Business Size & Characteristics (Edexcel IGCSE Business)

Characteristics of Small Businesses

Spec point — 1.2.2 · Characteristics relating to size: • concepts of risk, ownership and limited liability • public corporations – reasons for and against public ownership • ownership, control, sources of finance, use of profits, stakeholders and shareholders • appropriateness of different forms of ownership.

Characteristics of small businesses

• Small businesses employ fewer than 50 people

  • Micro enterprises employ fewer than 10 employees
  • Small enterprises employ between 10 and 49 employees

• Small businesses usually provide goods and services at a local or regional level

• They are the most common form of business in most countries

  • In 2022 5.5 million small businesses existed in the UK, more than 99% of all businesses operating at that time
  • Italy has the highest number of small businesses in the EU
  • Germany's businesses tend to be larger, on average, than those in other EU countries

• Small businesses share a range of characteristics

Characteristics of small businesses

• Measuring business size according to the number of employees is becoming increasingly unreliable

  • Businesses do not always employ full-time, permanent employees
  • The use of fixed-term contracts, subcontractors and casual staff means that a business could have high levels of output with few employees
  • Increased use of technology such as chatbots means that many services can provided with little human input

Characteristics of Large Businesses

Spec point — 1.2.2 · Characteristics relating to size: • concepts of risk, ownership and limited liability • public corporations – reasons for and against public ownership • ownership, control, sources of finance, use of profits, stakeholders and shareholders • appropriateness of different forms of ownership.

Characteristics of large businesses

• Large businesses are commonly classified as those that employ 250 or more workers and may be very well-known

• In many countries, a small number of large business generate the largest proportion of revenue

  • Germany has the highest number of large businesses in the EU
  • Greece and Ireland have few large businesses, with their economies dominated by SMEs

• Large businesses usually find it easier to raise external finance than small businesses

  • They are seen as less risky than unincorporated businesses
  • They have significant assets to allow them to pay back money they have borrowed

• Sources of finance for large companies include

  • Shares sold on stock exchanges

    • E.g. German footwear company Birkenstock's raised $1.5 billion when it became a Plc in 2023

  • Trade credit

  • Bank loans

  • Retained profit

• There is often a separation between ownership and control, especially in public limited companies

  • Shareholders own the company, but they appoint directors to manage the company
  • Profit is distributed to shareholders on an annual basis, but shareholders have little impact on the day-to-day operation of the business

• Some private limited companies can grow into very large businesses without ever having to sell shares to the public in order to raise finance

  • The benefit of this is that the owners maintain full control of the company
  • E.g. Hermès is one of the wealthiest family-owned businesses in the world

Exam Hint You are often asked to define key terms from this section. Avoid using the key term in your definition.