen to encourage and assist business start-ups and existing small businesses.
Government assistance for small businesses used in many countries includes:
1- Reduced rate of profits tax, this allow a small company the chance to retain more profits in the business for expansion.
2- Loan guarantee scheme, this is a government funded scheme which guarantees the repayment of certain percentage of a bank loan should the business fail.
3- Information, advice and support will be provided through the Small Firms agency of the Department of Trade and Industry.
4- Very economically deprived areas, government finance the establishment of small workshops, rented to small firms at reasonable rents. Other aid is designed to help small firms overcome particular
that they frequently experience.
These problems are:
Lack of specialist management expertise.
Problems in raising both short.
Marketing risks from a limited product range.
Difficulty in finding suitable and reasonably priced premises.
Managed and controlled by the owner(s)
Personal service to customers.
Easier to know each worker.
Advantages of small businesses
Employ specialist professional managers.
Benefit from the cost reductions associated with large scale production.
Able to set low prices taht other firms have to follow.
Access to several different sources of finance.
Diversified in several markets and products so that risks are spread.
Able to afford research and development into new products and processes.
Advantages of large businesses
Limited access to sources of finance.
Owner/s has/have to carry a large burden of responsability.
May not be diversified, so there are greater risks of negative impact of external change.
Disadvantages of small businesses
Difficult to manage.
Slow decision making and poor communication due to the structure of the large organisation.
Divorce between ownership and control.
Disadvantages of large businesses
The owners of many businesses do not want the firm to remain small, although some do.
Why do other businesses owners and directors companies seek growth for their business?
Increased market share. This will give a business higher market profile and retailers.
Increased economies of scale
Increased power and status of the owners and directors.
Reduce risk of being a takeover target
Expansion of a business by means of opening new branches, shops or factories.
This growth can be quite slow. However, it can avoid problems of excessively fast growth, which tends to lead to inadequate capital (overtrading), and management problems associated with bringing two businesses together that often have different attitudes and cultures.
Dattoli Rey Sol
Poyo Gumiela Eugenia
Perez Caporossi Nazarena