1. SIZE OF BUSINESS Business and its Environment

2. Number of Employees Simplest measure Often doesn’t give a true picture of ‘size’ of organisation:  Virtu Financial (high frequency trading firm) has 151 employees (a ‘medium-sized’ business by most definitions) and revenues of $665m.  Twitter (social media firm) has 3,900 employees and revenues of $664m

3. Revenue Total value of sales made in a given period Useful when comparing firms in the same industry but less useful when comparing firms in different industries:  Real Madrid’s annual revenue (2014) was €550million  Atletico Madrid €170million  Telefonica €62billion

4. Capital Employed Total value of all long-term finance invested in the business  (non-current assets + current assets) – current liabilities  An example of a non-current asset would be a computer used by a firm (not easily convertible into cash)  An example of a current asset would be payment owed by a customer  An example of a current liability would be payment owed to a supplier

5. Capital Employed Two firms employing the same number of staff may have different amounts of capital employed. Compare, for example, a hairdressers and an opticians. The optician would likely have more expensive equipment.

6. Market Capitalisation Used only for firms that have shares quoted on the stock exchange (public limited companies).  Market capitalisation = current share price x total number of shares issued Not very stable as share prices change frequently.

7. Market Capitalisation RankLogoNameMarket Capital- isation (Q2 2015) 1Apple$722b 2Microsoft$357b 3Exxon Mobil$347b 4Berkshire Hathaway $336b 5Google$334b 6PetroChina$319b

8. Market Share A firm with high market share must be a leader within its industry and comparatively large.  (total sales of firm/total sales of industry) x 100 Increasing market share is a foremost aim of most firms. However, if a given market is small, a medium-sized firm may have a large market share.

9. Other Measures Profit Number of routes or number of passengers served  Appropriate for a transport company Number of outlets  Appropriate for a retailer

10. EU Classifications of Business Size Business Category EmployeesRevenueCapital Employed Medium51-250Over €10m to €50m Over €10m to €34m Small11-50Over €2m to €10m Micro10 or fewerUp to €2m

11. Question What do you think would be the most appropriate ways of measuring the size of the following businesses?  A travel agent  A cinema chain  A car manufacturer

12. Conclusions Measuring business size is not straightforward. Different methods are appropriate in different contexts.