Measuring Business Size

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 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

  • For example, 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

• For example, 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