Grade 8B
Discuss whether a firm will always benefit from
an increase in its size.
Time Duration for submitting the Article is:
October 15th to October 20th, 2013
Write here your answer in 500 Words.
Write here your answer in 500 Words.
Entreprenuers often wants their firms to grow in size and increase the volume, value of their output. Producing more output means increasing the scale of production in a firm. The sze of firms can be measured by number of employees, organisation, capital employed and market share. The more the employees the bigger the firm is. Larger firms are often divided into different departments specializing in particular function, such as purchasing, sales and marketing. The size of an organisation can therefore be judged by how it is organised internally. Capital employed is money invested in productive asset in a firm that help it generate revenue. The more capital employed shows greater size of business. The market share of a firm measures the proportion of total sales revenue of te firm. Bigger firms have larger market share.
ReplyDeleteThere are 2 main ways for a firm to grow in size and expand the scale of production. First is internal growth it is also known as organic growth. Internal growth means a firm who is expanding the scale of production by purchasing equipment, buil new factories, hiring more labour. If a business ants to do this they need extra money like borrowing money from the bank, selling shares to investors or by selling other assets. The second way is called external growth, it involves one or more firms joining together to form larger enterprise. This is known as integration through merger and acquisition. Merger happens when the owner of one or more firms agree to join together to form a new enterprise. Acquisition happens when one company buys enough shares in the ownership so it can take full control, this may happen with or without the agreement of the owners of the company.
There are some benefits if a business expands in size:
1. Easier to earn funds
Usually big companies are trusted more by banks or financial institution to borrow money, they don’t need to undergo a difficult process to get the loans. Other than that big companies have some alternatives to get the funds such as issued obligation, selling shares.
2. Increased revenue
Big companies don’t need to do big promotion to sell a lot of their products, usually big companies already have brand image and public trust. If a consumer is finding a product they will find a product made by big companies. Examples are when consumer buys instant noodles they directly buy indomie, if they want to drink water they directly buy aqua this are the advantages of expanding in size.
3. Can decrease costs by making factories in low cost countries
Usually big companies have the chance to become international, so they can build factories in low cost countries. It means that they make factories in less expensive land, cheaper labour, affordable distribution way.
4. Big companies have the power to buy new technology
New technology can help a company produce more good, so that they produce in a more efficient and effective way. Sometimes new technology makes the quality of the product better and it minimizes the probability of failed products.
So in conclusion the benefits for the firm to expand in size are easier to earn funds, increased revenue, bigger market share that at the end points to the ability of the company to survive.
There is an impact when a firm is growing to a bigger size. It may be both positive and negative, however, it has always been every entrepreneur’s aspiration to increase the business that they built to its maximum size. Why? The reasons are either to attain more profit or seizing greater market share. Besides, when a firm is substantially big, they tend to control market price, meaning they are able to conduct monopoly. Another advantage they got from growing larger in size is that their brand name is more recognizable in other words they become more famous. As the business grows bigger, it has capability to accommodate bigger resources, attract and employ talented professionals and invest in state of the art technologies and infrastructures. There are two ways a business can grow in size, internal or externally. Internally or organically, means that they will expand the resources such as; branches, employees, machineries, factories, etc. On the other hand, when the business grows expand externally; they will conduct merger and acquisition. Merger is to attain partnership with another established firm, whilst acquisition is buying the shares/ ownership of the other company. Through merger and acquisition, the new combined companies may conquer larger network and market share.
ReplyDeleteHowever, there are also some disadvantages by having a large business. Some of them are:
1. Since the company is big, then it’s exposed and required by regulators to be more transparent hence competitors may easily emulate the business blueprint and process.
For example, Sour Sally frozen yoghurt. Initially, it was the only company that produces frozen yogurt in Indonesia. Once the company is successful, people realize that there is significantly high demand of frozen yoghurt and they try to replicate the business. Today consumers may enjoy many varieties of frozen yoghurt such as Red Mango, Tutti Frutti, Orange Berry, Smooch, and so on.
2. Large businesses are not easy to be controlled.
As you can see, the larger the business is, the more responsibility it carries. Big business possesses extensive networks and employs many workers. Due the complexity of business, a good corporate management is essential to control the company. They should also have reliable professionals and a system to ensure control is in place.
