Size of Firms: From small business to multi-national firm Size of Firms: From small business to multi-national firm (1) Definition (2) Characteristics (3) Reasons for survival & failure (4) Contribution & economic roles (1) Definition (2) Characteristics Small BusinessMulti-national Firms

(1) Sales (2) Capital - indicates the amount of investment (3) Profit (4) Market capitalization - for listed limited company (5) No. of employee - cannot be used to compare the size of organizations in different industries

(I)Small Business A) Definition an independent organization which employing fewer than 50 people B) Characteristics

C) Reasons for survival & failure SWOT Analysis þ to assess the firm’s external and internal environments to identify Strengths(S), Weaknesses(W), Opportunities(O) and Threats(T) Strengths internal factors to enhance performance Opportunities external factors which favor organization Threats external factors which are the disadvantages of the organization Weaknesses internal factors which inhibit performance

SWOT Analysis on Running Small Business Strengths higher flexibility in operation better employment relationship good clientele creates loyal customers Higher motivation to work innovation creates more business Weaknesses poor internal management lack of capital difficult to attract good staff Opportunities direct financial support information, advice and assistance Threats keen competition lack of government support

ú small firms back up the capacity of large firms D) Contribution of small business ú many innovations are made by small firms ú small firms are the main source of supply of raw materials and parts to large firms ú products produced by large firms are distributed through small firms ú small firms promote free competition

Growth of Business 1) Internal Growth occurs when a firm reinvest its profits into the business small business profit buy asset large firm

1) External Growth: Integration occurs when a firm takes over or merges with other firm þ take-over Parent company Subsidiary Through buying all/majority of shares of another firm which become the subsidiary þ merger Company A Company B Company C Company D new firm

3 Types of Integration (a) Vertical Integration occurs when firms in the same industry but at different production stages merge together Forward Vertical Integration (a producers merges with/take over a firm that is involved in the distribution channel) Backward Vertical Integration (when B merge with/take over supplier A) B (Distributor) A (Producer) merge with/ take-over B A (Supplier) merge with/ take-over

3 Types of Integration (b) Horizontal Integration occurs when firms in the same industry merge together that result in a larger scale of production AB merge with/ take-over Fast Food Chain A (e.g. Pizza H) Fast Food Chain B (e.g. Domina)

(c) Conglomerate Integration a merger of unrelated firms Industry AIndustry B Firm X Firm Y merge with Motives behind Integration

(I)Multinational Corporations (MNCs) A) Definition firms that have extensive involvement in international business B) Characteristics operations and investments are spread over several countries central strategies are formulated by the headquarters subjects to different business environment workforce is comprised of many different nationalities

C) Benefits from and criticisms of MNCs Benefits à generate income from overseas à provide employment opportunities à bring in capital à transfer technology à bring in more products à stabilize international relationships Criticisms V export jobs to foreign countries V intensify competition V engage in many unethical practices V emphasize profits with little social concern V cause environment problems

Internal Factors Business nature Amount of capital Personnel Problems Business experience of the owner Networking Government regulation Competition Selection of location Economic environment Supply of labor External Factors Internal Factors and External Factors