Describes firms, growth of firms and mergers

1. FIRMS

2. LEARNING OBJECTIVES
• Classification of firms
• Understand the advantages and disadvantages of small firms
• Understand the causes of the growth of firms
• Discuss the advantages and disadvantages of different types of
merger
• Understand economies and diseconomies of scale

3. CLASSIFICATION OF FIRMS
A. ECONOMIC SECTOR
• Primary sector
• Secondary sector
• Tertiary sector

4. CLASSIFICATION OF FIRMS
B. SECTOR OF OPERATION
• Public sector
• Private sector

5. CLASSIFICATION OF FIRMS
C. RELATIVE SIZE
• Small firms
• Large multinational companies

6. HOW TO MEASURE THE RELATIVE SIZE OF A FIRM
• 1. Number of employees
• 2. Market share
• 3. Market capitalization of a firm
• 4. Sales revenue of a firm

7. REASONS WHY SMALL FIRMS COEXIST WITH LARGE FIRMS
• 1. small firms provides a range of products
• 2. they are located in remote areas
• 3. small firms provide personal shopping experience
• 4. small firms can quickly adapt to changing customer
taste

8. ADVANTAGES AND DISADVANTAGES OF SMALL FIRMS
Advantages of small firms
• 1. few legal formalities exist for setup
• 2. The owners enjoys profits alone
• 3. There is flexibility in decision
making
• 4. there is a closer relation with
customers
Disadvantages of small firms
• 1. there is limited capital for startup
• 2. small firms have the highest risk of
failure
• 3. success of small firms is limited to
the ability of its owner
• 4.They suffer lack of continuity

9. STUDENT ACTIVITY
ATTEMPT EXAM-STYLE QUESTIONS ( Cambridge IGCSE And O Level Economics
Second Edition, Page 138)

10. MERGERS

11. TYPES OF MERGER
• Horizontal Mergers
• Vertical Mergers
• Conglomerate Mergers

12. ECONOMIES OF
SCALE
ECONOMIES OF SCALE are the cost-saving benefits of large –scale
operation, which reduces average costs of production

13. ECONOMIES OF SCALE
• Internal economies of scale
• External economies of scale

14. DISECONOMIES OF
SCALE
DISECONOMIES OF SCALE occurs when average costs of production
start to increase as the size of a firm increases

15. REASONS FOR DISECONOMIES OF SCALE
• ineffective communication
• Slow decision making
• clash of organizational cultures
• increased cost of production
• lack of workers motivation and less productivity

16. STUDENT ACTIVITY
Attempt EXAM-STYLE QUESTIONS ( Cambridge IGCSE And O Level Economics
Second Edition, Page 142)