3. Bureaucracy
when we have a big company it’ll take some time to make an important decision since one decision can make a huge impact on the company. Hence when a decision is required, there are many layers of ranks and divisions in the companies to be consulted with. It may also involve various processes to be undergone such as fill in the forms, seeking approvals, meetings and presentations etc. On the contrary, small companies or even mom and pap’s companies are much faster in decision making due to thinner layer or bureaucracy they possessed.
4. Bigger cost
The bigger the company is then the bigger cost it requires. Large companies will definitely require bigger cost than a small company. The cost is necessary to employ more people, pay their salaries and fringe benefits, train more employees, buy more sophisticated system, post advertisements, retain lawyers, corporate legal, tax consultants etc.
5. Redundancy
ReplyDeleteIn a big company, many people are trying to keep track of everything that is going on inside the business, however, many people may perform similar task for different divisions in the same company. For instance; there is accountant in each divisions in the Bank whilst there will be another team of accountants in the Head Office which will review their work once again.
6. Lack of sense of loyalty from the employees
It’ll take some time for a person to be recognized in a big firms that already has system running systematically. It is also highly competitive to work in big firms since they are able to hire many talented resources. Hence it is a very tight competition and with numerous employees, they may not always able to see their CEO or management every day. Whilst on smaller companies, employees tend to have higher sense of loyalty due to smaller numbers of employees. Thus they may have a stronger bond between them or even with the employers.
To conclude it, there is always a positive and negative impacts in growing the firms in size. Although entrepreneurs are fully aware of it, most of them chose to grow it. Some chose to grow it up to maximum capacity, make it publicly listed whilst some chose to grow it to certain extent that the company remains private and the owner able to give legacy to his/her heirs.
Charlene 8B
When a firm decide to increase its size, there will be some advantages and disadvantages. a firm can decide whether to increase its size or no, but most of the firms want to increase their size because the owner want to have a bigger profit, but some firms are satisfied with the amount of money they earned without have to increase their size and remain small.
ReplyDeleteBy increasing its size, it means that the business is expanding its size by increasing the production. Theres 2 ways a firm can grow in size, internally and take over or merge:
1. Growing in size internally, means that the firm will increase its production scale, through the purchase of additional equipment, increasing the premises and hiring more labor. By doing this, the business needs money and to finance this the owner might have to borrow money from banks or sell their shares.
2. External or merging. It usually acquire through merger or take over. Merger is when owner of one or more firms agree to join, done by buying enough share to take over control.
In all industries, there are firms of different sizes of different sizes of growth. There are some ways to measure them:
1. The numbers of workers they employ. A business with less than 50 workers are considered as a small business. And the business with more workers is considered as a big business. A firm can employ both machines and human. A human worker need to be paid with wages but machines don’t need payment and only need to be replaced or upgrade once in a long period of time. But that doesn’t mean that firms with little workers but high capital is small, that means that the business is capital intensive.
2. The amount of capital employed, money invested in productive assets in firm, these assets are used to sell goods and services. However some firms are labor intensive, such as a cigarette, they don’t have a large amount of capital but theyre still classified as a big business.
3. Output or sales. Its useful to measure them so we can compare the volume of sales and the total value of revenue they earned per period of time to the other firms of the same industry.
4. Market share. It measures the total of sales revenue or turn over that’s attributable to the firms.
A business can grow too much while its trying to expand the size and scale of their production. Which will cost production problems, higher cost and lower profit. And most of the small business who failed to expand their business will be bankrupt and end up in a debt trap where the business have to pay unlimited debt.
And some firms remains small because the size of the market, access to the capital is limited where the owner don’t have enough money to invest more, more technology has reduced the scale production needed and the owners’ demand to remain small.
But by increasing its size, a firm will have more advantages when facing with their rival. The bigger the firm is, the bigger will be the firms’ influence over the market price. And its proofed that most business that survived the market share is the big business, so it means that the bigger the business is, the higher percentage that the business will survived. And the bigger the business is, it can famous and earned fame and a big profit.
A company or firm usually will aim for the biggest profit as possible and survive as long as possible, so they might keep increasing their firm size to gain bigger profit and bigger capital so that the firm could survive, but does this always true? For example, Lehman Brothers Holdings, they were once very big. They were the fourth largest investment bank in the US and owns 26,200 workers. It’s build at 1850 which means it’s very solid and trustable. But on the end, they’re bankrupt in 2008 because of divestment and independence. So we’re going to discuss whether a firm will always benefit from increasing its size.
