BIZ QUESTIONS EOY YEAR 3

Business Y3 EOY

RED - explanation

BLUE - textbook definition

YELLOW - points

GREEN - less important point

PURPLE - Adv, Disadv

Classification of Business

Stages of the economic sector

Q1. Define the three economic sectors. [3]

The primary sector involves the use or extraction of natural resources.

The secondary sector involves the manufacture of goods using the resources from the primary sector.

The tertiary sector consists of all the services provided in an economy.

Q2. Define ‘Industrialization’ and ‘Deindustrialization’. [4]

Industrialization is the process of transforming the economy of a nation or region from a focus on agriculture to a reliance on manufacturing.

(primary to secondary)

Deindustrialization is the process of social and economic change that occurs when there is a decrease in the importance of the secondary industry.

(tertiary sector)

Q3. Explain 3 reasons for a change in sector importance. [4]

Sources of some primary products become depleted.

Most developed economies are losing competitiveness in manufacturing to newly industrialized countries.

As a country’s total wealth increases and living standards rise, consumers tend to spend a higher proportion of their income on services than on manufactured products.

QK. Examples of sectors

Public sector countries - russia , ghana , myan

Public sector work : foresting , oil rigs , coal mines , cotton fields

Secondary sector countries - china , italy

Secondary sector work : food processing , T - shirt production

Tertiary sector countries - singapore , korea

Tertiary sector work : nail salon , hair salon , restaurants , prostitution services

Private & Public Sector

Q4. Define ‘Private Sector’ and state its aim. [2]

The private sector is where private individuals own and run business ventures. They aim to make a profit.

Q5. Define ‘Public Sector’ and state its aim. [2]

The public sector is where the government owns and runs business ventures. They aim to provide essential public goods and services to increase the welfare of their citizens.

Q6. Define ‘Privatization’. [2]

Privatization is selling public sector businesses owned and controlled by the government to become private sector businesses.

Q7. Explain why private-sector businesses are more efficient than public-sector businesses. [4]

The main objective is profit and therefore costs must be controlled. Private sector owners might invest more capital in the business than the government can afford. Competition between private sector businesses can help to improve product quality.

Types of Business Organizations

Sole Trader/Sole Proprietorship

Q8. Define ‘Sole Trader’. [2]

A business organization owned and controlled by one person. They can employ other workers, but only they can invest and own the business.

Q9. State and explain 3 advantages of being a sole trader. [4]

Personal as the owner can easily create and maintain contact with customers, increasing customer loyalty to the business.

Easy to set up as there are very few legal formalities involved, less capital is needed, and there is no need to publish annual financial accounts.

Full control, hence quick and easy decision-making

Q10. State and explain 3 disadvantages of being a sole trader. [4]

Full responsibility as the sole owner has to undertake all running activities.

Unlimited liability as legal actions will be taken against the investors if bills or debts are left unpaid, where even their personal property can be seized.

Lack of capital. As there is only one owner, the amount of capital invested in the business will be very low, restricting the growth and expansion of the business.

Partnership

Q11. Define ‘partnership’. [2]

A partnership is a written and legal agreement between two or more people to own, finance, and run a business jointly to share all profits.

Q12. State and explain 3 advantages of a partnership. [4]

Easy to set up as there are very few legal formalities involved, and there is no need to publish annual financial accounts.

Partners can provide new skills and ideas to improve business profits

More capital investments as partners can invest more capital than a sole trader could.

Q13. State and explain 3 disadvantages of a partnership. [4]

Conflicts may occur between partners while making decisions.

Unlimited liability, where even their personal property can be seized if the business goes bankrupt

Lack of capital when compared to large companies.

Joint-stock Companies

QK. What is a joint-stock company?

A joint-stock company is a type of business entity where ownership is divided into shares, and the shareholders own a portion of the company based on the number of shares they hold. These companies allow investors to pool their capital to fund large ventures while spreading the financial risks and rewards across all shareholders.

QK. Advantages and disadvantages of a joint stock company?

ADVANTAGES : easy capital , continuity , shareholders have limited liability

DISADVANTAGES : hard to set up , pub limited companies have to disclose financial information , requre shit tonna documents to set up ,

Q14. Explain the system of a joint-stock company. [2]

These companies sell shares to raise capital. Other people can buy these shares and become a shareholder of the company. They are jointly owned by shareholders who receive dividends.

