Size and growth of business
Introduced| English | Meaning |
|---|---|
| revenue/ˈrevənjuː/ | Income received by a business from selling goods or services before costs are deducted. |
| turnover/ˈtɜːnəʊvə/ | turnover |
| capital employed/ˈkæpɪtl emˈplɔɪd/ | The long-term funds used in a business, commonly measured as total assets minus current liabilities. |
| market share/ˈmɑːkɪt ʃeə/ | A business's sales as a proportion of total sales in its market, measured by value or volume. |
| inorganic growth/ˌɪnɔːˈɡænɪk ɡrəʊθ/ | inorganic growth |
| merger/ˈmɜːdʒə/ | The combination of two or more businesses into a single organisation. |
| takeover/ˈteɪkəʊvə/ | The acquisition of control of one business by another person or organisation. |
| economies of scale/ɪˈkɒnəmiz ɒv skeɪl/ | Falls in average production cost as the scale of output increases. |
| niche/niːʃ/ | A narrowly defined part of a market with particular customer needs. |
| diseconomies/ˌdɪsɪˈkɒnəmiz/ | Increases in average production cost associated with a larger scale of operation. |
| organic growth/ɔːˈɡænɪk ɡrəʊθ/ | Expansion through a business's own activities and resources rather than by acquiring or merging with another business. |
How big is big?
- Is a firm with 10 staff but huge revenue 营业收入 bigger than one with 200 staff? "Size" has several meanings.
- And once a firm exists, a central question is whether — and how — to grow.
Business case lab
Classify real decisions so the main business concept becomes concrete.
Which are ways to measure the size of a business? (Select all that apply.)
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Employees, revenue and capital employed are standard size measures.
Measuring size
- Common measures: number of employees, revenue (sales turnover 营业额), capital employed 所用资本, and market share 市场份额.
- Each can give a different ranking — so the "best" measure depends on the purpose.
Business activity moves from raw materials through manufacture to services
Growth by taking over another company is:
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Mergers and takeovers are inorganic (external) growth.
Opening new branches using retained profit is an example of:
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Expanding from within is organic growth.
Growth from within the business, without merging, is called ______ growth.
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Organic growth is internal; inorganic is by merger/takeover.
Organic vs inorganic growth 外延增长
- Organic (internal) growth: expanding from within — more outlets, new products. Slower but lower-risk.
- Inorganic (external) growth: mergers 合并 and takeovers 收购. Faster, but riskier and often expensive.
Integration joins firms: horizontal (same stage), vertical (supplier or customer), or conglomerate (unrelated)
Shops competing on a high street: the market a business operates in
A firm may choose to stay small to serve a specialist niche market.
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Niche focus, personal service and control are reasons to stay small.
Why grow — and why stay small?
- Grow: lower costs (economies of scale 规模经济), more market power, higher profit.
- Stay small: serve a niche 利基市场, keep personal service, retain control, avoid diseconomies 规模不经济.
Worked example. A restaurant chain can grow organically by opening new branches, or inorganically by buying a rival chain overnight — gaining its sites and customers at once, but taking on its debts and culture too.
You've got it
- size is measured by employees, revenue, capital employed or market share
- organic growth 有机增长 is internal and steady; inorganic growth is by merger/takeover
- firms grow for economies of scale and power, or stay small to serve a niche