ReplyDeleteFirst, increase in size gives them more profit because bigger firm means bigger capital which means bigger production which means bigger amount of profit earned with pretty much the same cost as before. Second , increase in firm size means that chances of bankruptcy is lower because firms have more capital by increasing its size, so that the firm will have enough amount to capital to survive.
Third, increase in size can also tell that big firms will employ more worker to increase production which also means that increase in size will have an increase in employee which helps people socially and decrease unemployment. Fourth, increase in firm size, when they employ more people the firm will give training to their worker so that they will be quite specialized it also helps people around because when the worker is fired or the worker resigned, he will still can get a job to support his or her family because He or she is quite expert in his job.
Fifth, bigger firms will do less cost for advertising and promoting their production because big firms have already brand and public trust. Because of public trusted the firm, people will still buy their product without them have to advertise their product to the public. Six, bigger firms will have less cost of production, it’s because big firms will have big amount of capital to build factory in an LEDC country. Ex: Nike in Indonesia. It’s because countries like Indonesia have best quality products and worker with quite cheap wages cost. Which creates better products with less cost.
But, increasing size of firm doesn’t mean that there’s only benefits for increasing firm size. There are also some disadvantages of increase in size of firms in the world. First problem is when firms grow too much, this happens when people couldn’t control their firms no more because the firm too big for them to take care of the firm no more. The other problem in increasing firm size is level of controlling and giving decision in harder because increase in more firms will involve more people, which means more people to discuss about the people’s firms decision which makes it harder to be controlled
Firm increase is quite beneficial for some people because majority people care more about profit than other, so in some cases increase in size will normally benefit more
PART I
ReplyDeleteA firm will always find any way that is beneficial for them. One of the ways is by increasing its business size. It means the firm will wider for its business range. It may form as increase of its production, sales, capital, and many other forms of wealth.
Mostly, a firm will get benefit if they increase in its business size. The main example is when a business open and developing many more branches. That case will give the firm many benefits, such as
1. Increase in its sales
By developing more branches, the firm can sell more goods. So, if they can sell more goods, it means they increase their sales and will get more money
2. Increase in popularity
By developing more branches, means the firm wider their business range and cause more people to know about the firm, e.g. Carrefour. They have successfully increase their popularity by opening many branches in most of the not elite and elite shopping mall. As the result, most of indonesian society know Carrefour as the super complete supermarket.
3. Gain more profit
There are two sub-factors that may give a firm possibility to gain more profit. The first is because of gain in sales, it can gain more profit because the rushed up of their sold goods. The second is because their shops range have been spreaded widely, people can easily access and go visit their stores and buy their goods.
4. Lower the cost of production (Part of increase in profit gaining)
By launching more branches, they can increase their sales. So they can take more supplies from producer and manufacturer(the supplier). They can make agreement with their supplier to reduce the cost of per unit by puchasing in a larger quantity of unit supplies.
5. Increase in Market Share
By increasing their sales and gain more popularity, the firm automatically will increase its market share value among other competitors in the market. For example Samsung Smartphones. They are one of the biggest market shares value holders in the Smarphone creator market. The only one its biggest and effective competitors is Apple, Inc. which has only bit lower market shares value that Samsung Smartphones’.
But opening more branches is not the only one biggest factor to increase a firm’s business size. Without having much branches or no any branches will also make a business increase its size, for example Google Inc., Coca Cola, Yahoo, Inc., Universal Studio, etc. But there also businesses that needs much branches and stores to increase their size, for example Indomaret, Carrefour, Hypermart, Electronics Solution, etc. The other ways to increase business size are,
-Increase its popularity by posting many more interesting advertisement through many form and sources
-Lower its production cost
-Increase and gain more business productivity and business capital.
But the most important thing to increase a business size is gain more profit, capital and its market share.
PART II
ReplyDeleteBut bigger the business size may not guarantee a business to be always get more benefits. It may cause inefficiency in business running process. Means they still have to pay for more direct and indirect cost for bigger size of the business, such as
-Pay for more employees, ex: Manager, Cashier, Salesperson, Waiter, Security, etc.
-Pay for more general requirements, e.g. Carrefour: the product shelles(to store the goods), computers for cashier, electricity, etc.
-Pay for more shops rental, ex: in the shopping mall, have to pay monthly certain shop rental payment.
