igcse business section 4

productivity

the output measured against inputs used to create it

Ways to increase productivity

- improving the layout of the machines
- improving labour skills by training workers
- introducing automation

benefits of increasing productivity

- increased output
- fewer workers needed
- lower costs per unit

lean production

techniques used by businesses to cut down on waste and therefore increase efficiency

benefits of lean production

- less storage needed
- quicker production
- no need to repair defects
- better use of equipment
- improved health and safety

kaizen

production that involves 'continuous improvement' through the elimination of waste

JIT(just-in-time)

a production method that involves reducing or virtually eliminating the need to hold inventories of raw materials or unsold inventories of the finished product

job production

where a single product is made at a time

advantages of job production

- meets the exact requirements of the customer
- more varied jobs
- high price can be charged

disadvantages of job production

- skilled labour is often used
- costs are higher
- production often takes a long time
- any error are expensive to correct
- labor intensive

batch production

where a quantity of one product is made, then a quantity of another item will be produced

advantages of batch production

- flexible way of working
- gives variety to workers' jobs
- allows more variety to products

disadvantages of batch production

- can be expensive
- warehouse space is needed
- machines have to be reset between batches

flow production

Where large quantities of a product are produced in a continuous process

advantages of flow production

- high output
- costs are kept low
- produced quickly
- little training needed

disadvantages of flow production

- boring for workers
- significant storage requirements
- can be very easy for the production line to halt
- cost of setting up the production line is high

how technology changed production methods

- automation
- mechanization
- Computer Aided Design
- Computer Aided Manufacture

fixed costs

Costs which do not vary with the number of items sold or produced in the short run

variable costs

costs which vary directly with the number of items sold or produced

total costs

fixed and variable costs combined

average cost per unit

Total cost of production / total output

economies of scale

The factors that lead to a reduction in average costs as a business increases in size.

5 economies of scale

- purchasing economies
- marketing economies
- financial economies
- managerial economies
- technical economies

diseconomies of scale

The factors that lead to an increase in average costs as a business grows beyond a certain size.

3 diseconomies of scale

- poor communication
- low morale
- slow decision making

break-even point

the level of sales at which total costs equal total revenue

disadvantages of break-even charts

- draws with straight lines
- only concentrates on break-even point

factors affecting the location of a manufacturing business

- production methods
- location of market
- location of raw materials
- government influence
- transport and communications
- power and water supply
- climate

factors affecting the location of a service sector business

- location of customers
- climate
- near to other businesses
- rent/taxes
- availability of labor

factors affecting the location of a retailing business

- rent/taxes
- security
- access for delivery vehicles
- availability of suitable vacant premises

factors affecting businesses to relocate to another country

- new market overseas
- cheaper or new sources of materials
- difficulties with labour force and wage costs
- rent/taxes
- availability of government grants
- trade barriers

quality

to produce a good or a service which meets customer expectations

why is quality important

- establishes a brand image
- builds brand loyalty
- maintain a good reputation
- help to increase sales
- attracts new customers

quality control

the checking for quality at the end of the production process

quality assurance

The checking for the quality standards throughout the production process

role of legal controls on location decisions

- to encourage businesses to set up and expand in areas of high unemployment
- to discourage businesses from locating in overcrowded areas or sites of natural beauty