Grade 8C
Discuss whether a firm will always benefit from an increase in its size.
Time Duration for submitting the Article is:
November 4th to November 11th, 2013
Write here your answer in 500 Words.
Write here your answer in 500 Words.
A firm is an organization that people make to produce money or to make profit. The smallest form of business is called sole trader. Sole trader is a form of business which is considered the owner itself. Because of that, the business have unlimited liability which means the owner’s assets are visible and can be taken if the business fails. When the business succeed, the owner of the business can choose whether to expand the business or not. If the owner chooses to expand, the business will grow to a partnership and can grow again to private limited company or public limited company someday. Partnership still have limited liability but it is divided among the owners of the business. However, private limited company or public limited company have limited liability. If the business fails, the creditor can take the business’ assets but they cannot take the shareholders’ assets.
ReplyDeleteExpanding the business have its benefit. The first benefit is having limited liability. When a business is still small such as sole trader and partnerships, they have unlimited liability. The owners have a big disadvantage because their assets are visible and can be taken by creditors. However, if a business is big, such as private limited company and public limited company, they will have limited liability which means the shareholders’ assets are not visible and cannot be taken by creditors. The second benefit of expanding business is making more profit. Expanding the business means the business will have more machines and labour. It make the output of the business increases. If the output increases, the profit of the business will also increases. The third benefit is becoming popular. If a business becomes big, the business will be popular and known by many people. However, not every business can be popular worldwide. Some firms that are known worldwide are Apple and Microsoft.
Expanding business can also give disadvantages to the owners. The first disadvantage is have to allocate more time on working. When the business expand, there will be more work for the owners that have to be done. If they cannot manage to finish their work, the business can fail. The second disadvantage is potential of conflict. If a business expands, there will be more owner/shareholders in the business. There is a potential that they have different ideas and can result in conflict between each other. The third disadvantage is they need to have permission from the government. If they don’t have an agreement with the government, their business will be forced to close.
The conclusion is expanding our business will not always give us benefit. When we expand the business, we will get benefits from it. However, there will be disadvantages too when expanding a business. The decision to expand the business or not is in the owner’s hand. If the owner is brave and confident enough, the owner will expand his business.
Expanding business may have the benefit and disadvantages to the firm. Many small business owners aspire to grow their business. While there are disadvantages to expansion, the advantages and benefits received from expanding a business may far outweigh to them.
ReplyDeleteThe benefits of business expansion are such as new personnel, it is the opportunity to staff the firm with new qualified people. Since people are often noticed as the most important asset of a company, acquiring new and talented personnel is an advantage to business expansion. These people can help essential processes, bringing fresh and new ideas to the organization.
Business expansion often has the advantage of exposing the business to wider audience. This increased crowds of potential customers which can dramatically improve sales, resulting an increase in profitability. Customers, like employees, are important in operating a successful company. When expansion is done properly, it can place the company in the forefront of many customers’ interests.
Successful business expansion can place the firm in a safe position when it comes to acquiring necessary financing. This financing can be a lifeline to the business during expansion process and a fallback after expansion has occurred. A company with increased market shares and a solid financial position can typically acquire financing with less problems or probably none at all.
Expansion of business may give the owner the opportunity to relocate the business, whether it be across town or across state or even internationally. Wise business owners should consider the advantages of such scenarios if relocation might be a possibility. Enhanced access to suppliers can also be an important factor when considering decisions.
Another advantage for business expansion is the considerations. This expansion can pose problems for companies especially those who are not ready for the challenges of growth. It is essential that the company, while expanding, view on the profitability level, not just from the sales of growth level. Since the point is to make it more profitable, business owners should review the return on investment from an expansion. In addition, there should be a rational reason for the expansion.
Rapid growth of a business often brings its own unintended consequences. Management also faces the challenge of recruiting employees who can handle expanded responsibilities, without any sacrifices of cost and quality controls in the business. Disadvantages of such are mentioned below.
Compromised quality due to too much growth in a business can lead to declining quality. This disadvantage is caused by the compromise of reputation for quality which then results in lower profits. However, the company responded by halting production of eight models that accounted for half its domestic profits.
As companies expand, training and hiring become increasingly crucial, because many employees’ skills do not grow with the organization. Failure to evaluate new hires properly increases employee turnover, while creating loyalty and moral issues.
The benefits and disadvantages of an increase in size of firms show that business owners should be wise and smart enough to think through all the advantages and possible consequences throughout the expansion of business. Whether the firm would still be able to make profit or vice versa. Therefore, firms will not always experience benefits yet disadvantages in the growth of larger business.
An increase in size of a company does not always create a benefit. However, there are some advantages that the company will experience.
ReplyDeleteAdvantages include, increase in market share and power. Once a company has increased their market share, it will give them a big advantage. They will be able to receive more customers who have a higher demand for their products. Due to the increase in customers and people buying their goods, therefore their revenue and profit.
Also, if they become more and more bigger in size, then their company might be popular globally. And if this continues, other firms, individuals, or organizations, might even buy their company which is another easier way to expand the business. Not only will the original company earn more money, but they will also gain popularity, power and etc.
Next stage, they might even be opened internationally. Or in other words, become a multinational company. That way they will earn profit maximization, sales maximization and capitalization. They will also earn more consumers globally, have more specialization and skills in their company.
Although there are advantages of increasing the company, there are also disadvantages as well.
Disadvantages include, people who may not handle big things. What i mean is, there are business owners that may handle or manage big companies because they will require high responsibilities. Also, due to having high responsibilities, which means there are many work that you have to do and manage, as a result, you will have less quality time with your personal life. This is a disadvantage because most business owners have families. And it would make them more stressed because they have to manage work and have quality time with their family.
Some business owners could not manage the time to do these. Therefore, there are some owners who doesn't mind if they have a small business as long as they are still earning profit and have the enough amount of money to have working and fixed capital.
Also, the bigger the company, the more workers you will have. It is hard to find the workers that have that specific specialization for your job. It will take time to find those workers. And what if you did not manage to find those workers? It will add nothing good but more stress to your work.
However, over-creasing too much may not be good. Business will have to increase their ruler, complexity, specialization, quality of the products by adding more utility and management systems.
In my conclusion, there are advantages of increasing the size of your company, such as increase in revenue, profit, consumers, popularity, capital (capitalization) and market share. But also, there are some disadvantages that commonly companies will face.