Business classifications

At any one time, no two businesses have precisely the same ‘mix’ of objectives, resources, functions or constraints. Products differ, and resource requirements will vary in both size and type. A business whose customers finance their purchases of its product by borrowing money will experience a sharper and more immediate drop in sales when interest rates rise than a business making a relatively cheap product.

Businesses which appear very different may have certain characteristics in common that have a significant effect on their behaviour in certain situations. For example the size of a business will determine the financial resources it has at its disposal. When studying business it can be useful to group together all businesses that share a particular characteristic in order to gain an insight into the problems they face or the advantages they enjoy as a result. This grouping is known as classification. Figure 2 illustrates ten possible classifications. You should remember that grouping disparate items into classes for ease of reference is normal practice. Classes in schools and colleges are good examples. ‘The business studies group’ is a convenient term of reference for staff in some situations. The list of potential classifications in business is not limited to ten.

1. Formulate the main idea of the text.

2. Find in the text English equivalents of these words and phrases.

фінансувати	8. відносно дешевий продукт	15.здобувати, одержувати
позичати, запозичати	9. здаватися; з’являтися	16. зіткнутися лицем в лице
відчувати	10. значний ефект	17.групування, класифікація
різке падіння	11.визначати, вирішувати(ся)	18. штат, персонал
негайний, невідкладний	12. фінансові ресурси	19. бути обмеженим
процентна ставка	13. бути в розпорядженні когось	20. непорівнянний
зростати, збільшуватися	14. групувати

3. Are these statements true or false? Correct the false ones.

1. All firms share the same experiences and problems.

2. Different businesses peculiar characteristics in general that have a certain influence on their functioning.

3. In order to gain an insight into the problems that businesses face it is useful to group together all businesses with particular characteristics.

4. It is known that grouping disparate items into classes for the ease of reference.

5. The list of potential business classifications is usually limited to ten.

4. Answer the questions.

1. Do all types of businesses have precisely the same ‘mix’ of objectives?

2. What will determine the size of the business?

3. What is classification?

4. Will it be useful to group together all business activities?

5. How can the business be described?

5. Write a summary of the text.

Text 7.

Classification by size

Businesses are generally classified as being small, medium or large – a simple statement that disguises a number of problems of definition. The terms of reference of the Bolton Committee, set up in 1968 to inquire into the role of small firms in the British economy, defined small firms as those with not more than two hundred employees. This proved to be inadequate. How would you classify a business with less than one hundred employees but with a high value product and a turnover of £1m per annum? There are of course some businesses that clearly fall into one category or another. Nobody would dispute that Ford (UK), ICI and Unilever are very large businesses. Equally the one person corner shop is a very small business. The classification of businesses by size can be done according to the following criteria.

1 The size of its market share The market share of a business is its total sales expressed as a percentage of the total sales of the industry in which it operates. It is sufficient to point out that if a business employs less than one hundred people, but has a 90 per cent share of the market in which it operates, the influence it exerts on that market will be greater than the influence exerted on its market by a business employing thousands, whose market share is 20 per cent.

2 Annual sales (turnover) A high –cost product can generate more sales per employee than a low-cost product.

3 The amount of capital employed A business which uses advanced technology is likely to have relatively few employees. Automation will intensify this trend.

4 The way in which it is organized The Bolton Committee argued that personal management by the owners of a business was a characteristic of a small firm. As business increase in size the work load becomes too great for a small group of people, managers are employed and the control exercised by the owners decreases. We shall look at this in more detail when we discuss classification by ownership below.

5 The law distinguishes between small and medium-sized companies. The criteria on which it does this is summarized in the chart in Figure 3.

Classification by size is an introduction to the importance of scale in business. The word ‘scale’ indicates the way in which you should think of the size of a business. It is not the absolute size which is important but the size of a business in relation to the size of other businesses.

1. Which of these statements expresses the main idea of the text?

1. Although each business is unique, by classifying business we can study the characteristics they have in common.

2. There are different methods of classifying business activity.

3. It is important to understand the ways in which all businesses resemble each other.

4. Businesses are generally classified as being small, medium or large.

2. Find in the text English equivalents of these words and phrases.

1.зображати неправдиво, перекручувати	12. виражений у процентах	23. автоматизація
2. ставити	13. достатній	24. посилювати(ся)
3.довідуватися, дізнаватися	14. указувати (2)	25.напрям, тенденція
4. невідповідний	15.напружувати (сили)	26.особисте керівництво власником
5.високоякісний продукт	16. вплив	27.завантаження підприємства замовленнями
6. оборот, обіг	17.річний товарообіг	28.дрібне підприємство
7. обговорювати	18. дорога продукція	29. середня компанія
8. рівно, порівну	19. породжувати	30. розмір компанії, бізнесу
9. критерії	20. дешеві вироби	31.абсолютний розмір
10. розмір частки на ринку	21. розмір капіталу	32. по відношенню до
11. загальні, сумарні витрати	22. передова техніка, технологія

3. Are these statements true or false? Correct the false ones.

1. There are two types of business entities.

2. Small firms are those which with more than two hundred employees.

3. Ford (UK), ICI and Unilever are considered to be large businesses.

4. There are four criteria for the classification of businesses by size.

5. The influence the business exerts on the market depends not only on the number of its employees but also on the size of its market share.

6. Automation reduces the number of employees.

7. In a small company average weekly employees are equal to or less than fifty.

8. In a medium-sized company assets are equal to or less than £8 mln.

9. If, over a period of two years, turnover is equal or less than £2 mln, it is a small company.

4. Answer the questions.

1. Why are there a number of ways of classifying a business by size?

2. What is the market share of a business?

3. What does the word ‘scale’ indicate?

5. Write a summary of the text.

Text 8.