Q15. Explain why shareholders of a joint-stock company have limited liabilities. [4]

Only their individual investments are at risk if the business fails or leaves debt. If the company owes money, it can be sued and taken to court, but its shareholders cannot. The companies have a separate legal identity from their owners and are hence incorporated.

Q16. Explain how a joint-stock company is operated, and its continuity. [4]

Shareholders will elect a board of directors to manage and run the company daily. In small companies, the shareholders with the highest percentage of shares invested are directors, but directors don’t have to be shareholders. The more shares a shareholder has, the more their voting power. The business will continue even if one of its owners retires or dies.

Private Limited Companies & Public Limited Companies

Q17. Define ‘Private Limited’ & ‘Public Limited’ Companies. [4]

Private limited companies : One or more owners who can sell their shares to only the people known by the existing shareholders

Public limited companies : Two or more owners who can sell their shares to any individual or organization in the general public through stock exchanges.

Q18. State & explain 3 advantages of Pte Ltds & PLCs. [4]

Public limited companies can advertise their shares, in the form of a prospectus, which attracts investors.

Raise huge amounts of capital by selling shares.

Limited liability as the company and shareholders have separate legal identities.

QK. Pte Ltd and PLCs

Pte Ltd = private limited companies

PLCs = public limited companies

Q19. Explain 3 disadvantages of Pte Ltds or PLCs or both. [6]

Pte Ltd: They cannot sell shares to the public, restricting the transfer of shares, hence raising lesser capital than PLCs

PLC: PLCs and Pte Ltd must hold an Annual General Meeting (AGM), to inform shareholders about the company’s performance and decisions, and vote on strategic decisions, which can be very expensive to set up

Pte Ltd & PLC: Pte Ltds are required by law to publish their financial statements annually, and for PLCs to publish all accounts and reports. This can be very expensive, and competitors could use it to learn the company’s secrets.

Franchises

Q20. Define ‘franchises’. [2]

The owner of a business grants a license to another person or business to use their business idea.

QK. Franchise terms

Franchisor is the owner of the business name

Franchisee is the one running the operations

Q21. State advantages and disadvantages to the franchisor. [6]

Franchisee will run the operations. Income from franchisee in the form of franchise fees and royalties. Rapid, low-cost method of business expansion.

Profits from the franchise need to be shared with the franchisee. If one franchise fails, it can affect the reputation of the entire brand. Franchisees may not be as skilled.

Q22. State advantages and disadvantages to the franchisee. [6]

The franchisor will supply the raw materials or products. An established brand and trademark, so the chance of business failing is low. The franchisor will give technical and managerial support.

Cost of setting up the business. Need to advertise and promote the business in the region themselves. Profits have to be shared with the franchisor.

Joint Ventures

Q23. Define ‘Joint Ventures’. [2]

A joint venture is an agreement between two or more businesses to work together on a project. The foreign business will work with a domestic business in the same industry.

Ex. Nasa + Google to do Google earth

Q24. State advantages and disadvantages of a joint venture. [4]

Reduces risks and cuts costs. Each business brings different expertise to the joint venture. The market potential for all the businesses in the joint venture is increased.

The decision-making process may be ineffective due to different business cultures and leadership styles. Any mistakes made will reflect on all parties in the joint venture, which may damage their reputations.

Public Sector Corporations

Q25. Define ‘Public Sector Corporations’ & state their aim. [4]

Businesses that are owned by the government and run by directors appointed by the government. They usually provide essential services like water, electricity, and health services. They aim to keep prices low so everybody can afford the service, to keep people employed, and to offer a service to the public everywhere.

Q26. State advantages and disadvantages of public sector corporations. [6]

Businesses that are considered natural monopolies will be controlled by the government. They provide essential services to citizens. Rescue important businesses when they are failing through nationalization.

Motivation might not be as high because profit is not an objective. Subsidies lead to inefficiency. It is also considered unfair for private businesses. Businesses could be run for government popularity.

Business Objectives & Stakeholder Objectives

Q27. Define ‘business objectives’ and state 3 benefits. [3]

Business objectives are the aims and targets that a business works towards to help it run successfully.

Decision-making will be easier and less time-consuming as there are set targets to base decisions on.

Setting objectives increases motivation as employees and managers now have clear targets to work towards.

