AQA A level Business unit 4

Functional objective

Functional objective

these are goals for each functional area of a business and are based on corporate objectives

Operational objectives

costs, quality, speed of response and flexibility, dependability, environmental objectives, added value

Profit

sales revenue - total costs

Improve profit

increase sales or reduce costs

Quality

those features of a product or service that allow it to satisfy customers

Ways to measure quality

customer satisfaction rating, customer complaints, scrap rate, punctuality

Punctuality

how promptly a business delivers its goods

Punctuality formula

(deliveries on time/ total deliveries) x 100

Environmental objectives

reducing waste, reducing carbon footprint, minimising waste products or materials, increase recycling, achieving self-sufficiency in energy use

Added value

the difference between the costs of producing a good and the price it is sold for

How to measure efficiency

labour productivity, unit costs, capacity, capacity utilisation

Labour intensity

when labour costs outweigh capital costs of a business

Labour productivity

the amount of output that is obtained from each employee

Labour productivity calculation

output per period / number of employees in that period

Ways to achieve high labour productivity

quality of machinery, skills and motivation of workforce, methods of production used, reliability of raw materials

Increasing productivity

increasing number of hours worked, training to employ output, investment in technology, changing the way work is done, motivating employees

Unit costs

the cost of producing one unit of output

Unit costs calculation

total costs / units of output

Unit cost influences

efficiency of workforce, efficiency of machinery, how easily variable costs can be controlled

Capacity

the maximum total level of output or productivity that a business can produce in a given time period

Capacity utilisation

the percentage of a firm's total possible production level that is being reached

Capacity utilisation formula

(capacity output) / maximum capacity) x 100

Spare capacity

resources not being used that could be

Reasons for spare capacity

new competitors, change in customer taste, unsuccessful marketing, seasonal demand, over investment in fixed assets

Lean production

aims to reduce all forms of waste in the production process

Aims of lean production

zero delay, zero stocks, zero mistakes, zero waiting, zero accidents

Cell production

organising production around teams instead of a production line

Just in time production

reducing the stock holding of a business to make it more efficient by ordering just when it is needed

Stocks

raw materials, work in progress, finished goods

Factors influencing resource mix

type of operating process, relative price of resource, availability of resource, nature of product, state of technology, ethics

Using technology

robotics, automation, communication, design

Benefits of using technology

reducing costs, improving quality, reducing waste, increasing productivity, financial monitoring, new products, better working conditions

Quality

a measure of excellence which is free from defects or significant variations.

Intangible quality

image and brand, reputation, exclusiveness

Tangible quality

appearance, reliability, durability, functions, after-sales service, repair and maintenance

Benefits of quality

sales, USP, selling price, flexibility, cost reduction, firm reputation

Quality control

system that uses inspections to check the quality of work at stages of the manufacturing process

Quality assurance

system that improves quality by arranging every process to get products right first time

Total quality management

approach to long term success that aims for improvement continually throughout every functional area of the business

Kaizen

policy of implementing incremental changes in order to achieve better quality and greater efficiency

Quality standards

set of criteria used to establish quality systems which are accredited

Consequences of poor quality

productivity, profitability, customer satisfaction, costs

Mass customisation

personalisation or custom tailoring of goods to meet customer needs

Rationalisation

a process by which a firm improves its efficiency by cutting the scale of its operation

Outsourcing

when a business asks another business to make all or part of its products

Temporary contracts

an employee contract that is for a fixed period