There are different basis for comparing the size of the firms such as the amount of equity, the number of work, the amount of sales, and the market share of a firm.

There are different basis for comparing the size of the firms such as the amount of equity, the number of workers,the amount of sales and the market share of a firm.The most used measure of the size of firm is by comparing the amount of equity.The larger the equity ,the larger would be the firm concerned, and vice versa.Generally,the public-owned companies are larger because the equity are the contribution of many thousands of people through the issue of shares.

This can also be measured by the number workers employed although this is distorted when comparing between lab our -intensive firm and a capital-intensive firm, giving us an opinion that lab our -intensive firm is larger in size than capital-intensive firm but the conclusion might be otherwise. We may use the amount of sales revenue as an indicator of the size of a firm Generally it is true that the larger the sales revenue .the larger will be the firm .But it becomes invalid when we are comparing firms from different industries ,because sales revenues is dependent on the price and quantity of the product sold. A high value-added industry would definitely boost higher sales than one with a lower value added. Market share can also be used to compare the size of the firm. Generally ,if the firm in an industry has the largest market share, it would be said as the largest firm in the market for that product .But again ,comparison across industries using this method would not confirm that a firm with a market share of 90% in car manufacturing industry is larger than one with a market share 40% in rubber industry. We conclude that the comparison of the size of different firms cannot be based on one method. A firm`s size must be judged based on its equity size, market share ,number of employees ,scale of production and level of technology before a conclusion can really be reached

 

An account for the simultaneous existence of firms of different sizes within the same industry

 


The size a firm takes is dependent on many factors. The firm may not grow indefinitely due to the technological differences, management skills , geographical reason and resource constraint. given the imperfect knowledge in the market, a certain new technology which allows for mass production is available to some producers and not the others. This may account for the difference in the same industry. The differences in management skills and the risk-taking nature between the entrepreneurs in different firms make the difference in firm sizes. Geographical barriers may divide the county into different markets of different sizes these can be the mountain range or the width of rivers. That’s the firms of the same industry serving these markets are of different sizes. Also immobility of resources such as capital, raw materials and labor may account for different firm size. for example, a firm may want to expand its production capacity, but the immobilitity and inavailability of labor in the region may restrict it. Lastly the size of the market and the barriers to entry also affect the size of the firm. Take the case of the oligopoly`s price-leadership, a dominating firm with the ability to term monopoly chooses to stay only as price leader because of inability to bar small firms from entering the market . However, what is most important underlying all the above is the availability and size of the market. Any size of the firm boils down to the market it serves and shares. For personalized service, its market is segmented, small but specific. For most other non-personalized products, the limit to size is the extent of market shared. The larger the size of the market, hence the firm size, the more the economies of scale reaped and the higher the profits earned.

What else? Depending on the countries, industries, etc what are some of the basis for comparing the size of the firm?

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s