Economies of scale def?
When increasing the business’s output decreases production costs
4 methods of production
Job
Flow
Batch
Cell
Job production
Def?
2 Ads & dis?
One product is made at a time and is specific to the customer
Ads- Customer satisfaction from bespoke product, charge premium prices, motivated employees to use their skills
Dis- Skilled experts have higher wages, slow production causes slower cash flow
Batch production
Def?
2 Ads & dis?
Set quantity of identical products
Ads- Can meet fluctuations in demand, less labour intensive than ‘job production’
Dis- Wasted idle time between batches that needs to be planned, not bespoke to customer tastes
Flow production
Def?
2 Ads & dis?
Continuously making identical products
Ads- Low unit costs due to economies of scale, automated so consistent quality
Dis- Expensive machinery, higher absenteeism due to repetitive work
Cell production
Def?
2 Ads & dis?
Work divided into teams, each team is responsible for different part of production process
Ads- Higher motivation due to working as a team, more efficient as they share their skills
Dis- Needs organisation of the production process, team efficiency can be reduced by weaker workers
Production def?
The total amount produced in a time period
Productivity def?
Output per worker, per time period, measures how much each worker produces over a period of time
Productivity equation?
Total amount per time period / number of employees
Key benefit of improved productivity?
Decreased costs
4 Ways to improve productivity
-Employee motivation-> financial and non-financial methods
-Employee training-> useful contributions, less supervision needed
-Selective recruitment-> hiring enthusiastic employees
-Investment in machinery-> improve levels of output and quality
Cycle between productivity and competitiveness?
High productivity decreases business’ costs, prices can be lowered, compete with competitors, more success, more financial resources to invest in productivity
Efficiency def?
Maximum efficiency def?
How a business uses its resources as cost-effectively as possible
The point where the cost per unit is at its lowest
Average cost per unit equation?
Total costs / number of units
4 Ways to improve efficiency
-Relocation-> moving to a smaller/ cheaper location to reduce fixed costs
-Investment in capital equipment (machinery)-> increase output rate and quality
-Using lean production techniques-> reduce wastage
-Organisational restructuring-> reducing level of staff
Labour intensive def?
When is it most common?
Production that predominantly uses physical labour
Services, small-scale production
Capital intensive def?
When is it most common?
Production that predominantly uses machinery and technology
Large-scale production, standardised products
Labour intensive
2 Ads & dis?
Ads- workers can be more creative, workers can be retrained
Dis- Incentives may be needed to motivate staff, can be high training costs
Capital intensive
2 Ads & dis?
Ads- Machines provide consistent quality, machines can run continuously
Dis- High start up and maintenance costs, breakdowns can disrupt production
Capacity utilisation def?
Unit?
A measure of how well a business’ assets are being used to produce output
A percentage
Capacity utilisation formula?
Actual output / maximum possible output x100
Under-utilisation def?
3 Ad & 2 dis?
Operating beneath capacity
Ad- Flexibility to respond to increases in demand, time to train staff, time to maintenance machinery
Dis- Fixed costs are spread out over fewer units-> higher costs per unit, may need to reduce staff
Over-utilisation def?
2 Ad & 3 dis?
Operating above capacity
Ad- Minimise costs per unit, attract customers if they see they are busy
Dis- Lack flexibility to respond to changes in demand, strain on machinery, overworked staff may want to leave
4 ways to improve capacity utilisation and brief explanation?
Reduce capacity-> sell fixed assets or reduce staff
Increase usage-> encourage sales through discounts
Outsourcing-> use outside businesses for some tasks
Redeployment-> move underused resources to areas they are needed
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Exam structure6
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Theme 1 equations4
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1.1 Meeting customer needs63
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1.2 Market45
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1.3 Marketing mix & strategy76
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1.4 Managing people55
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1.5 Entrepreneurs & leaders0
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Theme 2 equations24
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2.1 Raising finance47
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2.2 Financial planning37
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2.3 Managing finance34
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2.4 Resource management46
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2.5 External influences1
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Theme 3 equations0
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3.1 Business objectives & strategy0
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3.2 Business growth0
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3.3 Decision making techniques0
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3.4 Influences on business decisions0
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3.5 Assessing competitiveness0
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3.6 Managing change0
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Theme 4 equations0
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4.1 Globalisation0
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4.2 Global markets & expansion0
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4.3 Global marketing0
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4.4 Global industries & companies0
