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CIA4U0 Analyzing Current Economic Issues

CIA4U0 Analyzing Current Economic Issues. Chapter 6: Business Organization & Finance Topic 3: Small & Big Businesses P 128-133. Small & Big Business Topic Overview. Introduction Small Business Big Business Multinational Corporations & the Global Economy. Small & Big Business Introduction.

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CIA4U0 Analyzing Current Economic Issues

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  1. CIA4U0Analyzing Current Economic Issues Chapter 6: Business Organization & Finance Topic 3: Small & Big Businesses P 128-133

  2. Small & Big BusinessTopic Overview • Introduction • Small Business • Big Business • Multinational Corporations & the Global Economy

  3. Small & Big BusinessIntroduction • Small business = engine that fuels the Canadian Economy (hire only a few employees, but there are LOTS of them) • Big business, because of their size and political influence, steer the economy • Small business is any independently owned business with less than 50 employees • Medium – 51 to 499 • Big – 500+

  4. Small & Big BusinessSmall Business • Limited by size and scope • Intense competition from lots of other firms • Promotes efficiency within each company and within the economy • Competitive advantage comes through specialization and niche marketing

  5. Small & Big BusinessSmall Business • This is a Darwinian environment-only the strongest survive, the weak fail • Those that succeed are those most able to: • Read current market conditions • Anticipate changes in the market • Be aggressively innovative • Maximize profits (efficiency)

  6. Small & Big BusinessBig Business—Horizontal Integration • Horizontal integration is one way for a small company to grow larger • Process of buying controlling interest in one or more competitors • Leads to economies of scale and cost savings • Eliminate redundant or duplicate work • Allow smaller companies to compete globally • Gives larger companies better access to markets

  7. Small & Big BusinessBig Business—Vertical Integration • The merging of two firms involved in different stages of the production process of the same good or service. • Examples: • A car company buys a steel manufacturer • A publishing company buys a chain of book stores • A fast food company buys up farmland to grow the food to be sold in its restaurants

  8. Small & Big BusinessBig Business—Vertical Integration • Diversifies operations-if one part of the business falters, the others can make up for it • Guarantees supply and sales markets • Increases control over quality, quantity and price of the finished good • Also produces economies of scale • Financial advantages-buy what they need, develop what they can’t buy and can take greater risks in the process

  9. Small & Big BusinessBig Business—Corporate Alliances • The collaboration on special projects or market initiatives with competitors or suppliers without an exchange of ownership • A business network that works as one firm • Can be limited to one task or objective or can include moderate or full integration for a period of time • 10,000 alliances in 1995, expected to double by 2005

  10. Small & Big BusinessBig Business—Corporate Concentration • Occurs when a large amount of business activity takes place within a handful of corporations • This small number of corporations are, in turn, controlled by a few wealthy people • Holding company—all it does is buy ownership in other companies • Conglomerate-a group of companies in different businesses controlled by one management group

  11. Small & Big BusinessMultinational Firms/Global Economy • As companies grow, they find ways of doing different kinds of business in more than one country • When companies are in so many countries that decisions are based on global results instead of domestic or national results, they are deemed to be a Multinational Corporation (MNC) • Many out of the US, some out of Canada • Branch-plant economy-one that is based on companies whose home offices are in other countries

  12. Small & Big BusinessMultinational Firms/Global Economy • Advantages: • Access to untapped markets • Greater profits • Diversification • Access to cheaper raw materials and labour

  13. Small & Big BusinessMultinational Firms/Global Economy • Decision making is complex • Marketing and production decisions are made at the branch plant level • Corporate initiatives and research and development are controlled at the corporate level

  14. Small & Big BusinessMultinational Firms/Global Economy • We have relatively little “R&D” in Canada • Many of our sites are “branch-plants” • Higher salaries are offered by companies in other countries  “The Brain Drain” • Transnational Enterprises—those that can operate beyond the control of government due to size and wealth • Easy to move operations • Have great political influence

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