IGCSE Business Studies1.3.2 The methods and problems of

measuring size

Learning Outcomes• Students know the different methods of

measuring a businesses size• Students are aware of possible problems when

classifying a businesses size• Students understand the limitations of measuring

business size.

3

Global vehicle

sales (m)

Turn-over

($bn)

Market capitalisation

* ($bn)

General Motors 8.5 185 16.6

Toyota 7 150 227.9

Ford 6.5 165 13.4

Volkswagen 5 98 39.2

DaimlerChrysler 4.5 170 62.5

PSA/Peugeot Citröen 3.5 60 15.0

Hyundai Automotive 3.1 40 1.0

Nissan 3 65 54.0

Honda 2.9 77 67.7

Renault 2.4 42 34.0

Measuring business size• Which is the

biggest car company in the world?

• Business size can be measured in many ways– Sales turnover– Output– Employees– Factories– Market

capitalisation* Stock market value on 18/12/06. Data from www.bloomberg.com

4

Task – motorcycle report• You are a business consultant asked by the motorcycle manufacturer

Hanbo to write a brief report to the Managing Director comparing the company’s size with three others in the same industry:– Place the four companies in order of size for each of the three measures.– Give an overall order for the four companies. Explain your reasoning– Conclude by explaining why is it difficult to state a definite order of size

*

Workers employed

Capital employed (£ million)

Sales(£ million)

Hanbo 20,000 50 100

Triumf 5,000 150 200

Dukati 3,000 60 150

BWM 15,000 180 150Note: The data is of course completely fictional!

So…What Are the Problems When Trying to Measure

Business Size?

Research Task• Choose a Market• Identify the 3 largest companies in that market• How did you measure them?• Did you have any problems?

LimitationsMethod Limitation

Number of Employees

• Machines can replace employees• Level of skill not accounted for

Sales • Does not account for promotions

Market Share

Land Size Technological developments allow for virtual business

Market Capitilsation

Share prices vary daily

Quiz• Which is the larger business:

• Google or Toyota?• BSM or ISM?• Globe or Smart?• Amazon or WallMart?