The common method of measuring business/firms size:

  1. Capital Employed: This is the amount of money invested in productive assets (machinery, factories etc) that generate revenue. The more money a firm can invest in productive assets, the more it can produce. But production by some large firms is labour intensive. 
  2. Size of Workforce (number of employees): But some large firms are capital intensive and employ relatively few workers. 
  3. Total Sales/Revenue: The value of revenue is good indicator as to how big firms are and comparisons can be made between other firms in the same market by measuring market share. 
  4. Market Share: Large firms may dominate sales in the markets they supply. But not all markets are large. Firms serving small or niche markets will tend to remain small. 
  5. Total Share Capital (Total Equity): Many large firms are Public Limited Companies and an easy way to measure their size is to look at the total value of shares they have sold. But, some large firms still remain small. 
  6. Internal Organization: Large firms are dividend up into different departments each specializing in a particular function, such as purchasing, sales and marketing, finance and production. In smaller firms, the owners and employees all tend to carry out all these functions. 
Different ways business can grow: 

Internal growth 
It happens because: 
  • Increase the number of goods and to produce 
  • developing new products 
  • finding new markets 
External Growth 
There are 4 main types of integration: 
  • Horizontal Integration: Same firms and some sector of business activity. Example: two wheat farmers.
  • Forward Vertical Integration: Same firms but one is a customer of the other. Example: shoe manufacturer & cocoa powder) 
  • Backward Vertical Integration: Same forms but one is a supplier to the other. Example: a chocolate manufacturer and cocoa powder) 
  • Conglomerate Integration: Two business that completely in different industry. Example: Car manufacturer & truck manufacturer)
Factor Affecting Business Growth: 
  1. Owner's choice 
  2. Market size 
  3. Access and availability 
  4. Market domination 
Why Some Business Grow and Others Remain Small: 
  • Increase in profits, Increased sale usually increase revenue and if the business kept control of its cost during its growth, then this should also increase profits. 
  • Increase in market share, An increase in market share not also result from business growth. The growth in the value of a business's sales does not automatically increase its market share. 
  • Economic of scale, Business grows may benefit from reduced average cost as a result of economic of scale. 
  • Greater power to control the market, Large businesses in an industry have greater power to control market activities. 
  • Protection from the risk of takeover, Public Limited Companies are often at risk of takeover. 
Problems to Business Growth: 
  • Internal growth is usually slow 
  • When two different business activity stick together, some people will loose their works. They can bully the small company
  • If the business is too large, the product will be expensive 
  • Any two business that are brought together through integration are likely to have different ways of doing things 
  • There will be a loss of control 
Why Business Fail: 
  • Competition: There are business in the same thing as yours 
  • Economic influences: Business will not good if there is high tax and high interest rates
  • Poor planing: they want the perfect result but not prepared the detail perfectly 
  • Poor cash-flow management: Too much money to making the business
  • Poor management skills: They services is very bad to business. Example: the waitress is doing the bad service to the customer
  • Lack of Objectives: They don't care about the detail and the result is lack focus and direction
  • Lack of finance 
  • Poor choice of location: They choose the location at quite place, no crowded
  • Poor marketing: The business did unsatisfactory research and lack of knowledge on what customer needs
Four companies were failed in their business: 
  1. Bethlehem Steel 
  2. Pets.com 
  3. White Star Lines "TITANIC" 
  4. Atkins Nutritionals  
Some Common Reasons of Business Deterioration: 

Internal cause of Business Distress:
  • Inept management 
  • Poor mowing capital management 
  • High cost structure 
  • Uncontrolled hyper growth 
  • Poor marketing execution 
  • Fail post-acquisition integration 
  • Lack of financial policies 
  • Poor accounting or record keeping 
  • Lack of effective strategic management 
External reasons of Distress: 
  • Competition 
  • Inability to obtain sufficient working capital 
  • Change in marketing demands 
  • Shift in prices 
  • Technology changed
  • Labour issues 
  • Government policies 
  • Change in interest rates 
Source:
  1. Cambridge International AS and A Level Business Coursebook