IGCSE Business Studies 1.3.2 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.

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

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 BWM 15,000 180 * Note: 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?

Limitations Method 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?