Managers can compare the business’ performance to its objectives and make any changes in its activities if required.

Q28. State & explain 3 objectives of private sector businesses. [6]

Survival is an important objective, especially for firms in highly competitive markets. To achieve this, firms could lower prices, which would mean forsaking profit maximisation.

Profits are required for further investment into the business as well as for the payment of return to the shareholders of the business.

Growth as larger businesses can ensure greater job security and salaries for employees. The business can also benefit from higher market share and economies of scale.

Q29. Explain why business objectives change. [2]

As market situations change and as the business itself develops, its objectives will change to reflect its current market and economic position.

Stakeholders

Q30. Define ‘stakeholders’. [2]

A stakeholder is any person or group that is interested in or directly affected by the performance or activities of a business.

Q31. Define 3 internal stakeholders and state their objectives. [6]

Shareholders are the risk-takers of the business who invest capital into the business to set up and expand it.

They are entitled to a rate of return on the capital invested into the business and will therefore have profit maximization as an objective. Business growth will also be important to ensure that the value of shares increases.

Workers are the people who are employed by the business and are directly moved in its activities.

Job security which is the ability to be able to work without the fear of being dismissed or made redundant.

Regular payment for the work they do.

Contract of employment that states all the rights and responsibilities to and of the employees.

Managers are employees who control the work of others and make key business decisions.

Business growth will allow managers to control a bigger and well-known business.

Higher salaries due to their jobs requiring more skill and effort. Aim towards a secure job.

Q32. Define 4 external stakeholders and state their objectives. [6]

Customers purchase and consume the goods and services that the business produces or provides.

A price that reflects the quality of the good

A safe and reliable product that is not falsely advertised

Well-designed products of a perceived quality

The Government protect workers and customers from the business’ activities and safeguard their interests.

For the business to grow and survive, bringing benefits to the economy. A successful business will increase the total output of the country, improve employment, and increase government revenue through taxes.

They expect firms to stay within their rules and regulations.

Banks provide financial help for the business’ operations.

Business liquidity

The Community which consists of all the stakeholder groups, especially the third parties that are affected by the business’ activities.

The business must offer jobs and employ locals.

The production process of the business cannot harm the environment.

Products must be socially responsible and must not pose any harmful effects from consumption.

Q33. State & explain 3 objectives of public-sector businesses & social enterprises. [6]

Financial: Meeting the profit target set by the government. This is so that it can be reinvested into the business to meet the needs of the society.

Service: Provide a service to the community that must meet the quality target set by the government.

Social: Aiding the community by providing citizens employment, good quality goods and services at an affordable rate, etc.

Motivating Workers

Motivation

QK. What is motivation?

Motivation refers to the internal and external factors that drive stakeholders to pursue goals, put in effort, and perform tasks effectively and efficiently within an organization. It is the process that influences, energizes, and directs behavior toward achieving specific business objectives.

Q34. Explain 3 reasons why people work. [4]

Job security means they can always maintain or grow their standard of living.

Job satisfaction, being satisfied with their job.

Have a better standard of living, whereby earning incomes they can satisfy their needs and wants.

Q35. Why do firms make sure their workers are motivated? [2]

When workers are well-motivated, they become highly productive and effective in their work, become less absent, and are less likely to leave the job, thus increasing the firm’s efficiency and output, leading to higher profits.

Maslow’s Hierarchy of Needs

Q36. Draw a diagram explaining Maslow’s Hierarchy of Needs. [4]

Motivation Theories

Q37. Explain F. W. Taylor’s motivation theory. [4]

Taylor based his ideas on the assumption that workers were motivated by personal gains, mainly money and that increasing pay would increase productivity. Therefore, he proposed the piece-rate system, whereby workers get paid for the number of output they produce. Hence, to gain more money, workers would produce more. He also suggested scientific management in production organization, to break down labour to maximize output.

Q38. Explain Herzberg’s Two-Factor Theory. [4]

Herzberg states that people have two sets of needs, basic animal needs called ‘hygiene factors’ such as status, security, and work conditions, and needs that allow the human being to grow psychologically, called the ‘motivators’, such as achievement, recognition, and promotion. The hygiene factors need to be satisfied, if not they will act as de-motivators to the workers.

