Enterprise, businesses
growth and size
Why and how governments
support business start-ups
• Small business are important to most economies throughout the world. In UK for example, in 2012
• 4.8 million businesses
• More than 99% of these businesses were small ore medium-sized businesses, employing fewer than 250
people
• 4.6 million micro-businesses(96% of all businesses), employing fewer than ten people
Governments are keen to encourage new start-up business
because of the benefits they bring to the economy. These
benefits include
Job creation
• Small firms may not individually employ many workers
• Employ a very large percentage of the working population
•
Entrepreneurs – who start up new businesses
bring ideas for goods and services
• Increase variety of products available
• To create a greater consumer choice in the
market
•
•
The more businesses there are in the
marketplace, the greater the competition
Competition usually results in lower prices
and better quality of goods and services
• Small businesses: provide specialist goods and services to
consumers which larger businesses are less interested in
supplying because they are only interested in mass
marketing
• provide goods and services needed by the larger firms in the
industry, for example a small firms that produces electronic
components used by large computer manufacturers
Start-up businesses: begin life as a small
business, but some will grow and become the
larger businesses of the future
Country: benefit from the advantages larger
businesses bring to the economy
Some start-up and smaller businesses
often have much lower costs than larger
businesses and can pass this on to the
consumer through lower prices
Government: provide financial and other support
new business start-ups
Most common types of government support include:
• Grants and interest-free or low-interest loans
• Lower taxation rates on profits in the early years
• Rent-free premises for a certain period of time
• Free or subsidised training schemes for employees
• Information, advice and support from specialist agencies
Key Term
• Business start up: a newly
formed business. They
usually start small, but some
might grow to become much
bigger
Measuring business size
•Capital employed
•Value of output
•Number of employees
•Market share
Capital employed
• Value of all long-term finance invested in a business
• Used to buy the things that a business needs before it can
produce goods and services
• For example: factory/office buildings, machinery and
inventory-these are known as assets
• Small business will invest less capital than a large business
in the same industry- for example, a small baker will only
need one shop, one food mixer one oven and a small
inventory of raw materials
• A large bread manufacturer will need production lines,
industrial mixers, large ovens and a large inventory of raw
materials
Value of output
• The amount businesses earn from selling their
products is often used to compare the size of
businesses in the same industry
• A small business will have much lower revenueearnings from sales-than a larger business
For example: a small general store will have
fewer customers than a large supermarket and
therefore, much lower sales and revenue.
The larger the market a business serves, the
more revenue the business is likely to earn
Number of employees
• Large businesses need to produce a much greater
output or provide their services to a much larger
market than smaller businesses. They will also have
more departments and managers
• Larger businesses usually employ many more
employees than smaller businesses in the same
industry, for example a local general store and a
large national supermarket
Market share
The larger the share of the total
market, the larger the business
Market Share%
Firm A
Firm B
Firm C
10
60
6
500
500
850
Firm B is larger than Firm A because its market share is six times
bigger
However , can we describe Firm B as a large business? The answer is
yes if we use market share as a measure. However, does this mean
that Firm C with a market share of just 6% is a small business? The
answer lies not in the market share of each business, but in the
value of each firm’s share of the market:
So, if we work out Firm B’s share of the market:
60% of 500000= $300000
And Firm C’s share of the market:
6% of $850000= $ 510000
We can see that the value of Firm C’s market share is much higher
than the value of Firm B’s market share. Therefore, Firm C is larger
than Firm B
End