What are The Determining Factors the Size of a Business Unit ?

Answer:

“Whether the scale of production is small, medium or large, the size of a business unit depends mostly on the availability of finances, managerial ability, marketing possibilities and efficiency expectancy.”

It is never easy as to decide about the size of an upcoming unit. One has to see the relation of the size of a particular business with efficiency as well as see whether that particular size fits well in that particular social structure or not. All these questions need to be studied before deciding about the size of a business unit. The size of the business unit refers to the scale of its operations.

Whether the scale of production is small, medium or large, it depends mostly upon the availability of finances, managerial ability, marketing possibilities and efficiency expectancy. A concern may be started at the moderate scale in the beginning and it may be expanded later on.

On the other hand, a concern may be started on a large scale from the very beginning. The size of the firm is associated with economic efficiency. A particular size of the unit marketing is more efficient than other sizes. If all the firms in the industry attain that size, the whole industry attains a given level of efficiency.

One cannot say with complete authority that his decision regarding the size of his business is correct and final. Businessmen have a careful consideration for all factors, which affect their efficiency and profitability. While discussing the size of the unit there is confusion about the usage of concepts such as plant, firm or industry.

While talking about the scale of operations in relation to a manufacturing business, we may have in mind the size of the factory where production is done or we may think about the size of the unit which controls the whole operations.

Plant means an establishment for the production of goods and provision of services. A plant may mean a factory, a mill, an establishment or a retail shop. In other words, it is a place where actual production is done.

It includes machinery, equipment’s and the workers employed therein. A firm is essential a unit of ownership, control and administration. A firm is a wider term then plant. It includes not only technical units but also the process of marketing, human relations etc.

So, we can say that whatever the form of a particular business entity the profit motive along with the viability of the size and the considerations of the social structure are instrumental in determining the size and dimensions of business.