10 Analyse the reasons, why value of output can’t be a good approach to measure business size. [6]

[Sir Afzal Shad]

Q10 Analyse the reasons, why value of output can’t be a good approach to measure business size. [6]

Possible Structure:
[KN]
[AN]
[AN+]

[KN]
[AN]
[AN+]

[Kumail Alvi]

[KN] Inflation.
[AN] Changes in the general price level over time can distort the value of output. If prices increase, the value of a business's output will increase even if the physical quantity produced remains the same.
[AN+] Conversely, deflation can make the business appear smaller, even if it is producing the same amount.

[KN] Changes in technology.
[AN] Technological advancements can lead to increased efficiency and reduced costs.
[AN+] This can result in a reduction in the value of output even as the business grows in terms of physical output or productivity.

[Syed Raza]

[KN] Economic Conditions
[AN] economic conditions and market dynamics can influence the value of output. A business may experience changes in its output value due to factors like inflation, changes in consumer demand, or shifts in market conditions
[AN+] which may not accurately reflect its underlying business size or performance.

[KN] advanced technology
[AN] Advancements in technology and automation can increase a business's output value without a corresponding increase in the number of employees or operational complexity.
[AN+] This may lead to a mismatch between the value of output and the business's actual size and labor force.

[Sodais sajid]

KN: Economies of Scale
AN: Larger businesses often benefit from economies of scale, which means their cost per unit is lower
AN+: They can produce more for less, leading to higher revenue.
KN: Seasonality
AN: Many businesses experience seasonal fluctuations in revenue, which can make comparisons difficult
AN+: They might look much larger in a high season and much smaller in a low season.

[Ibrahim Aamir]

[KN] the amount of profit
[AN] some of the firms would be still producing in high quantity but operating on breakeven and not able to expand
[AN+] the size of the business is directly related to the profit made by the business

[KN] seasonally
[AN] some firms would be only working in some times of the year
[AN+] during that time they would be producing high value of output but that does not defines it's size

[Salman Khalid]

[KN]Variability in Pricing and Costs
[AN]different price points means that a business with a high-value output may not necessarily have a large physical presence or workforce.
[AN+] Some businesses may excel in producing high-value, specialized products with a relatively small team, thanks to technological advancements and process efficiencies.

[KN]Customization and Niche Markets
[AN]Businesses that specialize in customized or niche products or services may have a high value of output despite serving a smaller customer base.
[AN+] A business may have a high value of output, but a significant portion of this value may go to suppliers or intermediaries.

[Ahmed Zunair]

[KN] Inflation
[AN] Changes in the general price level over time can change the value of output If prices increase the value of a business output will increase even if the quantity produced remains the same.
[AN+] Thus the value of output to calculate the business size isn't accurate
KN] Seasonal Businesses
[AN] some firms operate half a year or seasonally
[AN+] Thus half a year there is no production and output and hence calculating a business from its output isnt reliable

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Good Job
Syed Mustafa Ali
--Moderator

[Syed Mustafa Ali]

[KN] Variations in Profit Margin
[AN] Businesses can have different profit margins. A company with high revenue but low profits may not be as significant as a smaller business with higher profitability.
[AN+] Revenue alone doesn't reflect the financial health or economic impact of a business.

[KN] Economic externalities
[AN] Businesses can have both positive and negative externalities on society and the environment, which aren't reflected in revenue figures.
[AN+] Measuring size solely by output value ignores these broader effects.

[khuram khan]

[KN] Variability in Pricing and Costs
[AN] Different price points means that a business with a high-value output may not necessarily have a large physical presence or workforce.
[AN+] Some businesses may excel in producing high-value, specialized products with a relatively small team, thanks to technological advancements and process efficiencies.

[KN] Customization and Niche Markets
[AN] Businesses that specialize in customized or niche products or services may have a high value of output despite serving a smaller customer base.
[AN+] A business may have a high value of output, but a significant portion of this value may go to suppliers or intermediaries

[Talha Asim]

KN]seasonal output [AN] goods that are produced seasonally like sugar cane cannot be measured for the time the industry is inactive [AN+]thus the proportionality cannot be measured against the time it is not active with those firms that remain active throughout the year

[KN]niche markets[AN]business that by choice operate in a niche have a low value of goods than those of a mass market[AN+]a business having high value of output wont even matter if most of it is given away due to costs like paying suppliers

[Shaliza khawaja]

(kn) different prices
(an) some products with low prices could be sold more and some with high prices can be sold less
(an+) which further puts different between its output
(kn) seasonal products
(an) some business producing in winters and summer its output can change every season
(an+) and its output sold can be different every season hence not a good idea to measure business through value of output

[hafsa kashif]

[kn] a high output does not mean that the business is huge in size when looking at other measurements
[an] for example firms may have a low level of employed people but high value of output
[an+] this can lead to an overestimation of how big the business actually is
[kn] owners' choice
[an] many businesses operate in a niche market therefore by choice have a low value of goods then that of mass markets
[an+] thus the business may be huge or successful but most of its output is given to suppliers

[Hadia Zia]

[KN] Varying pricing structures.
[AN] A business with many operations may be charging different prices in each operation which can lead to disparities in recorded value of output.
[AN+] Thus this can lead to overestimation or underestimation of the size of the business.

[KN] Seasonality.
[AN] businesses whose demand for products is dependent on the season like ice-creams in summer is likely to have greater value of output in the particular season than compared to the whole year.
[AN+] Thus this will lead to mismatch between the value of output in summer which will be high than compared to all other seasons.

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Moderator Comment: Perfect Answer!!! BRAVO!!!

[Maham fatima]

[KN] All output produced may not be sold
[AN] hence a business with high output may have low revenue and high storage costs
[AN] Leading to low profits


[KN]It ignores other measures
[AN] A firm employing few employees might produce several expensive units of output each year
[an]This might give higher output figure than a firm selling cheaper products but employing more workers

Moderator Comment: Please recheck.

[Humzah Zafar]

[KN]Different prices
[AN]Different businesses in different areas may set different prices for their products. A business having higher output may not have a better or healthy workforce
[AN+]Thus this leads to inaccurate measurement

[KN]High costs
[AN]A business in a mass market might have higher output than a niche market however if most of the earned revenue is used to pay expenses in a mass market then the business may not be very successful
[AN+]Thus this shows that the business with higher output is not always more successful