Motivating Factors

Q39. State 3 worker (fringe) benefits. [2]

Discounts on the firm’s products, free accommodation, free healthcare

Q40 Explain ‘job satisfaction’ & ‘job rotation’. [4]

The enjoyment derived from the feeling that you’ve done a good job.

This involves workers swapping around jobs and doing each specific task for only a limited time and then changing around again. This increases the variety of work and will also make it easier for workers to do other jobs if somebody is ill or absent.

Q41. Explain ‘job enlargement’ & ‘job enrichment’. [4]

Extra tasks of similar levels of work are added to a worker’s job description. They will not add a greater responsibility of work for the employee, but make work more interesting.

This involves adding tasks that require more skill and responsibility to a job. This gives employees a sense of trust from senior management and motivates them to carry out the extra tasks efficiently.

Q42. Explain ‘team-working’. [2]

A group of workers is given responsibility for a particular process, product or development. They can decide as a team how to organize and carry out the tasks.

Q43. Explain ‘opportunities for training’. [2]

Providing training will make workers feel that their work is being valued. Training also provides opportunities for personal growth and development thereby attaining job satisfaction.

Q44. Explain ‘opportunities of promotion’. [2]

This will get workers to work more efficiently and fill them with a sense of self-actualization and job satisfaction.

Recruitment, Selection, & Training of Employees

Q45. State 6 roles of the H.R. Department. [2]

Wages and salaries, industrial relations, training programs, health and safety, recruitment and selection, redundancy and dismissal

Recruitment & Selection

Q46. Define ‘recruitment’. [2]

Recruitment is the process from identifying that the business needs to employ someone up to the point where applications have arrived at the business.

QK. Steps to recruitment

1. Job analysis ( req of job , job qualification needed )

2. Attracting candidates , via advertising

3. Selection , review application , do interviews

4. Hiring -

(recruitment starts with a vacant position in the work)

Job Analysis, Description, & Specification

Q47. Define ‘Job Analysis, Description, & Specification’. [4]

A job analysis identifies and records the tasks and responsibilities relating to the job. ( job responsibilities )

A job description outlines the responsibilities and duties to be carried out by someone employed to do the job, ( responsibilities of job for the employee )

A job specification is a document that outlines the requirements, qualifications, expertise, skills, personal characteristics, etc. required by an employee to be able to take up the job. ( job requirements made by the employer for the employee )

Internal & External Recruitment

Q48. Define ‘Internal Recruitment’. [2]

Internal recruitment is when a vacancy is filled by an existing employee of the business.

Q49. State 3 advantages and 2 disadvantages of internal recruitment. [6]

• Saves time and money as there is no need for advertising and interviewing.

• The person is already known to the business, so they know the business’ way of working.

• It is motivating for other employees to see their colleagues being promoted, urging them to work hard.

• There is no new skills and experience coming into the business

• Jealousy among workers

Q50. Define ‘External Recruitment’ and state its process. [2]

External recruitment is when a vacancy is filled by someone who is not an existing employee and will be new to the business.

External recruitment needs to be advertised and can be done in local or national newspapers, specialist magazines and journals, job centers, or even recruitment agencies.

QK. State 2 advantages and 3 disadvantages of internal recruitment. [6]

• more better options than internal recruitment

• avoid jealously among workers

• more expensive

• takes time to do advert process

• risk of poor fit

QK. CV.

curriculum vittate

Selection

Q51. State 3 points that an interviewer looks for in a candidate, along with 4 types of tests they can carry out. [2]

Personal qualities of the applicant, the applicant’s ability to do the job, character and personality of the applicant

Skills tests, aptitude tests, personality tests

Q52. Define the ‘contract of employment’. [2]

The contract of employment is a legal agreement between the employer and the employee listing the rights and responsibilities of workers.

Q53. State pros & cons of part-time employment to the employer. [6]

More flexible hours of work. Employees work fewer hours and are willing to accept lower pay. It is less expensive than employing and paying full-time workers.

They are less likely to be trained because the workers see the job as temporary. They may be less committed to the business and are more likely to leave and go get another job. They are less likely to be promoted because they will not have gained the skills and experience as full-time employees.

Training methods

Q54. Explain the importance of training workers. [2]

It will improve the worker’s skills and knowledge and help the business be more efficient and productive, especially when new processes and products are introduced. It will improve the workers’ chances of getting promoted and raise their morale.

