Unit 3: size of business
1. Explain why any one stakeholder group might want to compare the size of one
business with another.
Investors: To assess risk and reward. Larger firms are usually more stable; smaller firms
offer higher growth potential.
2. Explain one reason why capital employed might not be the appropriate way to
compare the size of two businesses.
Industry differences: A car factory is capital-intensive (high value), while a consultancy is
labour-intensive (low capital), even if they earn the same profit.
3. Explain one reason why comparing the size of two businesses by the number of
employees might give a misleading picture.
Automation: A firm with robots needs fewer workers but can have a much higher output
than a firm with many manual workers.
4. Explain one way in which the market capitalisation measure of business size will be
affected by a stock exchange crash.
Share price drop: Since Market Cap = Share Price * Number of Shares, a crash instantly
lowers the "paper value" of the company.
5. Analyse one effect on business stakeholders of horizontal integration.
Customers: Negative effect due to less competition. This often leads to higher prices and
fewer choices in the market.
6. Analyse one effect on business stakeholders of forward vertical integration.
Employees: Increased job security. The business now controls its own shops/outlets,
ensuring a guaranteed path to the customer.
7. Analyse one potential strength for the business if the owner, who is retiring,
encourages their children to continue owning and managing the business.
Continuity: It preserves the corporate culture and long-term vision without the disruption of
new outside management.
8. Analyse one benefit to your country's economy that would result from the growth of
the number of small firms.
Job creation: Small businesses are the primary source of new employment and increase
economic diversity/innovation.
, 9. Analyse one problem for a business of it being small.
No Economies of Scale: Small firms cannot buy in bulk, leading to higher unit costs
compared to large competitors.
10.Explain to a manager one difference between organic and external growth.
Speed: Organic (internal) growth is slow and natural; External growth (mergers/takeovers) is
rapid and immediate
11.A fast-food business wants to expand using retained earnings to purchase more
cafés. Analyse one advantage to the business from this form of growth.
Cheaper financing: No interest payments to banks and no loss of control to new
shareholders.
Ch 4: Business objectives
1. Explain one purpose of a mission statement
It provides clear guidance and a sense of direction for employees, ensuring everyone works
toward the same core values.
2. Explain one practical limitation of mission statements.
They are often too vague or general, which makes them difficult to apply to specific,
day-to-day tactical decisions.
3. Analyse how the objective of 'increasing shareholder value' might conflict with
corporate social responsibility (CSR).
CSR initiatives (like fair wages or emission cuts) increase operating costs, which can
lower the short-term profits and dividends paid to shareholders.
4. Explain one reason why the objective of a private-sector business might be different
to the objective of a public-sector business.
Private firms focus on profit maximisation, while public-sector organisations prioritise
service delivery and social welfare for the community.
5. Define the term 'SMART objectives'.
Objectives that are Specific, Measurable, Achievable, Realistic, and Time-bound to
ensure goals are clear and trackable.
, 6. Analyse the 'triple bottom line' concept when applied to social enterprises.
Success is measured by Profit, People, and Planet, meaning the business tracks financial,
social, and environmental impact equally.
7. Explain one reason why the objectives of a business might have to change over time.
Economic changes like a recession may force a business to switch its objective from
aggressive growth to simple survival.
8. Analyse one benefit to a business of having SMART objectives.
They provide clear targets, which improves staff motivation and makes it easier for
managers to measure and control actual performance.
9. Explain one way in which ethics can influence business activities.
Ethics dictate supply chain choices, such as refusing to buy from suppliers who use child
labour or provide unsafe working conditions.
10.Analyse one reason why some businesses might decide not to act ethically in a
competitive market.
Cost advantage is the goal; ethical sourcing is often expensive, and firms may choose
lower costs to stay price-competitive against rivals.
11.Explain one example of a SMART objective that could be set for your school or
college.
To increase the overall student pass rate in Business Studies by 5% by the end of the
2026 academic year.
12.Explain one business objective a manufacturing business could establish.
To reduce factory production waste by 10% over the next twelve months to improve
operational efficiency and lower costs.
13.Analyse one reason why short-term profit maximisation might not be an appropriate
objective for a medical drug research business.
Long-term investment is required for R&D; focusing on short-term profit would lead to
underfunding the research needed for vital medical innovation.
14.Explain one reason why the owners/directors of a small private limited company
would set a profit-satisficing objective.
Owners may prioritise a work-life balance and a comfortable lifestyle over the high stress
and long hours required to chase maximum profits.
