IGCSE Business Studies

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Presentation transcript:

IGCSE Business Studies 1.3.4 Measuring Business Size i-study.co.uk

Firm Sizes Start-Up SME Established Multinational i-study.co.uk

Why measure business size? Government Trade Unions Banks Investors i-study.co.uk

How to measure business size We do not use profit as a measure for business size!! Employment Number of people employed Capital Employed/ Assets money invested in the productive assets of a firm Market Value The share price and stock valuation of a company Market Share proportion of revenue a company earns in an industry i-study.co.uk

Why measurements are inaccurate http://www.forbes.com/global2000/list/#header:profits_sortreverse:true Rank Employer Country 1 Walmart United States 2 Hon Hai Precision Industry (T.A. Foxconn) Taiwan 3 Sinopec China i-study.co.uk

Why measurements are inaccurate Number of people employed Labour intensive vs Capital intensive Output Volume vs Value Capital employed or Assets Labour intensive vs low asset needs Market Value Market Share small markets i-study.co.uk

Measuring Market Share This is done in the following way: Total sales of company x100 Total sales in Industry i-study.co.uk

Market Share vs Market Size Market Share is the proportion of revenue a company earns in an industry Market Size is the revenue earned by an entire industry i-study.co.uk

Market Share i-study.co.uk

Market Share i-study.co.uk

Why some firms remain small Small market May even be a niche market Increasing production may not lead to more profit Ease Owner may be happy with profits Scaling-up may be very difficult Lack of capital May be very expensive to scale up Might need access to new equipment i-study.co.uk

Why some firms grow To earn greater profits To gain more access from banks To benefit from economies of scale To diversify To make their shareholders happy To gain a competitive edge To get discounts from suppliers i-study.co.uk

How firms grow i-study.co.uk Internal Joint Stock / Public Company External (integration) Takeover Mergers i-study.co.uk

Integration i-study.co.uk

Benefits of Integration Horizontal Vertical Lateral / Conglomerate i-study.co.uk

Benefits of Integration Horizontal Vertical Lateral / Conglomerate Greater market share Has a supplier and consumer – spread profits Diversification if there is a recession Less competition Can refuse to sell or stock competitors Can share good practice Cheaper production (economies of scale) Can tailor products to suit retail needs i-study.co.uk

Problems with Growth i-study.co.uk

Growth Look at the problems associated with growth. Write a paragraph discussing how each of these problems could be overcome by a business. Think carefully about your answers. i-study.co.uk