Size and growth of business
Measuring the size of a business
- No single best measure — use more than one:
- number of employees,
- revenue (sales turnover),
- capital employed,
- market share (% of the whole market),
- market capitalisation (total share value, for a plc).
Practice
Which is a valid way to measure the size of a business?
Size is measured by employees, revenue, capital employed, market share or market capitalisation.
Business growth
- Internal (organic) growth — the firm grows itself: more sales, new branches, new products. Slower, lower risk.
- External growth — joining another firm (integration) via a merger or takeover:
- horizontal — same stage, same industry,
- vertical — different stage (forward = towards customer; backward = towards supplier),
- conglomerate — a different industry (spreads risk = diversification).
Practice
Internal (organic) growth happens when a business:
Internal growth is the firm expanding on its own; external growth joins with another firm.
Practice
Match each integration to its meaning.
Horizontal = same stage; vertical = different stage; conglomerate = different industry (diversification).
You've got it
Key idea
- measure size by employees, revenue, capital employed, market share, market capitalisation (use several)
- internal growth is slow + safe; external growth = merger/takeover (integration)
- integration: horizontal (same stage), vertical (different stage), conglomerate (different industry)