1. Explain why any one stakeholder group might want to compare the size of one
business with another.
Investors: To assess risk and reward. Larger firms are usually more stable; smaller firms
offer higher growth potential.
2. Explain one reason why capital employed might not be the appropriate way to
compare the size of two businesses.
Industry differences: A car factory is capital-intensive (high value), while a consultancy is
labour-intensive (low capital), even if they earn the same profit.
3. Explain one reason why comparing the size of two businesses by the number of
employees might give a misleading picture.
Automation: A firm with robots needs fewer workers but can have a much higher output
than a firm with many manual workers.
4. Explain one way in which the market capitalisation measure of business size will be
affected by a stock exchange crash.
Share price drop: Since Market Cap = Share Price * Number of Shares, a crash instantly
lowers the "paper value" of the company.
5. Analyse one effect on business stakeholders of horizontal integration.
Customers: Negative effect due to less competition. This often leads to higher prices and
fewer choices in the market.
6. Analyse one effect on business stakeholders of forward vertical integration.
Employees: Increased job security. The business now controls its own shops/outlets,
ensuring a guaranteed path to the customer.
7. Analyse one potential strength for the business if the owner, who is retiring,
encourages their children to continue owning and managing the business.
Continuity: It preserves the corporate culture and long-term vision without the disruption of
new outside management.
8. Analyse one benefit to your country's economy that would result from the growth of
the number of small firms.
Job creation: Small businesses are the primary source of new employment and increase
economic diversity/innovation.
, 9. Analyse one problem for a business of it being small.
No Economies of Scale: Small firms cannot buy in bulk, leading to higher unit costs
compared to large competitors.
10.Explain to a manager one difference between organic and external growth.
Speed: Organic (internal) growth is slow and natural; External growth (mergers/takeovers) is
rapid and immediate
11.A fast-food business wants to expand using retained earnings to purchase more
cafés. Analyse one advantage to the business from this form of growth.
Cheaper financing: No interest payments to banks and no loss of control to new
shareholders.
Ch 4: Business objectives
1. Explain one purpose of a mission statement
It provides clear guidance and a sense of direction for employees, ensuring everyone works
toward the same core values.
2. Explain one practical limitation of mission statements.
They are often too vague or general, which makes them difficult to apply to specific,
day-to-day tactical decisions.
3. Analyse how the objective of 'increasing shareholder value' might conflict with
corporate social responsibility (CSR).
CSR initiatives (like fair wages or emission cuts) increase operating costs, which can
lower the short-term profits and dividends paid to shareholders.
4. Explain one reason why the objective of a private-sector business might be different
to the objective of a public-sector business.
Private firms focus on profit maximisation, while public-sector organisations prioritise
service delivery and social welfare for the community.
5. Define the term 'SMART objectives'.
Objectives that are Specific, Measurable, Achievable, Realistic, and Time-bound to
ensure goals are clear and trackable.
, 6. Analyse the 'triple bottom line' concept when applied to social enterprises.
Success is measured by Profit, People, and Planet, meaning the business tracks financial,
social, and environmental impact equally.
7. Explain one reason why the objectives of a business might have to change over time.
Economic changes like a recession may force a business to switch its objective from
aggressive growth to simple survival.
8. Analyse one benefit to a business of having SMART objectives.
They provide clear targets, which improves staff motivation and makes it easier for
managers to measure and control actual performance.
9. Explain one way in which ethics can influence business activities.
Ethics dictate supply chain choices, such as refusing to buy from suppliers who use child
labour or provide unsafe working conditions.
10.Analyse one reason why some businesses might decide not to act ethically in a
competitive market.
Cost advantage is the goal; ethical sourcing is often expensive, and firms may choose
lower costs to stay price-competitive against rivals.
11.Explain one example of a SMART objective that could be set for your school or
college.
To increase the overall student pass rate in Business Studies by 5% by the end of the
2026 academic year.
12.Explain one business objective a manufacturing business could establish.
To reduce factory production waste by 10% over the next twelve months to improve
operational efficiency and lower costs.
13.Analyse one reason why short-term profit maximisation might not be an appropriate
objective for a medical drug research business.
Long-term investment is required for R&D; focusing on short-term profit would lead to
underfunding the research needed for vital medical innovation.
14.Explain one reason why the owners/directors of a small private limited company
would set a profit-satisficing objective.
Owners may prioritise a work-life balance and a comfortable lifestyle over the high stress
and long hours required to chase maximum profits.