Q55. Define ‘induction training’ & state pros & cons. [4]

An introduction given to a new employee, explaining the firm’s activities, customs and procedures and introducing them to their fellow workers.

It helps new employees settle into their jobs quickly. It may be a legal requirement to give health and safety training before the start of work. They are less likely to make mistakes.

Wages still have to be paid during training, even though they aren’t working. It delays the state of the employee starting the job. It is time-consuming.

Q56. Define ‘on-the-job training’ & state 3 pros & cons. [4]

It occurs by watching a more experienced worker doing the job.

It ensures there is some production from the workers whilst they are training. It is training to the specific needs of the business. It usually costs less than off-the-job training.

The trainer will lose some production time as they are taking some time to teach the new employee. The trainer may have bad habits that can be passed on to the trainee. It may not necessarily be recognized training qualifications outside the business.

Q57. Define ‘off-the-job training’ & state 2 pros & 3 cons. [4]

It involves being trained away from the workplace, usually by specialist trainers.

A broad range of skills can be taught using these techniques. Employees may be taught a variety of skills and they may become multi-skilled to allow them to do various jobs in the company when the need arises.

Costs are high. The additional qualifications mean it is easier for the employee to leave and find another job. It means wages are paid, even though they aren’t working.

Workforce Planning

Q58. Define ‘workforce planning’ & state 5 reasons for downsizing. [4]

Workforce Planning is the establishment of the workforce needed by the business for the foreseeable future in terms of the number and skills of employees required.

A business has merged or been taken over and some jobs are no longer needed. Introduction of automation. Relocating of the factory abroad. Factory, shop, or office closure. Falling demand for their products.

Q59. Briefly describe 2 ways to downsize the workforce. [4]

Dismissal is when a worker is told to leave their job because their work or behavior is unsatisfactory. aunty lai lai win

Redundancy is where an employee is no longer needed and so loses their work, though not due to any fault of theirs. They may give some money as compensation for the redundancy.

Q60. Define ‘industrial tribunal’. [2]

A legal meeting which considers workers’ complaints of unfair dismissal or discrimination at work. This will hear both sides of the case and may give the worker compensation if the dismissal was unfair.

Internal & External Communication

Effective Communication

Q61. Define ‘communication’ and explain the difference between internal & external communication. [4]

Communication is the transferring of a message from the sender to the receiver, who understands the message.

Internal communication is between two members of the same organisations

External communication is between the organisation and other organisations or individuals.

Q62. State 4 factors of effective communication. [2]

A sender of the message,

a medium of communication,

a receiver of the message,

and feedback from the receiver to confirm that the message has been received and acknowledged.

Q63. Define ‘one-way & two-way communication’. [4]

One-way communication involves a message which does not require feedback

Two-way communication is when the receiver gives a response to the message received

Q64. Define ‘downward, upward, & horizontal’ communication. [4]

Downward communication involves messages from managers to subordinates. ( higher to lower )

Upward communication involves messages from subordinates to managers. ( lower to higher )

Horizontal communication occurs between people on the same level of an organization structure. ( same level )

Communication Methods

QK. Types of Communication methods and examples

Verbal communication - talking irl , zooming , calling

Written communication - text , gmail

Visual communication - videos , pie charts

Q65. State advantages & disadvantages of verbal communication. [4]

The speaker can reinforce the message by changing his tone, body language, etc. to influence the listeners. There is an opportunity for immediate feedback. It is quick and efficient

No written record of the message can be kept for later reference. It can take long if there is feedback and therefore, discussions. In a meeting, it cannot be guaranteed that everybody is listening or has understood the message.

Q66. State advantages & disadvantages of written communication. [4]

E-mail and fax are quick and cheap. There is evidence of the message for later reference. It can be copied and sent to many people, especially with e-mail. Can include details.

No opportunity for body language to be used to reinforce messages. Cannot ensure that message has been received or acknowledged. Direct feedback may not always be possible. Language could be difficult to understand. Long messages may cause disinterest in receivers.

Q67. State 2 advantages & disadvantages of visual methods. [2]

Can present information appealingly and attractively. Can be used along with written material.

No feedback. The message may not be understood properly. ( dun require feedback )

Choosing Communication Methods

Q68. Explain 7 factors affecting the choice of an appropriate communication method. [6]

Speed: If the receiver has to get the information quickly, then a telephone call or text message has to be sent. If speed isn’t important, a letter or e-mail will be more appropriate.

