Methods of measuring business size (5)
- Number of Employees - more
- Revenue - high sales
- Capital Employed - long term finance invested
- Market Share% - company sales/market sales x100
- Market Capitalization - total value of shares = current share price x total number of shares issued, only on plc
Advantages of owning a small business (7)
- Easy to control - easy to manage
- Adapt to changing demand - retain customers
- Profits can be high - overheads tend to be low.
- Strong relationship with customers - repeat sales.
- A small business may flourish in a niche - charge high prices.
- Better working atmosphere - employees know each other
- Choose to stay small
Disadvantages of owning a small business (7)
- Unable to take advantage of market growth - lose market
- Share to competitors.
- No economies of scale
- No diversity - more risk of failure
- Greater focus - motivate
- Less chance of specialization
- Less sales and awareness
Family owned business
A business that is owned and managed by at least two members of the same family
Advantages of Family owned business (3)
- Committed - longer hours lower rates
- Pass knowledge - maintain quality
- Give finance - less reliance on external , interest and control
Disadvantages of Family owned business’s (3)
- Newer gen incompetence - conflict and failure
- Less formal practice - inefficiency
- Tradition operation method - no innovation
Internal growth
Expansion of business by expanding through opening new branches shops or factories by reinvesting profits
Advantages of Internal growth (3)
- Economies of scale
- More awareness - more sales
- Retain control - takeover difficult
Disadvantages of Internal growth (3)
- Diseconomies of scale
- Reduce short term capital - buying fop
- Slow growth - difficult competition
External Growth
Expansion of a business by means to merge or takeover and other firms from either the same or a different industry
Horizontal Intergration
Intergration with a business in the same industry and same stage of production
Advantages of horizontal integration (3)
- Eliminates competitors - increase market share and power
- economies of scale - less cost of production
- Rationalize - concentrating production on one site
Disadvantages of Horizontal integration (3)
- Bad publicity- rationalize
- customer opposition - less choice
- monopoly investigation - gov intervention
Foward vertical integration
Intergration with a business in the same industry but with the retailer
Advantages of forward vertical integration (3)
- control promotion and prices
- eliminate competitor - increase sale and build brand name
- Adds to profit margin
Disadvantages of vertical Integration (2)
- lack in experience - inefficiency
- uncompetitive - bad brand image
Backward Vertical integration
Intergration with a business in the same industry but with the supplier
Advantages of backward vertical integration (3)
- control over quality, time and price
- joint research - better quality
- Control over supply - prevent competitors
Disadvantages of Backward vertical integration (2)
- lack experience - inefficiencies
- Not innovate - poor quality
Conglomerate Integration
Intergration with a business in a different industry
Advantages of conglomerate integration (2)
- diversify - spread risk
- attract new customers - more sales
Disadvantages of conglomerate integration (2)
- lack experience - inefficiencies
- Hard to maintain brand image
Strategic Alliance
agreement between two organizations to commit resources to achieving a specific objective while remaining Independant
