Measuring Business Size (Cambridge (CIE) IGCSE Business)

Futuristic Microchips

• 4 Designers

• 5 Maintenance staff

• 9 Total employees

• High tech production line - $100,000

• 500 Microchips at $100 = $500,000

Tasty Satsumas

• 400 Farm workers

• 18 Managers

• 418 Total employees

• Basic fruit-picking tools

• $20,000

• 500, 000 oranges at $1= $500,000

• The method of production can influence this metric significantly

  • Capital-intensive businesses produce high levels of output with few employees

  • Labour intensive businesses have many employees that may generate a small volume of output

• The nature of workers' contracts can make this measure unreliable

  • Some businesses hire many part-time workers, while others prefer full-time workers

  • Short-term, zero hours or agency worker contracts may not be included in workforce measurement

• Not accurate when comparing labour-intensive and capital intensive production methods

  • European manufacturing businesses tend to have high levels of capital, such as robots or advanced machinery, compared to those located in countries such as Vietnam and Indonesia

  • Property values differ significantly across the world, and even between regions

    • E.g. The value of property in Singapore is significantly greater than property in mainland China

• Businesses sell very different products

  • Comparing a market stall selling sweets with a retailer of luxury handbags would be unrealistic, as their prices and volumes sold are very different

• Selling prices vary between markets

  • Businesses may sell products to customers in low-income markets at a lower price than in a higher-income market

• High value output can be produced by businesses with very few employees or with limited capital employed

  • E.g. A bespoke jewellery maker may produce only a few expensive items each year

• The value of output does not measure how successful a business has been at selling goods produced. If they are left unsold, they are a poor measure of business size