But if the firm has run out of money or lack of capital, they have to borrow some money from the bank or else if not the firm will stop running the business. And if the firm have borrowed some money of the bank and can’t use the money well and cause unability to return the money with its interests, the firm will trapped to debt trap and cause business bankrupt and the business owner will gone to prison.
So if a firm bigger its business size, it has more chances to make more profit and gain bigger income and will gain many other beneficial things. But it also have a failing possibility, for example if they can’t afford the increase of expenses for accomplishing the development of increasing the business size. If the firm fails, many problems will come.
That's all of the ideas pop out from my brain, Thank You!
Well, firm is a business organization, such as corporations, Limited Liability Company or partnership. Firms are typically associated with business organizations that practice law, but the term can be used for a wide variety or business operations units. A business or a firm always want to get the maximum benefit that they can get or as a higher profit. But if they increase their size or we called as an expanding it brings benefits and disadvantages too.
ReplyDeleteWell how firms grow in size? There are 2 ways, first is internally or internal, I’m going to explain about internal. Expanding its production scale, through the purchase of additional equipment, increasing the premises and hiring more labor. To finance this the owner need to use the profits to borrow money from banks or sell their shares. While if external, means it’s commonly acquire through merger or take over. Merger is when owner of one or more firms agree to join, done by buying enough shares to take overall control. Usually they complement each other, example: Gillette with P&G.
The advantages of expanding the business or firms is more work can be completed since there are more workers to accomplish the goal, why? Because if we expand a business we need more workers so that it will be faster to completed the job. As a business grows it gains two major advantages over its smaller rivals. Large firms have more influence over market price. They’re big enough to be price setters. Price setters is a company that dictates the prices that buyers pay for products and services. Large firms also often enjoy economies of scale. Economics of scale are a major source of competitive advantage of larger firms. This means that business has lower unit costs because of its large size. They can buy raw materials cheaply in bulk and also spread the high cost of marketing campaigns and overheads across larger sales. For example, if a large firm can produce a given type of sunglasses for $20 while it cost its smaller rival an average of $30, then the larger firm has $10 per unit cost advantage. Larger firms can charge lower prices or enjoy a higher profit margin.
The disadvantage of expanding the business or firms is since that if the firms expand the business size they will have more workers that the advantages but the disadvantages is the business have to pay more in salaries. If we expand the business, of course we will buy many things to sell and if they have a bankrupt they will have a higher risk, and if they expands they business they also need many money to hire the labor buy the capital and other.
So overall the conclusion is when the firms increase the size it brings benefit to the business or the firms like example when they expand their business or firms they will have more workers and they goals will complete faster. But not always that the business will have a benefits or advantage , it also bring disadvantage like if they have more workers means they need to pay the salaries high. So the conclusion that the business or firms will have benefits or advantage when they increase the size but they also have the disadvantage.
When a business increasing it size , they will of course earn more benefit . they can increasing it by buying more capital , land , and hiring more labor or they can also increasing their size by buying more shares . all of them can making a benefit, but it will not always. Some of the didn’t successful and they even make some loss to the company.
ReplyDeleteSo when a business increasing their size , It can be divided into two, external and internal. All of them will always make a benefit. The example of the benefit are getting more profit , more famous ,and more output /sales .They can grow internally by : First , buying more capital . When a business buy more capital such as machine , of course they output/ sales will be bigger. This machine can make the business produce more and sell more. If they are selling more , they will get more profit and this is one of the example benefit in increasing their size. But as we know , capital can be divided into two which is capital expansion and capital deepening. Capital expansion means that we buy more machine but that machine can only produce a small amount of goods . Like example we buy 10 machine, but the machine can only produce 10 goods. Capital deepening means we just buy one machine , but that machine can produce 10 goods . This mean capital deepening will have a better quality. So in increasing capital , a business can choose this two kind of capital. Second , they can grow internally by buying more land . Land will be the place where process happening . So this is also very important . When a business buying more land , then they will of course producing more goods , but it must be supported by more labor and workers. More goods can make a bigger sales and this will of course make a profit. Third , they can increasing their number of workers. When a business have a lot of workers , of course their number of sales will be bigger. This workers will produce goods for the company which will be sell and business can get a profit from it. Not only by internal, but they can also do it externally. When a business increase their size by external , it means that they buy more shares. the bigger amount of shares a business owned , their profit will also become bigger. Like example , we buy a shares . we buy about 20% of the business B. When that business get a profit from selling their product, that profit must be divided to all the shares owners. We called this dividend. So , that why , if it’s a good business , their shares will be expensive. The most expensive shares now is Walmart. This is because Wal mart produce a lot of profit , that can attract other shares owner to buy the Walmart shares , so that they can get a higher profit. Not only high profit , but they can also become famous . People will known your business when you buy the shares of an expensive business such as Apple , Wal Mart , Samsung , etc . This all are the example of the benefit in increasing externally.
