Factors which explain why some businesses are bigger than others:
The term “economies of scale” means the fall in cost of production per unit. For example, a company like Reckitt & Colman hires taxis around the world to take key employees to meetings or to airports
With Capital employed some businesses are bigger than other because the small businesses have to pay a lot of fees to start a business. For example small businesses that compete with Dettol have to pay for the machinery, space and factory they use. So the dangers for a small business competing directly with a company like Reckitt and Colman are that it won’t survive.
The Size of the market matters when considering the size of a business, the bigger the market the bigger the business. For instance, Reckitt & Colman sells products which appeal to consumers in London, New York, Cape Town and Rio de Janeiro. This means the size of Reckitt & Colman’s market share is big - Global.
Flexibility matters when considering the size of a business because how flexible a company can maybe determine the profit or profit increase. For example, the company Reckitt and Colman found out those small shops in South Africa were reluctant to but Preen, a stain remover, in cases of 24. They had limited space in their shops and couldn’t sell 24 very quickly. So Reckitt & Colman repackaged Preen in cases of 12. The result was a 27% Increase in 1996 in sales to theses shops.
Entrepreneurship matters when considering the size of a business because measuring an entrepreneurship by the number of employees would not be fair unlike if it was a large business then that would be allowed.
Production methods also matters when considering the size of a business Manufacturing Furniture Polish or household cleaning products is suited to large scale production. So it makes sense for a manufacturer of theses products to be large. However, there are some industries where the method of production dictates small scale production. For instance, a high class restaurant can only serve a small number of customers if it is to maintain a high quality of food and service. Any craft business is likely to be small because of the individual nature of the work done.
Task 3
-
Mergers – When two businesses agree to join together, it is usually called mergers. Mergers tend to be of similar sized businesses.
-
Takeovers – When one business buys another business, it is usually called a takeover. The takeover may be an agreed takeover, where the business being bought is happy with the terms of the offer. For example, Tomkins bought Gates, a US manufacture of power transmission belts and hose and connectors, in 1996 for £745 million.
-
Acquisitions - Some acquisitions are takeovers. However, others occur when one business buys a part of another business buys a part of another business. For instance, in 1996, Tomkins bought the hose business of Nationwide Rubber Enterprises Pty limited for £0.8 million.
-
Joint Ventures – A business may join with other businesses to sell a product together.
Task 4
Tall organisation Chart – Chain of command
-
Chain of command – the path (or chain) down which orders (or commands) are passed. In a company, this goes from the board of directors down to shop floor worker.
-
Span of control – the number of people who report directly to another worker in a superior position.
-
Delayering – the removing of layers of management and workers in a hierarchy so that there are fewer workers in the chain of command.
-
Formal groups – a group created by an organisation to complete a specific task.
-
Informal groups – a group of people who join together outside the formal structure of an organisation.
All the key terms are linked because most of them are needed for a business
An Example Organisation Chart
Task 5
-
Product Based Organisation – This type of organisation also increases accountability. Intelek plc is organised into two product divisions, electronics and aerospace.
-
Functional Organisation – This type of organisation has two important advantages. It allows specialisation and the structure of the organisation is clear. Workers know who to turn to when they need a job done. A typical Interlek subsidiary is organised by function, i.e. into a number of departments such as production, marketing and personnel.
-
Geographical Organisation - Some large companies are organised on a regional basis. For instance, all the businesses in North America might be organised into a North American division.
-
Market based Organisation – Some businesses are organised on a market basis. For instance, a publisher might have a number of divisions, such as education and technical. Books will be produced by one division.
-
Centralised Organisation – Intelek, in part is a centralised organisation. This means that many decisions about the company are made at head office in Swindon.
Works Manager
Managing Director
Senior Production Engineer
Shop Floor Worker
Foreman
Ways businesses can grow
Acquisitions
Joint ventures
Group Managing Directors
Methods of Organisation
Market Based
Organisation
Centralisation
Organisation
Functional
Organisation
Geographical Organisation
Product Based Organisation
Mergers
Takeovers
H & V Division Projects Manager
Works Manager
Project/ sales Manager
- -
