How Business Size is worked out:
Business Size - the EU has a standardised way of measuring size based on the number of employees and turnover or balance sheet value
| Category | Employees | Turnover | Balance sheet total |
|---|---|---|---|
| Medium | < 250 | <€50m | <€43m |
| Small | < 50 | <€10m | <€10m |
| Micro | < 10 | <€2m | <€2m |
Factors that affect Business size:
Market size - If a market is small with a limited amount of customers there is less room for companies to grow in that market, which means there will be more smaller businesses than other markets.
Nature of the Product - If a product is technologically or monetarily hard to make than it's more likely for bigger companies to sell it. For example there aren't any small companies that make spaceships as it's a hard product to make compared to more basic products like phone cases.
Ability to access resources - There can be a lack of raw resources available to a company which caps the amount of a product they can produce. This can also include a lack of capital for expansion.
Personal Preference - A business owner may not want to expand their business for person reasons like not wanting the extra stress of having a larger company.
Effect of business size on stakeholders of a business:
| Stakeholder | Advantages | Disadvantages |
|---|---|---|
| Employees | -Greater job security -Could have higher pay -Could have a trade union if big enough which means better rights | -Feeling remote from decision makers -May be problems of coordination between employees |
| Suppliers | -Regular orders -Large orders -Security | -May be ‘bullied’ into a bad deal -Overdependence on one big firm can cause problems if business changes supplier |
| Local Community | -Creation of jobs -Boosts local economic activity -Community initiatives from large firms | -Possible pollution or congestion around location of business -Large business may drive local companies bankrupt |
| Shareholders | -Can have a lot higher profits which means larger dividends -Large firms can gain managerial economies of scale to improve performance | -Can be hard to save a large company if it's beginning to fail due to the size -Wrong decisions have a much larger impact |
| Customers | -Can be provided with more products -Economies of scales can mean lower prices for customers -Business has to treat customers better to maintain national image | -Diseconomies of scale might raise cost which means higher prices -If business point of contact is a call centre it can seem remote |