Size of business

Measurement of business size Significance of small businesses Internal growth

Measurement of business sizeLearning objectives

Identification of different ways to measure the size of a business

Measuring business size Methods (more useful when comparing firms in

same industry):1. Number of employees

Problem: highly automated firms

2. Sales turnover Problem: high-value production vs low-value

production

3. Capital employed – long-term investment Problem: Firms in different industries have very

different capital equipment needs

4. Market capitalisation = Problem: share price changes everyday

5. Market share = Problem: more than one way to measure this.

Other forms of measurement

Number of outlets Total floor sales space – supermarkets Number of guest rooms Number of students No best measure – depends on the need Good to compare on at least two criteria

Significance of small businessesLearning objectives

Be able to identify the advantages and disadvantages of being a small business

Know the strengths and weaknesses of family businesses

Understand the importance of small businesses and their role in the economy

Know the role of small businesses within the economy

Significance of small businesses

UK: Turnover less than £2m a year Assets less than £950,000 Employees less than 50

They are very important to all economies

Significance of small businesses

Create many jobs

Create new product ideas – greater choice for consumers

Compete with larger firms – eg. the cost of air travel has been reduced significantly due to small airlines

Possibility to grow into large companies – eg. The Body Shop, Hewlett-Packard, Tesco, Microsoft

Lower average costs allow small businesses to offer lower prices to the consumer

How do governments assist small businesses Reduced rate of income tax

Loan guarantee scheme

Providing information

Subsidised rent in some areas

What problems do small businesses have Lack of specialist management expertise Problems raising finance Limited product range Finding suitable and reasonably priced

premises

Student activity

You are setting up your own small business in Nanjing with some friends. Prepare a presentation for the rest of the class explaining

What your business is How you will integrate with other businesses in the

area (large and small) The advantages that you will have as a small

business The problems that you are likely to face How the government may help you

Family businesses

Internal growth

Learning objective

Know why and how a business might grow internally