Business size, scale and context: how they shape decisions

Can one problem have two different right answers? In twenty twenty-two the price of cooking oil shot up. Ukraine is a major source of the world's sunflower oil, and the war cut supplies. For a family chip shop with one fryer and a few staff, the oil bill suddenly threatened the business. A restaurant chain with thousands of branches around the world faced the same rise. They bought the same oil, faced the same price rise and sold the same chips. So why could the right decision be completely different for each of them? The chip shop's answer turns on what kind of business it is.

The size of a business is most often measured by how many people it employs, and there are four bands. A micro business has fewer than ten employees. A small business has ten to forty-nine. A medium business has fifty to two hundred and forty-nine. A large business has two hundred and fifty employees or more. If your course asks you to identify the size of a business, these bands by number of employees are the ones to learn. Which size band is a garage that employs eight mechanics and one receptionist? It is micro, because eight plus one is nine employees, which is fewer than ten. Naming the band is half the job. Describing a size means saying what a business of that size is likely to be like. Mourne Bike Tours runs guided cycling holidays in County Down, in Northern Ireland. It employs thirty-two staff. What size is Mourne Bike Tours, with its thirty-two staff, and what is a business of that size likely to be like? Give the band, then describe it, before I show you mine. Mourne Bike Tours is a small business, because its thirty-two staff fall between ten and forty-nine. A business this size is likely to be owned by one person or a few partners, who still run it day to day. With thirty-two staff, most people know each other, and some do more than one job, like a guide who also mends the bikes. And it has limited money compared with a large tour company, so it may rely on a loan or the owners' savings to buy new bikes. Now a different question. Another answer says, "It is small because it has thirty-two staff." What is missing from it? The description is missing. It names the size, but it says nothing about what a business of that size is like. One examiner's report says students' "Knowledge of different sizes of businesses" was excellent. A later report shows where that knowledge stopped: "most candidates identified the size of the business but were unable to fully describe it for the other two marks." Both reports hold together. Knowing the bands is common, and describing is where answers fell short. The fix is to follow the band with what that size means for this business: who runs it, how its staff work and how much money it has.

Scale is a different question from size: it asks where a business operates and sells. A local business serves customers in one town or area, like a village cafe. A national business sells across the whole country, like a supermarket chain with stores in every region. A global business operates in many countries, with customers, staff and often suppliers around the world. Now one for you. A shoe brand with forty staff sells online to customers in thirty countries. What is its size, and what is its scale? It is small by size, because forty staff is between ten and forty-nine. It is global by scale, because it sells in many countries. Scale is also different from sector. Sector asks what kind of work a business does: primary takes raw materials from nature, secondary makes things, and tertiary provides services. A dairy farm selling milk in its own county is primary and local, while a software firm with ten staff can be tertiary, small and global. Size, scale and sector are three separate questions. One examiner's report on a question asking for a business's scale says, "Many candidates confused the scale of the business with the sector they operate within or gave vague answers such as 'large.'" Large is a size word, so it says nothing about where a business operates. The fix is to answer a scale question with local, national or global, and a reason from the case.

Each scale brings its own opportunities and its own challenges, and both come from the scale itself. A local business has loyal customers and knows its area well. But its market is small, and it depends on how that one area is doing. Now try it on a new case. A bakery serves one seaside town. What is one challenge that comes from its local scale? A wet summer that keeps visitors away cuts its sales, and with only one town to sell in, it has nowhere else to make up the loss. A national business has a bigger market and can build a brand people recognise. But it faces more competitors, and many sites are harder to manage. A global business reaches huge markets and spreads its risk across many countries. Its own challenges are taught in the globalisation video, so they stay there. To check a challenge comes from the scale, ask one question: would this happen because of the new scale? If any business could face it, it is generic. Glaslyn Gin is a micro distillery in Gwynedd, in north Wales, that sells to three local shops. It has agreed to supply a national supermarket chain with stores across the UK. What two challenges could Glaslyn Gin face from operating at a national scale? Aim for two, each caused by the new scale. The first challenge is volume. The supermarket will order far more bottles than three local shops do, so Glaslyn's small still may not keep up. It may have to buy a bigger still and hire staff before any extra money comes in, which is hard for a micro business with little cash. The second challenge is competition. On supermarket shelves across the UK, Glaslyn's gin sits beside famous national brands that spend millions on advertising. In its local shops, people know the owner and the story behind the gin. Nationally it loses that loyalty, so it has to compete on price and brand far from home. Now a question about a weaker answer. Another student writes, "It might run out of money." Why does Glaslyn's cash problem count, when that answer does not? Glaslyn's cash problem is caused by the national order, because it must buy a still and hire staff before the supermarket pays. Running out of money could happen to any business, so it says nothing about the new scale. One examiner's report on a question about operating at a larger scale says, "Many candidates offered answers that are generic business challenges and did not link them to operating at a larger scale." The fix is the test from Glaslyn: would this happen because of the new scale? If not, swap it for a challenge that would.

Size and scale change what a business can afford to do, so one problem can have opposite right answers. Take energy bills rising by twenty per cent, with a business deciding whether to raise its prices. Nook is a one-shop cafe with two staff, in a village with no other cafe. By size it is micro, and by scale it is local. Brew Line is a national coffee chain with four hundred branches, competing with three other big chains on every high street. By size it is large, and by scale it is national. Should each of them raise its prices? Decide for Nook and for Brew Line, with a reason from each one's size and scale. For Nook, energy is a big share of a tiny cafe's costs, and it has little cash to absorb the rise. Its customers are local and loyal, with no other cafe in the village, so twenty pence more on a drink is unlikely to drive many away. Nook should raise its prices a little. For Brew Line, three big rivals sit on every high street, and customers compare prices easily, so a price rise could push them to a rival chain. But across four hundred branches it can negotiate energy deals and spread the extra cost. Brew Line should hold its prices, and cut its energy use and costs instead. The same rise in costs leads to opposite decisions, because size, scale and competition differ. One examiner's report puts the rule plainly: "Candidates also need to consider the scale and size of businesses in scenarios to ensure responses are plausible." Plausible means believable for that business. The fix is one check before any recommendation: would this make sense for a business this size, at this scale? Following real businesses in the news gives you a feel for what fits each size.

One more pass, and this time you answer each question first.

How many employees does a medium business have? A medium business has fifty to two hundred and forty-nine employees.

Now a business you have not met yet. A car-wash firm with sixty staff has sites in one city only. What are its size and its scale? It is medium by size, because sixty is between fifty and two hundred and forty-nine, and local by scale, because it serves one city.

Now a plumber with one van is offered work across the whole of the UK. What is one challenge that comes from that new scale? One van cannot reach jobs across the country, so the plumber must hire staff and buy more vans, or turn work down.

And to finish, why can the same decision be right for one business and wrong for another? Size and scale change what each business can afford and how its customers will react, so the plausible answer differs.

And the chip shop in twenty twenty-two. It is micro by size and local by scale, oil is a big share of its costs, and it has little cash to absorb the rise. Its loyal local customers may accept a small rise in the price of a portion, so raising prices a little is the plausible answer for the chip shop. The chain with thousands of branches can buy oil in huge amounts on long-term deals, spread the cost and keep its prices steady to protect its brand. It is the same oil, with opposite answers, because the context decides.

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