Cost: If the company wishes to keep costs down, it may choose to use letters or face-to-face meetings as a medium of communication. Otherwise, telephone, posters, etc. will be used.

Message details: If the message is very detailed, then written and visual methods will be used

Leadership style: A democratic style would use two-way communication methods such as verbal mediums. An autocratic one would use notices and announcements.

Amo of receiver: If there is only one receiver, then a personal face-to-face meeting or telephone call will be more apt. If all the staff is to be sent a message, a notice of e-mail will be sent

Importance of a written record: If the message needs to have a written record like a legal document or receipts of new customer orders, then written methods will be used.

Importance of feedback: If feedback is important, like for a quick query, then a direct verbal or written method will have to be used.

Q69. Define ‘formal & informal’ communication. [2]

Formal communication is when messages are sent through established channels using professional language.

Informal communication is when information is sent and received casually with the use of communication among employees.

Production of Goods & Services

QK. INPUT AND OUTPUT

INPUT being cell ( factors of production )

OUTPUT being actual work produced ( G&S )

Q70. Define ‘Production’ and state 4 roles of the operations department. [2]

The effective management of resources in producing goods and services.

Use the resources cost-effectively and efficiently. Manage inventory effectively. Produce the required output to meet customer demands. Meet the quality standards expected by customers.

Q71. Define ‘productivity’ and state the formula for labour productivity. [2]

Productivity is a measure of the efficiency of inputs used in the production process over some time. It is the output measured against the input used to produce it.

Q72. Explain 4 ways to increase productivity. [4]

Improved quality control and assurance systems to ensure that there is no wastage of resources.

Introducing automation so that production is faster and error-free.

Improve employee motivation so that they will be willing to produce more efficiently.

Improving labour skills by training them so they work more productively and waste fewer resources.

Q73. Define ‘lead time’ & ‘buffer inventory level’. [2]

The time it takes for the reorder supply to arrive.

The level of inventory the business should hold at the very minimum to satisfy customer demand at all times.

Inventory Management

Q74. State 3 reasons why businesses hold inventories. [2]

Benefit from economies of scale. Price fluctuations. Prepared for production.

Q75. State 6 costs that occur from holding inventory. [4]

Warehousing, insurance, shrinkage, handling costs, obsolesce, opportunity.

Lean Production

Q76. Define ‘Lean Production’ and state 7 types of wastage. [4]

Lean production refers to the various techniques a firm can adopt to record wastage and increase efficiency.

Waiting, unnecessary inventory, transportation, defects, overproduction, over-processing, motion

Q77. State 3 benefits from avoiding wastage. [4]

Less storage of raw materials, components, and finished goods so less money and time is tied up in inventory. Ultimately, costs will lower, which helps reduce prices, making the business more competitive and earn higher profits as well. No need to repair faulty goods which leads to good customer satisfaction.

Q78. Explain the term ‘Kaizen’ & state 3 benefits. [6]

Kaizen is a Japanese term meaning ‘continuous improvement’, aiming to increase efficiency and reduce wastage by getting workers to get together in small groups and discuss problems and suggest solutions. Since they’re the ones directly involved in production, they will know best how to identify issues. When kaizen is implemented, the factory floor, for example, is rearranged by re-positioning machinery and equipment so that production can flow smoothly through the factory in the least possible time.

Improved factory layout may allow some jobs to be combined, so freeing up employees to do other jobs in the factory. Reduced amount of space needed for production. Increased productivity.

Q79. Explain ‘Just-in-Time Inventory Control’ & state 3 benefits. [6]

This technique eliminates the need to hold any kind of inventory by ensuring that supplies arrive just in time they are needed for production. The making of any part is done just in time to be used in the next stage of production and finished goods are made just in time they are needed for delivery to the customer. The firm will need very reliable suppliers and an efficient system for reordering supplies.

Finished goods are immediately sold off, so cash flows in quickly. Warehouse space is not needed anymore, so more space is available for other uses. Reduces cost of holding inventory

Q80. Explain ‘Cell Production’. [2]

The production line is divided into separate, self-contained units each making a part of the finished good. This works because it improves worker morale when they are put into teams and concentrate on one part alone.

