Business AS · Business and its environment. The idea in plain words, the rules to remember, the mistake to avoid and a worked example, written and checked by Mega Lecture.
There is no single best way to measure the size of a business. Number of employees, sales revenue, capital employed, market capitalisation and market share can each give a different ranking, so the right measure depends on the industry. Profit is not a measure of size.
Small firms matter: they create jobs, supply large firms, serve local and niche markets and can adapt quickly. Their weakness is higher unit costs and limited finance.
Firms grow internally (organic growth) by selling more of their own products, or externally by merger or takeover. External growth is quick, but it often fails because of culture clashes and diseconomies of scale.
Students mix up backward and forward vertical integration. Think of the chain from raw material to customer: backward is towards the raw material (the supplier), forward is towards the final customer.
Answer: Company B is larger, at $120 million against $100 million, although it has fewer shares.
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