business operations

economies of scale

financial advantage (falling average costs) of producing something in very large quantities

diseconomies of scale

rising average costs when a firm becomes too big

internal economies of scale

cost benefits an individual firm enjoys when it expands

sources of internal economies of scale

purchasing economies

marketing economies

technical economies

financial economies

risk bearing economies

managerial

purchasing economies

as a firm expands it can buy raw materials or goods in bulk

allows it to negotiate discounts with suppliers and reduce cost per unit

marketing economies

large firms can spread the cost of advertising across many products

reducing the cost per product

technical economies

using better machinery or technology to increase speed and reduce cost

financial economies

getting loans at lower interest rates due to size

risk bearing economies

spreads risk by diversifying products or markets

managerial economies

hiring specialists to improve efficiency

external economies of scale

cost benefits that all firms in an industry can enjoy when the industry expands

types of external economies of scale

skilled labour

infrastructure

cooperation

ancillary and commercial services

skilled labour

as industries grow

more skilled workers become available

reducing recruitment and training costs

infrastructure

increased demands leads to better roads and transport systems

lowering costs for businesses

ancillary and commercial services

specialist marketing, cleaning or banking systems will set up close to the area so the industry will benefit from their services

cooperation

when firms in the same industry are set up close to each other, they’re more likely to cooperate so they all gain

types of diseconomies of scale

bureaucracy

labour relations

control and coordinations

bureaucracy

when a firm becomes too big it becomes more hierarchical with layers of management

this leads to increased bureaucracy

decisions need to pass through multiple levels of approval

slows down decision making

increases administrative costs

labour relations

in larger firms, managing employee relations becomes more challenging

more disagreements and union involvement

increases operational costs

decreases productivity

control and coordination

as the firm grows, it becomes harder to maintain control and coordination across different departments

risk of miscommunication and mismanagement

inefficiency

production

transformation of resources into a final product

types of production

batch production

job production

flow production

job production

method of production involves employing all factors to complete one unit of output at a time

advantages of job production

high quality and customization

better worker motivation

meets individual customer needs - customer satisfaction - more sales

disadvantages of job production

high cost per unit

time consuming

skilled labour needed (more expensive)

batch production

method that involves completing one operation ay a time on all units before performing the rest

advantages of batch production

lower unit costs

flexibility

better quality control

disadvantages of batch production

mstakes affect the whole batch

less personalization - lacks uniqueness

flow production

large scale production of a standard product

where each operation on a unit is performed continuously one after the other

usually on a production line

advantages of flow production

very low unit costs

fast production

less labour needed - automation

disadvantages of flow production

high set up costs

boring work - low motivation

net flexible to demand

labour intensive production

production methods that make more use of labour relative to machinery

capital intensive production

production methods that make more use of machinery relative to labour

increasing labour productivity

training

motivation

better equipment

increasing capital productivity

upgrading equipment

regular maintenance

lean production

impact of productivity improvements

competitiveness - can increase market share and enjoy a higher profile in the market

workforce

customers - lower costs leads to lower prices

lean production

approach to production aimed at reducing the quantity of resources used

impact of lean production

raises productivity

reduces costs

improvs reliability and speeds up product design

principles of lean production

just in time

kaizen

just in time production

production technique that is highly responsive to customer orders and uses very little stock holding

advantages of just in time production

fewer suppliers - few costs

stronger link with suppliers

disadvantages of just in time production

high ordering and administrative costs

hard to cope with changes in demand

kaizen

japanese term meaning continuous improvement

all workers make small incremental changes to improve efficiency and reduce waste

advantages of kaizen

low cost improvements

boosts employee involvement - motivates them

disadvantages of kaizen

slow results

time consuming

importance of using resources effectively

improved competitiveness

positive environmental effects

impact of new technology in the primary sector

applications of drones

cutting machines

GM crops in agriculture

impact of new technology in the secondary sector

robots

computer aided design

impact of new technology in the tertiary sector

e commerce

atms

online booking

benefits of new technology

high productivity and low costs

less waste of resources

costs of new technology

high set up and purchase costs

loss of flexibility

factors of production (CELL)

capital

enterprise

land

labour

division of labour

specialization in specific tasks or skills by an individual

how does division of labour increase productivity

organization of production is easier

workers concentrate on the task that they do best

quality

features of a product that allow it to satisfy customers’ needs

importance of quality

allowing a business to gain a competitive advantage

faulty products are costly

quality control

making sure that the quality of a product meets quality standards

advantages of quality control

helps identify problems in production

prevents poor quality products

disadvantages of quality control

wastage can be high

inspection can be costly

quality assurance

system where quality is checked at every stage of production

advantages of quality assurance

employees take responsibility - more careful and involved in maintaining quality

better for brand reputation as consistent quality builds customer trust

disadvantages of quality assurance

time consuming

training costs

total quality management

managerial approach where every employee is responsible for maintaining high quality in everything they do

focuses on continuous improvement and teamwork

advantages of total quality management

higher customer satisfaction - better quality means more loyalty

boosts employee morale - take pride in their work

disadvantages of total quality management

time consuming for results

expensive to implement