Exercises: Business classification, location, and size

Classify these businesses according to the sector in which they operate (primary, secondary, or tertiary): an orange farm, a canning factory, a bank, a fishing fleet, an IT consultancy, and a supermarket.

According to the number of employees, businesses are classified into micro-enterprises (fewer than 10), small (10 to 49), medium (50 to 249), and large (250 or more). Indicate which group each belongs to: a repair shop with 8 employees, a factory with 120, a shop with 23, and a multinational with 5 000.

The diagram shows the classification of businesses by size according to the number of employees. A repair shop has 35 employees: state which category it belongs to and explain what other criterion, besides the workforce, is used in practice to measure business size.

A food delivery company is undecided between renting a small, expensive space in the city center or a larger, cheaper warehouse in an industrial park on the outskirts. Identify and explain three location factors it should weigh before deciding.

Explain the difference between a location decision and a size decision, and explain with an example how the size of the target market determines the appropriate business size to choose.

An industrial SME with 45 employees hires 8 more people after winning a large order. a) Does it change its size category? Justify your answer. b) Discuss two practical consequences that growing in size can have for a business (access to grants, legal obligations, coordination costs).

A supermarket chain is considering two strategies to enter a medium-sized town: opening a large hypermarket on the outskirts or opening four small stores spread across the neighbourhoods. Analyse the decision using at least three criteria (costs, type of customer, competition, logistics) and recommend one option, justifying your choice.

A compostable packaging company produces 25 000 units monthly at an average unit cost of 4,20. pesos To reduce costs, the operations management proposes doubling the installed capacity by acquiring automated machinery with a high fixed cost, claiming that «thanks to economies of scale, the average unit cost will automatically be cut in half».

1. a) Refute the management's claim with reasoned arguments, explaining under what demand and internal management conditions this plant expansion would not reduce average costs, but would instead generate diseconomies of scale.
2. b) If after undertaking the investment actual market demand stands at 28 000 units per month, predict what will happen to the average cost per unit (differentiating the impact of fixed costs of underutilization) and how this situation will affect the company's break-even point.

A Mexican textile company is considering offshoring its production to another country with lower wages, while keeping design and sales in Mexico. a) Analyze the arguments for and against this offshoring. b) Evaluate how it might affect brand image and quality as perceived by customers.