But , business will not always earn a profit . Some of them doing this but they are failed . They even make a loss and get bankrupt because of this. When a business increasing their size internally , it must be supported with a large amount of consumer or it will just become nothing. If a business producing their goods too much , but there are only a little amount of consumer , they can make a loss. Their product will not be sell all and it will become the business loss. Some of the business even get bankrupt because of this , or they will borrow money from bank to cover this loss. But it will be still the same because they still have to pay it back or they can get into a debt trap because of too much borrowing money .If a business grow externally , they can also get a loss. If they buy a business shares and suddenly they are fail , they will not earn profit , but they will get a loss. Like example we buy 10 % shares of the A company . This company was very good and making a lot of profit at that time. That’s why the shares is very expensive. We buy the 10% of it , but during the time , the company A failed and not making profit any more. We can sell the shares to another person , but of course the price will become cheaper and we will get a loss from this.
ReplyDeleteSo the conclusion is that when a business increasing their size , it wont be always profitable . Some of them even make a loss and don’t make a benefit at all.
A firm is a group of people that made and sells products to consumers. They do this in an aim of profit. The main goals of a firm is to make as much as profit as possible. This is related to an increase in firm size, as usually a firm gains more profit by having a larger firm size.
ReplyDeleteFirms do benefit in from an increase in size.
They benefit by having an increase in market share. Firms when they grow in size they have a larger portion of the market share. Having a larger market share means that the business can gain more profit and this is key to a business as having profit is the point of having a business. Having a larger market share and profit will give certain benefits such as
An increase in capital as the profit of a company grows so does its ability to hire more capital, this is crucial for a much larger companies as they need more workers and machinery and funds to keep up with their growing size. If they don’t hire more capital however, the company will be at a disadvantage as the company expands it cannot produce more goods and services for the whole company to actually gain profit.
Another way would be an easier way to outcompete rival companies. As a company grows in size they expand their market share, most of the time to another country making itself a MNC or multinational company, companies as an example are coca cola, Carrefour, and apple. Having a market share at another company brings more profit which means the company could outcompete its competitors temporarily. Though, companies do not want to completely outcompete each other as rivalry brings benefits to both companies by having more motivation. This increases productivity for both companies which could help increase the growth of the company even more.
Though, growth doesn’t always bring firm benefits. In certain cases they bring obstacles, troubles and challenges to the company.
When firms grow they usually have trouble trying to reduce the cost and increase the price of the products they’re selling while staying competitive in the market. If a firm reduces its cost of production to the point where the products actually decrease in quality, consumers will not be satisfied and that could ruin the firm. If they increase the price too much they could lose a part of the market share to other competitors which cheaper prices.
Sometimes they will encounter lack of capital. Despite the fact that when firms are larger they can hire more capital sometimes the newer products that they’re making needs even more capital than they can hire in a normal situation. Sometimes they have to have to borrow money and risk going into the debt trap.
To conclude what has been discussed, the point of this would be that a growth of firms is a very important thing that firms must do to increase market share and profitability, but growth also brings problems to the firm that should be solved.
A firm is a group of people that produce and sell products to consumer. A firm main objective is to grow to make as much profit as possible. To as much profit as possible, a firm can usually increase their profit by increasing the size of the firm.
ReplyDeleteSo firms benefits when they grow in size.
They benefit from increase of sales due to the increase of firm size. An increase in firm size can be the increase of labor they use or the capital they use to produce products . When there are more labor or capital used by a company to produce products, sales of the company will increase and also the revenue of the company will also increase due to the sales increase. When the revenue of a company increases, the profit will also increases.
Firms also benefit from the popularity they earn due to the increase of firm size. An increase in firm size can mean that the firm is building more branches. This widens their business range and more people can know about them and if they build a branch outside of the country an become an MNC ( multinational company), then other people outside the country can also know them. If a firm is more well known by people, it also will help increase profit.
