In the news! Hot seat challenge

Tell me one even the news over the last week and what effect it

has had on it stakeholder

Economies of scale vs. diseconomies of scale

Ownership vs. control

GCSE Business studiesUnit 2

Topic 6

Learning objectives

£ I can explain economies and diseconomies of scale

££ I am able to identify the difference between ownership and control

£££ I can confidently answer exam questions on the topic so far

Economies of scale

• Occur when the cost per unit falls as the business expands

• Result from a complex series of factors which together form the benefits of operating on a larger scale

• Examples:– Technology– Marketing– Managing

Diseconomies of scale

• Occur when the cost per unit increases as the business expands

• Result from a long run rise in average costs

• Disadvantages:– Standardisation– Lack of market demand

Ownership Vs. Control

Q. What % of plc shares are owned by people like me and you?

A. 14%

Q. Who owns the other 86%?A. Financial institutions, this is sometimes a

bad thing as financial institutions want quick results and therefore want a return on the money that they have invested.

Q. Why might this be bad for business?A. Leaves less money for long term

investment

Q. What is the difference between ownership and control?

A. Owners of the company are shareholders. The managers control the decision making on a day-to-day basis.

Q. Why may the two stakeholders have a conflict of interest?

A. Any number of reasons, name a few

This creates the divorce between ownership and control.

Assessment

• SportsAlive Ltd is a private limited company. It is a family-owned business that runs a chain of sports clothes shops. Some members of the family want the business to grow quickly in the future. They believe the company should float and become a public limited company.

1. What is meant by a ‘private limited company’? 2 marks2. Explain two reasons why someone might want to invest

in SportsAlive 5 marks3. Discuss the advantages and disadvantages to the

owners of SportsAlive of becoming a public limited company 9 marks

4. Discuss the ways in which stakeholders may be affected if SportsAlive becomes a public limited company 9 marks

Learning objectives

£ I can explain economies and diseconomies of scale

££ I am able to identify the difference between ownership and control

£££ I can confidently answer exam questions on the topic so far