GNDU B.Com (Bachelor of Commerce)

Chapter 3: Size, Scale and Location of Business Units

Summary

The size of a business unit refers to the scale on which it operates, measured by factors such as capital employed, number of workers, volume of output and value of sales. Several factors influence size: the nature of the product and its market, the availability of capital and finance, the level of demand, the techniques of production, managerial ability and the entrepreneur's objectives. Closely related is the location of an industry, which is influenced by the nearness to raw materials, availability of power and labour, transport facilities, access to markets, availability of water, climate, and government policy and incentives. A unit may operate on a large scale or a small scale, and each has distinct benefits and problems. Large-scale units enjoy economies of scale, better use of machinery, division of labour, easier finance and bargaining power, but they face problems of rigidity, difficulty of control, impersonal relations and greater risk from market changes. Small-scale units enjoy flexibility, close personal supervision, low overheads, quick decisions and the ability to serve niche or local markets, but they suffer from limited capital, weak bargaining power, outdated technology and difficulty in surviving competition. The choice of size and location therefore involves balancing the advantages of scale against the need for flexibility and the realities of cost and competition.

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