1.3 Size of Business

Cambridge International AS Level Business — 9609

2026 Syllabus Objectives

By the end of this topic, you should be able to explain:

  1. The appropriateness of different methods of measuring the size of a business
  2. The advantages and disadvantages of being a small business
  3. The strengths and weaknesses of family businesses
  4. The importance of small businesses and their role in the economy
  5. The role of small businesses as part of the industrial structure in some industries
  6. Why and how a business might grow internally (organic growth)
  7. The different types of external growth through merger and takeover: horizontal, vertical (backward and forward), conglomerate diversification, friendly merger, hostile takeover
  8. The impact of a merger/takeover on stakeholders
  9. Why a merger/takeover may or may not achieve its objectives
  10. The importance of joint ventures and strategic alliances as methods of external growth

1. Measuring the Size of a Business

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Before you can say whether a business is "big" or "small," you need a way to measure it. There is no single perfect method — different measures are better in different situations.

Why does size matter?

Different groups of people need to know how big a business is:

  • Suppliers may prefer to sell to larger businesses because they are seen as less likely to go bankrupt.
  • Governments can identify which businesses need support to grow.
  • Investors compare business sizes to decide where to put their money.

Five Main Methods of Measuring Size

Method 1: Number of Employees (Size of Workforce)

This measures how many workers a business employs.

  • Businesses with fewer than 250 workers are called small and medium-sized enterprises (SMEs).
  • Businesses with 250 or more workers are considered large.

Why it can be misleading:

  • A business that uses lots of machines instead of people (capital-intensive) will have very few workers, even if it produces enormous amounts of goods.
  • A small workshop that relies mainly on people (labour-intensive) might have many workers even though it is not a big business.
  • Part-time workers, zero-hours contract workers, or agency workers may not be counted, making the figure unreliable.

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