Worked example 1

Firm A: revenue $500m, 2,000 staff. Firm B: revenue $200m, 8,000 staff. Which is 'larger' and which measure is more meaningful for a labour-intensive call centre comparison?

Show solution outline

By revenue: A is larger ( $500m vs$ 200m).

By employees: B is larger (8,000 vs 2,000) — likely labour-intensive service model.

Call centre comparison: Employee count more meaningful — output scales with headcount; revenue per employee shows productivity ( $25k vs$ 200m/8000 = $25k per worker at B — need more data).

Lesson: State which measure and why for the industry context.

Worked example 2

Two companies, AlphaTech and BetaMobile, compete in the European smartphone market. The total market sales for the year were €150 billion. AlphaTech's sales were €45 billion, and BetaMobile's sales were €30 billion. Calculate the market share for each company and comment on their relative size based on this measure.

Show solution outline

1. State the formula: Market Share (%) = (Company's Sales / Total Market Sales) × 100

2. Calculate AlphaTech's Market Share:

Market Share = (€45 billion / €150 billion) × 100
Market Share = 0.30 × 100
AlphaTech Market Share = 30%

3. Calculate BetaMobile's Market Share:

Market Share = (€30 billion / €150 billion) × 100
Market Share = 0.20 × 100
BetaMobile Market Share = 20%

4. Comment on Relative Size: Based on market share, AlphaTech is the larger company within the European smartphone market, holding a 30% share compared to BetaMobile's 20%. This indicates AlphaTech has a stronger competitive position and is the market leader between the two.

Limitation: This measure only reflects their standing in one specific market (European smartphones). BetaMobile might be a larger company globally or have significant operations in other sectors (e.g., laptops, cloud services), which this single measure does not capture.

Measurements of business size — practice questions

Worked example 1

Worked example 2