This article was written for the purpose of elucidating whether, in the growing economy, it's possible to expand the scale of business almost infinitely, or whether there exists an optimum scale which will restrain even a growing firm from further exp...
This article was written for the purpose of elucidating whether, in the growing economy, it's possible to expand the scale of business almost infinitely, or whether there exists an optimum scale which will restrain even a growing firm from further expansion of scale.
It is also put forward for consideration that small firms can be more effective in certain circumstances than big business. Moreover, the growth problem of small business is dealt with in the context of the optimum scale of business.
This article consists of the following contents.
Ⅰ. The onjectives of study
Ⅱ The definition of the optimum scale of business
Ⅲ. New phenomena in mass distribution
Ⅳ. The expansion of business scale and its problems
1. Fundamental types of the optimum scale
2. Advantages of scale expansion
3. Disadvantages of scale expansion
Ⅴ. The growth and business scale of small business
1. The external factors of suboptimal business scale
2. The internal factors of suboptimal business scale
3. The growth and optimal scale of small business
Ⅵ. Conclusions
Nowadays, rapid development of the economy changes the features of the market and, in turn, the functions of small business. Small business has been considered, in one way or another, as being inefficient and out of date. However, it's not rare for a small business to be practically more productive than big business. That is, small business is, in some areas, more advantageous due to the cost and demand factors.
In particular, the dynamic characteristics of the competitive market have incessantly changed the optimality of business scale and, thus, small business should take into account the changing market structure and fit itself to those changes dynamically.
In this article, answers to the following questions are presented. What are the implications of the optimal scale of business? Can any firm expand its scale with no bounds? Are there sufficient possibilities for small business to become more efficient than big business? And why does a firm struggle for sales growth even at the sacrifice of efficiency or profits?
There are also remarks on a report that some of the big businesses in the U. S. diseribution industry are reducing the number of their branches so as to overcome the declines in sales-per-employee and return-on-investment, and to increase thir turn-over rates.
In addition to an analysis of the advantages and disadvantages of scale expansion, internal and external factors that confine small business to sub-optimal scale are suggested.
What is the most rational critertion for the optimal scale of business among profit, sales, and efficiency, small business can evidently validate its existence and develop in a growth process. On the part of big business, there is an upper bound of scale expansion due to the decline of efficiency.
To sum up, the main purpose of this article is to search for up-to-date meanings of the optimal scale of small business in the market where big business and small business coexist properly and validly.