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IGCSEBusinessEdexcelRevision Notes1. Business Activity & Influences on BusinessWhat Makes a Business Successful?Measuring Business Success

Measuring Business Success (Edexcel IGCSE Business): Revision Note

Exam code: 4BS1

Lisa Eades

Written by: Lisa Eades

Reviewed by: Steve Vorster

Updated on

Ways to measure business success

  • A successful business is considered to be one that achieves its objectives

    • Business success can be seen in both financial and non-financial measures

Financial and non-financial measures of success

Flowchart illustrating measures of success, split into financial and non-financial categories, including profit, growth, and various satisfaction metrics.
Business success can be something as simple as making a profit and achieving customer satisfaction

Financial measures of success

  • Financial measures are often the key performance indicators of the business

Financial measures of success

Financial measure

Explanation

Revenue

  • Income received from selling goods and services is compared over time and against competitors

    • An increase in revenue suggests that a business is growing and its decision-making is effective

Market share

  • Sales of the company are measured as the percentage of total sales in an industry

    • Growth in market share over time can help to improve a businesses market position and increase its competitiveness

Profitability

  • The proportion of sales converted to profit is compared over time and against competitors

    • A high profit margin means that the business can cover its costs, reinvest profits to grow and reward investors

Business growth

  • The opening of new outlets or production facilities or an increase in the size of the workforce suggests business growth

    • Growing businesses can take advantage of economies of scale and are likely to become better-known 

Shareholder satisfaction

  • Shareholders are most likely to be satisfied when share prices and dividends are increasing

  • A rising share price occurs when a business is increasing profits or is considered to have potential to grow

  • Businesses that generate healthy profits may choose to increase dividends for shareholders

Examiner Tips and Tricks

You may need to carry out calculations to compare the success of a business over a given period of time

Percentage change is one way to do this

To calculate percentage change, use the formula

fraction numerator New space amount space minus space Original space amount over denominator Original space amount end fraction space cross times space 100

Non-financial measures of success

  • Businesses also measure their success on how well they have achieved non-financial objectives

  • These objectives are often particularly important to public sector organisations, charities and other non-profit organisations

Non-financial measure

Explanation

Example

Customer satisfaction

  • Positive reviews and recommendations from customers indicate that a business is meeting this objective

  • The number of returning customers is an indication of customer satisfaction

  • Last Ottoman Cafe & Restaurant in Istanbul is rated as one of the city's  top five restaurants on Tripadvisor

Employee satisfaction

  • Low levels of staff turnover, high labour productivity and large numbers of applications for job vacancies indicate that a business is meeting this objective

  • In 2023, financial services business Groupe Hexagone was rated by employees as one of France's best places to work

Owner satisfaction

  • Business owners often have personal objectives they want the business to achieve

  • If a business is providing a good service, allows an owner to earn a satisfactory income, or achieves recognition, these personal objectives may be met

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    Author
    Reviewer
    Lisa Eades

    Author: Lisa Eades

    Expertise: Business Content Creator

    Lisa has taught A Level, GCSE, BTEC and IBDP Business for over 20 years and is a senior Examiner for Edexcel. Lisa has been a successful Head of Department in Kent and has offered private Business tuition to students across the UK. Lisa loves to create imaginative and accessible resources which engage learners and build their passion for the subject.

    Steve Vorster

    Reviewer: Steve Vorster

    Expertise: Economics & Business Subject Lead

    Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.