PRODUCTIVITY

What is productivity?

Productivity measures how efficiently inputs are converted into outputs.

Why is productivity important to a business?

Higher productivity lowers unit costs, increases competitiveness, and improves profitability.

What is labour productivity?

Output per worker or output per hour worked.

Give the formula for labour productivity.

Labour\ productivity = \frac{Total\ output}{Number\ of\ workers\ (or\ hours\ worked)}

What is capital productivity?

Output produced per unit of capital used.

What is total factor productivity?

Output compared to all inputs used, such as labour and capital combined.

What units can productivity be measured in?

Physical units (e.g. number of products) or monetary value.

Why is productivity measurement difficult in service industries?

Outputs are often intangible and quality is harder to measure.

What is output?

The quantity of goods or services produced.

What are inputs?

Resources used in production, such as labour, capital, and materials.

What is unit labour cost?

Labour cost per unit of output.

How can training increase productivity?

Workers become more skilled, efficient, and produce fewer errors.

How can motivation increase productivity?

Motivated workers work harder and more efficiently.

Give examples of motivation methods.

Pay rises, bonuses, job enrichment, promotion.

How can technology increase productivity?

Automation and machinery speed up production and reduce waste.

How can specialisation increase productivity?

Workers focus on specific tasks, increasing speed and efficiency.

How can improved management increase productivity?

Better planning, communication, and supervision reduce inefficiency.

What is lean production?

Methods aimed at reducing waste and increasing efficiency.

How does higher productivity benefit a business?

Lower costs, higher profits, improved competitiveness.

How does higher productivity benefit employees?

Job security, higher wages, bonuses, better working conditions.

How does higher productivity benefit customers?

Lower prices and improved product quality.

How does higher productivity benefit shareholders?

Higher profits and dividends.

How does higher productivity benefit the economy?

Economic growth, increased employment, improved living standards.

What are possible drawbacks of increasing productivity?

Job losses due to automation, stress, and reduced morale.

What is capacity utilisation?

The percentage of a business’s maximum possible output that is actually being used.

Why is capacity utilisation important?

It shows how efficiently a business is using its resources.

What is maximum capacity?

The highest level of output a business can produce.

Give the formula for capacity utilisation.

Capacity\ utilisation\ (\%) = (\frac{Actual\ output}{Maximum\ output}) \times 100

A factory can produce 10,000 units but produces 7,500. What is capacity utilisation?

(\frac{7,500}{10,000}) \times 100 = 75\%

What does high capacity utilisation indicate?

Strong demand and efficient use of resources.

What does low capacity utilisation indicate?

Weak demand and underused resources.

What are the benefits of high capacity utilisation?

Lower average costs, higher profits, and better efficiency.

What are the risks of high capacity utilisation?

Overworking staff, machinery breakdowns, inability to meet sudden demand increases.

What are the benefits of low capacity utilisation?

Flexibility to respond to demand increases and less pressure on resources.

What are the drawbacks of low capacity utilisation?

Higher unit costs, wasted resources, and lower profits.

How does capacity utilisation affect employees?

High levels may cause stress; low levels may cause job insecurity.

How does capacity utilisation affect customers?

High levels may cause delays; low levels may improve responsiveness.

How does capacity utilisation affect shareholders?

Impacts profitability and dividend levels.

How does capacity utilisation affect suppliers?

Influences order size and stability.