When a firm grows in size , firm can also increase their revenue and popularity. When their revenue and popularity increase , it also automatically increase their market share value. When their market share value increase, it helps the firm to outcompete their competitors. This allows them to increase their revenue more and in the end there will also be more profit. Firm can also sell their shares and earn more money and since the value of their market share increases they can earn more money.
But, the increase in size of a firm don’t always bring benefit to the firm. They can also cause them troubles or challenges for them to overcome.
As you can see, the larger the company is , the bigger cost the firm requires. The firms need to pay for the employees, they need to train their employees, they also need to give them fringe benefits. Firms also need to take care of their premises and capital. They need to pay more taxes. They need to take care of their branches and the problems that their branches face.
When a firm grows large and is well known by people, people will also think if they build the same kind of firm that produce the same kind of product then they will also be successful. When this happens , the firm build more competition because they grow in size.
When firm grows , they will tend to produce more goods than usual. But if firms don’t see the size of their market , then it will be wasteful because if the quantity of goods increase and the market size is not as big as the quantity, the amount of product sold will be just as big as the market size or even less . This makes the remaining goods unsold and the company will receive less profit.
So, the growth of the size of firms is important to firms because it helps the firm to gain more profit. But it also gives the firm more challenges and troubles for the firm to overcome.
There are several ways to measure a business size. We can measure a business is big or not by identifying how much workers that they employ, how much capital that they employ, the volume or value of their output or sales. A firm is said big if they employ more than 50 workers. However some firms are capital intensive, employ relative few workers instead use machinery and computer to automate their production. The money invested to the business is considered as assets. This money is used to produce goods and services. Some firms are labor intensive so their production require lot of workers but relative little capital. Advantages of output of sales : Output of sales is useful to compare other firms in the same industries, it measures volume of sales, or the value of revenue they earn per period of time. Market share is used to proportion of total sales revenue or turnover that is attributable to the firms. So a firm will increase their business size because it will somehow bring profit for them. It bring profit to the firm such as : so the business owner know the size of rival firm they compete with, the investors will want to make good return on the savings they invest in different business, banks know whether the firm is big enough to take out a loan and make repayment. The another benefit is so the trade unions will know how many workers being employed, trade union is the organization of workers which protect the workers. There are another benefit of measuring the size of a business: so the consumer know the power firms have over price and the quality of goods, the government will set the taxes and to encourage small company to compete with the bigger company. A firm can grow their size internally and externally. Internal means to expand it’s production scale by purchasing additional equipment, increasing the premises, and hiring more labor. To finance this the owner will need to use their profits to borrow money from money or by selling their shares. External means that it’s commonly acquire through merger or take over. Merger is when owner of one or more firms agree to join, done by buying enough share to take overall control, usually they complement each other like pizza hut with domino’s pizza. A firm must becareful because a firm can grow to much. When they try to expand the size and scale of their production too much. This cost a problem, the higher cost and lower profit. Some firm will want to remain small if their business is already profitable, but some firms need to remain small because there is only small number of consumers willing to buy a product. A firm can also remain small because the new technology reduce the scale of production needed. But being a small firm have an advantage also. Because they are small the government will give a lower taxes for them because the government want to encourage them to grow their size so they can compete with a bigger company. So a firm will get benefit of increasing their business size if they don’t increase the size to big.
ReplyDeleteVincent CIA
8B
ReplyDeleteThe purpose of business organization is to find profit, to expand the company, to lower the cost, to fulfill the needs from shareholder (for go public company). Sometimes, the company tries to expand their business to make customers easier to get the company’s product. Usually, the company built new factory in areas that is not reachable. Company also gives promotions to the customers to introduce their products. The company did this to attract new customers that in the end will raise the sales of the company. The bigger the sales, so the bigger profit the company will earn. If the profit is bigger, the company is easier to expand their business or their company, especially in size of the company.
