Edexcel A Level Economics A:复习笔记3.1.1 Size & Types of Firms
Reasons for Growth & Reasons to Remain Small
- Many firms start small & will grow into large companies or even multi-national corporations (Amazon started in a garage)
Reasons Why Firms Grow
| Owners/Shareholders/Managers desire to run a large business & continually seek to grow it | Owners/shareholders desire for higher levels of profit | Desire for stronger market power (monopoly) so as to increase profits |
| Desire to reduce costs by benefitting from economies of scale | Growth provides opportunities for product diversification | Larger firms often have easier access to finance |
- While many firms grow, others do not or they intentionally choose to remain small
Reasons Why Small Firms Exist
| They offer a more personalised service & focus on building relationships with their customers | Unable to access finance for expansion | They provide a product that is in a niche market - smaller market size but can be very profitable |
| Many small firms operate in mass markets with low barriers to entry | Rapid growth can cause diseconomies of scale which can be difficult to deal with & so many owners choose to avoid these | Owners goal is not profit maximisation but rather an acceptable quality of life (satisficing) |
Divorce of Ownership & Control
- As firms grow, the owners (or shareholders) often appoint managers to run the business for them
- There is a separation (divorce) between the owners and the managers who control the day-to-day running of the business
- This divorce gives rise to the Principal-Agent problem
- E.g. Shareholders want to maximise their profits, but workers want to maximise their salaries
- E.g. Shareholders want to maximise their profits, but managers may want to maximise the number of sales over the value of the sales
- The problem is exacerbated by information gaps in that the agents have a lot more information than the owners and are often able to control the flow of that infromation
- One way that Principals attempt to diminish the problem is by granting share options to managers
- If managers are shareholders, then they will be likely to align their interests more with those of the owners
Public & Private Sector Organisations
- Public sector organisations are owned & controlled by the Government
- Their goal is not profit maximisation but to provide a service
- There are a wide variety of government owned organisations in the UK
- Corporations like the BBC and Channel 4
- National services such as State Schools & National Health Service Trusts
- Local services such as Transport for Greater Manchester
- Civil service departments such as Defence, Police, Education
- Regulatory bodies such as the General Dental Council
- Private sector organisations are owned & controlled by private individuals
- Types of ownership vary from sole trader to partners to company shareholders
- The goal of most private sector organisations is profit maximisation
- This often causes the private sector to be more efficient than the public sector with higher levels of productivity
Profit & Not-for-profit Organisations
- Most firms In the private sector exist to make a profit, even if their goal is not profit maximisation
- If they do not make a profit then they are likely to go out of business
- Exceptions to this are not-for-profit organisations which also operate in the private sector
- They exist to provide a service or meet a need
- Many sell goods/services & use the profits they generate to further their objectives, e.g. The British Heart Foundation
- The government exempts them from paying direct taxes
- All Charities are not-for-profit organisations and are regulated by the UK Charity Commission
转载自savemyexams
国际竞赛真题资源免费领取
美高学分项目重磅来袭！立即了解
