Topic B - Business Size and Structure - OCR

IFY B U S I N E SS STUDIES TOPIC B B U S I N E SS S I Z E AND STRUCTURE Lorraine Briegel- Jones l.briegeljones@intogloba l.com  LEARNING OBJECTIVES 1. E x p l a i n t h e d i ff e r e n c e s b e t w e e n public sector and private sector organisations B1 2. E x p l a i n t h e d i ff e...

IFY B U S I N E SS STUDIES TOPIC B B U S I N E SS S I Z E AND STRUCTURE Lorraine Briegel- Jones l.briegeljones@intogloba l.com  LEARNING OBJECTIVES 1. E x p l a i n t h e d i ff e r e n c e s b e t w e e n public sector and private sector organisations B1 2. E x p l a i n t h e d i ff e r e n t w a y s o f measuring the size of private sector businesses B2  Watch the video Private about the differences between the public sector and private sector. Make notes under the v following headings - Ownership public Financing sector Objective Private sector v public sector https://youtu.be/NJY6P7t-yD0?featur Private Ownership sector Private sector v organisations are owned by public individuals. Public sector sector organisations are owned by the government. Private Financing sector Private sector organisations are v financed by private money, investors public and loans. Public sector sector organisations are financed with money collected from taxes. Private Objectives sector Private sector v organisations are driven by profit. public Public sector sector organisations provide goods and services for the benefit of the P R I VAT E O R PUBLIC? P R I VAT E O R PUBLIC? P R I VAT E O R PUBLIC? P R I VAT E O R PUBLIC? P R I VAT E O R PUBLIC?  Can you think of any more examples? P R I VAT E O R PUBLIC? Add three more organisations to each list MEASURING THE SIZE O F P R I VAT E SECTOR BUSINESSES  THERE ARE SEVERAL W AY S T O MEASURE B U S I N E SS SIZE. W H AT ARE THEY?  Number of employees MEASURING THE SIZE O F P R I VAT E SECTOR BUSINESSES Supermarket Employees Capital Revenue (£m) employed (£m) W 300 150 250 X 800 500 1200 Y 1200 700 1000 Z 1500 400 400 NUMBER OF M E A S U R I N G S I Z E O F T H E P R I V A T E EMPLOYEES S E C T O R B U S I N E S S E S  Number of employees Easiest of all the methods to calculate Businesses which are labour-intensive can measure their size by the number of employees working for them. However capital-intensive businesses may not have many employees but may be large by other measures. MEASURING THE SIZE Small businesses are argued to have O F P R I VAT E fewer than 50 employees. Large businesses have more than 250 SECTOR employees. BUSINESSES  Measure revenue Revenue (income) can be measured using the annual sales turnover of the business. Revenue = price per unit x number of units sold Company A sold 40,000 units @ £3.00 per unit. MEASURING THE SIZE Company B sold 60,000 units @ £1.50 O F P R I VAT E per unit. SECTOR Which company is bigger? BUSINESSES Supermarket Employees Capital Revenue (£m) employed (£m) W 300 150 250 X 800 500 1200 Y 1200 700 1000 Z 1500 400 400 M E A S U R I N G T H E MEASURE REVENUE S I Z E O F S E C T O R P R I V A T E B U S I N E S S E S  Measure capital employed Capital Employed is the total funds that are invested in a business (after the long term loans have been deducted). It is the total amount of money (capital) MEASURING working (employed) in the business. It is all THE SIZE the money the company ‘owns’ less long O F P R I VAT E term (over 1 year) loans. SECTOR BUSINESSES Supermarket Employees Capital Revenue (£m) employed (£m) W 300 150 250 X 800 500 1200 Y 1200 700 1000 Z 1500 400 400 M E A S U R I N G T H E C A P I TA L E M P LOY E D S I Z E O F S E C T O R P R I V A T E B U S I N E S S E S Examples of comparison of business size by capital employed Company A has secured Company B has investment investment from selling of £13,000, retained profits of £7,000 and has sold shares of £50,000 but shares worth £45,000. They they also have a long also have a long-term loan term bank loan of to the bank totaling £12,000 £30,000 Which company is bigger? What are your conclusions so far about measuring the size of a business? There is no standard way of measuring the size of the business. A number of factors need to be taken into account when making a judgement about the size  Measure market share This measures the proportion of the market held by a product or a business. It is calculated how…? Can you use profits instead of MEASURING turnover? THE SIZE O F P R I VAT E SECTOR BUSINESSES MARKET SHARE Company sales (revenue) x 100 Total market sales (revenue) QUESTION The UK grocery market was worth £128 billion in 2007. Tesco, Asda and Sainsbury were the top three companies with combined sales of £82.4 billion. Tesco’s sales were £40 billion and Asda’s sales £21.5 billion. Calculate the market share for Tesco in 2007. ANSWER 40/128 × 100 = 31.25% QUESTION The UK grocery market was worth £128 billion in 2007. Tesco, Asda and Sainsbury were the top three companies with combined sales of £82.4 billion. Tesco’s sales were £40 billion and Asda’s sales £21.5 billion. Calculate the market share for Asda in 2007. ANSWER £21.5/128 × 100 = 16.8% QUESTION The UK grocery market was worth £128 billion in 2007. Tesco, Asda and Sainsbury were the top three companies with combined sales of £82.4 billion. Tesco’s sales were £40 billion and Asda’s sales £21.5 billion. Calculate the market share for Sainsbury in 2007. (2 marks) ANSWER £82.4B – (£40B + £21.5B) = £20.9 billion 20.9/128 x 100 = 16.3% Blackberry Ltd has sales of £0.6M. The market is worth £12M. Calculate the market share of Blackberry Ltd. (3 marks) Answer £0.6M× 100 = 5% £12M A seaside town has three fish and chip shops/cafes; F&C with annual sales of £156 000, The Chippie with annual sales of £240 000 and Carla’s Cafe with annual sales of £104 000. Calculate the market share of The Chippie. M A R K E T C A P I TA L I S AT I O N Only applies to Public Limited Companies (PLCs), (name three!) whose shares are traded on Stock markets. This is the total value of all the shares added together. Current value of shares x number of shares issued Market Capitalisation is simply the total share value Which form of measurement is best? Which Form of Measurement is Best?  There is no ‘best’ measure. The one used depends on what needs to be established about the firms being compared.  The measure chosen may give a different interpretation for the same business.  A business might employ only a few people, especially if it is a high-tech business, but it could have a very high revenue from sales.  Using number of employees, the business might be described as small, but using revenue earned, it might be described as large. NOTE: Profit is not a good measure of business size – but it Problems with measuring size In practice, measuring the size of a business may not be easy. A highly automated chemical plant may only employ 45 people, but have a turnover of £40 million - According to the number of employees, the European Union (EU) would class it as a small business. However, according to the level of turnover it could be classed as a large business. Which is larger? Apple or Samsung?  APPLE SAMSUNG No of employees (2023) 164,000 266,000 Revenue (2023) $394,000 billion $244,000 billion Market Share (smartphones) (2023) 18% 23% Capital employed (2023) $2.09 billion Market capitalisation $2.75 trillion $400-500 billion Question A4 Which of the following is not a method of measuring the size of a business? A. capital expenditure B. market capitalisation C. capital employed D. market share ANY QUESTIONS? W H AT ' S T H E M O S T I M P O RTA N T T H I N G YO U L E A R N E D T O DAY ? F I N A L LY ….. This Power Point can be found on the VLE in the folder 'Lorraine Briegel- Jones' – filed under Topic B. For next lesson - Watch Topic B – pre-recorded videos Make notes Prepare questions