There are number of ways to measure and compare the size of the firm:
1. How many worker they employ.
2. How they are organized
3. How much capital thy employ
4. Their market share
There are 2 ways a firm can grow in size, and expand scale of production:
1. Internal growth, such as buying new equipment, make new factory
2. External growth, with merger, or acquisition
Bigger companies have trustworthy from the customer. Companies wanted this so that every product that is produced will get positive review from customers. Example: if coca cola introduces a new product, like coca cola zero, everyone will try and buy the new product. This will be different if a small company produces a similar product to coca cola zero. Maybe customers will not be interested or maybe isn’t attracted to try the product. So this example will show size of company will benefit the selling activity in that company. Other example is the Indofood Company. Indofood Company tries to expand their business by producing varieties of new product, such as Indomie, Pop Mie, snacks, herbs and spices. This strategy will make the company Indofood, to become bigger in size of the company. Indofood also owns factory in strategic places, so the distribution of the product will be easier and affordable.
Some company that owns bigger size of business usually can go internationally. By this, the profit of that company will be bigger, and also, the trust of the people towards the company, will rise. Especially to investors that wanted to invest their money. by that company by buying their shares. Bigger companies also rule brand image. So, company wouldn’t have a hard time to advertise their product. The capability of going international will make the company to choose to make factories in areas and country that cost a low cost, ex: Indonesia, Thailand, Vietnam, China, Bangladesh. So, if we buy products, we need to see where it was produced. Don’t consider yourself to buy the product where it was made in your own country with a higher price. The bigger companies also have the benefit to obtain capital funds(fund that are needed to expand the business). The way is: to issued shares, issued obligation, or to have bank loan, this things are only able to do by bigger companies that owns a good image in public eye, and also in banks.
New technology makes firms measurable bigger in size. Usually company that owns new technology is much more efficient and effective in their production work. A large firm may have more customers; sell into more market at home and overseas product that smaller business, so it can reduce the risk from no sales
So, in conclusion, the company will try to increase their company size to obtain: brand image, public’s trustworthy, easy ways to obtain capital fund, going international (to rule the international market),benefits to make factories in a low-cost country, to make many variety of product. So, a sale that is produce is getting bigger.
Celine Kusnadi 8B
Firms have some benefits when they increase their size of business. How to increase the size of a business ? First of all, there are four major ways how to measure the sizes of firms. In all industries, there are firms of different sizes of different stages of growth. Here are a few ways to measure them ; 1. How many workers they employ , 2. How much capital they employ , 3. The volume or value of their output or sales , 4. Their market share. (How many workers they employ) Less than 50 are considered as Small Firms , However somer firms are capital intensive,employ relative few workers instead use machinery and computer to automate their production . (How much capital they employ) Money invested in productive assets in a firm, these assets are used to sell goods and services , However some firms are labor intensive, which means their production process require lot workers but relative little capital. (The volume or value of their output or sales) Useful to compare other firms in the same industries , It measure volume of sales , Or the value of revenue they earn per period of time . (Their market share) Measure the prportion of total sales revenue or turnover that’s attributable to the firms , E.g. market share of Coca Cola and Pepsi Cola and the soft drink market. How firms grow in size ??? There are two ways . Which is ; internally and externally . (Internal) Expanding it’s production scale, through the purchase of additional equipment, increasing the premises, and hiring more labor . To finance this the owner will need to use the profits to borrow money from banks or sell their shares. (External) It’s commonly acquire through merger or take over . Merger is when owner of one or more firms agree to join, done by buying enough share to take overall control . Usully they complement each other . Business expansion has potential benefits and drawbacks. Some owners are reluctant to take the risk of growing business and option to stays small . As a business grows it gains two major advantages over its smaller rivals . Large firms have more influence over market price. They’re big enough to be price setters. Large firms also often enjoy economies of scale. This means that a business has lower unit costs because of its large size. They can buy raw materials cheaply in bulk and also spread the high cost of marketing campaigns and overheads across larger sales. For example, if a large firm can produce a given type of sunglasses for £20 while it costs its smaller rival an average of £30, then the larger firm has a £10 per unit cost advantage. Large firms can charge lower prices or enjoy a higher profit margin. Economics of scale are a major sourcer of competitive advantage for large firms.
ReplyDeleteSo, in conclusion , there are some methods of expansion . Internal (organic ) growth : the business grows by hiring more staff and equipment to increase its output . External growth : where a business merges with or takes over another organisation. Combining two firms increases the scale of operation. Franchising : where a business leases its idea to franchisees. This allows new branches to open across the country and internationally.
Thank You , Leonardo Steven 8B
Firm is an organization involved in the trade of goods, services, or both to consumers or to other businesses. Benefit in economics, increased wealth or ability to satisfy needs and wants with respect to production, distribution, and consumption of goods and services. An increase in size means make the firms grow bigger and it also can be categorized as increasing the number of production and selling and usually is profit. For every action have its own advantage and disadvantage, but sometimes it have more advantage than its disadvantage and sometimes it also can be bad for us because sometimes if it’s wrong, it can make more disadvantage than the advantage for us. We also can’t say that a firm will always benefit from increasing its size. There are some disadvantage too for increasing the firm’s size.
ReplyDeleteThe advantages of increasing the size of the firms are we can produce more so automatically we can sell more and we can get more profit, the other advantages is we can employ more employee so it will help the country to reduce the unemployment, the other advantage is if our company is big, so many people buy our products and our company will be famous, we also can help the country by the economic growth that caused by many people buy our products so there are more transaction, the other advantage that is very important for the others are we can give the fringe benefits to the others, such as repair the roads near our company, plant the trees, give the donation to the area that’s affected by the disaster, and give the public services.
But it is not always benefit for us, but we also can get the disadvantage for us, such as, it will take a lot of money to expand our business, we need more labor so it mean we also will spend more money than usual, expanding a firm also can be risky for us because if we produce a lot but no one want to buy our products, so our stock will be many and if no one still don’t want to buy our products, the products can be expired or it out of technology. The other risky problem that we can face is if we have too much stock, so the machine will not produce anymore and if the machine is not producing, it will make the company loss because we have buy the machines and if we don’t use the machine, the machine will be useless, and if we buy the machine by loan to the bank, we still need to pay the interest to the bank although the machine is not producing. But although it take a lot of money and risky we must also see the positive things that we get.
As the conclusion, expanding a firm can give us a lot of advantage for us and it is very good but beside it, we also can get many disadvantage that we can’t prevent, so the statement that said that expanding the size of the firm is always beneficial for us is not always true because we also can find some of the disadvantage that we can’t prevent.
Richard Sanders - 8B
A firm is a group/organization that uses resources to produce goods which are bought by the consumers to satisfy their wants and needs. A firm’s main objective is mainly to gain profit which is gain through selling products. A firm can also increase the size of their firm or market share.
ReplyDeleteWhen a firm increases their size, it does not mean that the firm will always gain benefit, there will be both positive and negative side effect.
In order to increase the size of a business, a firm must find another to merge with as a firm only can’t stand by itself and these days, if your business is not deemed successful, it would be a hard time to find another.
A big company would mean that there will be more than one owner and a decision would be hard to achieve, a person might disagree about something while another agrees, resulting the slow rate of reaching an agreement, slowing down the company.
Profit, earning a profit just for one person would be really beneficial rather than having to divide the profit to more than one person if you were to join with another company, which means that the profit earn to a person would be less then when your just a sole company.
But on the other hand, increasing the size of a firm could be a benefit of the firm.
Joining with another firm means that the access to capital would be higher rather than the capital of just one firm.
More innovative idea could also be thought up by two firms rather than just one firm and if the product is a success, it would increase the profit of both company.
To summarize up all that had been discussed above, increasing the size of a firm does not always mean success, there will also be a negative effect.
Grace – 8B
A firm is a group/organization that uses resources to produce goods which are bought by the consumers to satisfy their wants and needs. A firm’s main objective is mainly to gain profit which is gain through selling products. A firm can also increase the size of their firm or market share.
ReplyDeleteWhen a firm increases their size, it does not mean that the firm will always gain benefit, there will be both positive and negative side effect.
In order to increase the size of a business, a firm must find another to merge with as a firm only can’t stand by itself and these days, if your business is not deemed successful, it would be a hard time to find another.
A big company would mean that there will be more than one owner and a decision would be hard to achieve, a person might disagree about something while another agrees, resulting the slow rate of reaching an agreement, slowing down the company.
Profit, earning a profit just for one person would be really beneficial rather than having to divide the profit to more than one person if you were to join with another company, which means that the profit earn to a person would be less then when your just a sole company.
But on the other hand, increasing the size of a firm could be a benefit of the firm.
Joining with another firm means that the access to capital would be higher rather than the capital of just one firm.
More innovative idea could also be thought up by two firms rather than just one firm and if the product is a success, it would increase the profit of both company.
To summarize up all that had been discussed above, increasing the size of a firm does not always mean success, there will also be a negative effect.
Grace – 8B