Methods of Production

QK. Different methods of production and examples

Job Production - custom cake , custom retail , carpentor

Batch production - shirts , newspaper , computer chips

Flow production - China mass producing shitty products

Q81. Define ‘Job Production’ & state 3 pros & 3 cons. [6]

Products are made specifically to order, customized for each customer.

The product meets the exact requirements of the customer. Workers will have more varied jobs as each order is different, improving morale. Very flexible method of production

Production often takes a long time. Materials may have to be specially purchased for different orders, which is expensive. Skilled labour will often be required which is expensive. Since they are made to order, any errors may be expensive to fix.

Q82. Define ‘Batch Production’ & state 3 pros & 2 cons. [6]

Similar products are made in batches or blocks. A small quantity of one product is made, then a small quantity of another.

Flexible way of working as production can be easily switched between products. Gives some variety to workers, leading to more consumer choices. Even if one product’s machinery breaks down, other products can still be made.

Lots of raw materials will be needed for different product batches, which can be expensive. Machines have to be reset between production batches which delays production. Can be expensive since finished and semi-finished goods will need moving about.

Q83. Define ‘Flow Production & state 3 pros & cons. [6]

Large quantities of products are produced in a continuous process on the production line.

Costs are low in the long run so prices can be kept low. Can benefit from economies of scale in purchasing. Capital-intensive production, so reduces labour costs and increases efficiency. Automated production lines can run 24/7.

Capital cost of setting up the flow line is very high. Lots of raw materials and finished goods need to be held in inventory, which is expensive. If one machinery breaks down, the entire production will be affected. A very boring system for workers, leading to low job satisfaction and motivation.

Choosing Production Methods

Q84. State factors affecting which production method to use. [2]

The nature of the product and demand. The size of the market and business.

Technology & Production

Q85. Define ‘Automation & Mechanization’. [4]

Equipment used in the factory is controlled by computers to carry out mechanical processes.

Production is done by machines but is operated by people.

Q86. Define ‘CAD, CAM, & CIM’. [4]

Computer software that draws items being designed more quickly and allows them to be rotated, zoomed in, and viewed from all angles.

Computers monitor the production process and control machines and robots, similar to automation.

The integration of CAD and CAM. The computers that design the product using CAD are connected to the CAM software to directly produce the physical design.

Q87. Define ‘EPOS & EFTPOS’. [4]

Used at checkouts where the operator scans the bar code of each item bought by the customer individually. The item details and price appear on the screen and are printed on the receipt. They can also automatically update and reorder stock as items are bought.

The electronic cash register at the till will be connected to the retailer’s main computer and different banks. When the customer swipes the debit card at the till, information is read by the scanner and an amount is withdrawn from the customer’s bank account.

Q88. State pros and cons of technology in production. [4]

Greater productivity and job satisfaction. Better quality products. Quicker communication and less paperwork. More accurate demand levels are forecast since computers monitor inventory levels. New products can be introduced as new production methods are introduced.

Unemployment rises as machines and computers replace human labour. Expensive to set up. Employees take time to adjust to new technology or even resist it as their work practices change. New technology quickly becomes outdated and frequent updating of the system will be needed, which is expensive and time-consuming.

Costs, Scale of Production, & Break-even Analysis

Costs

Q89. Define ‘fixed costs’. [2]

Costs that do not vary with output produced or sold in the short run, and are incurred even when the output is zero.

Q90. Define ‘variable costs’. [2]

Costs that directly vary with the output produced or sold

Q91. Define ‘total costs’. [2]

All fixed costs added to all variable costs of production.

Q92. Define ‘average costs’. [2]

Total cost of production divided by total output.

Scale of Production

Q93. Define ‘economies of scale’ & ‘diseconomies of scale’. [2]

Economies of scale are the factors that lead to a reduction in average costs as a business increases in size.

Diseconomies of scale are the factors that lead to an increase in the average costs of a business as it grows beyond a certain size.

Q94. Explain the 5 economies of scale of larger businesses. [6]

Purchasing: For large output, a large amount of components have to be bought. This will give them some bulk-buying discounts that reduce costs.

Marketing: Larger businesses can afford their vehicles to distribute goods and advertise on paper and TV. They can cut down on marketing labour costs. The advertising rates costs also do not rise as much. Average costs will thus reduce

Financial: Bank managers will be more willing to lend money as they are more likely to be able to pay off the loan. Thus, they will be charged a low rate of interest on their borrowings, reducing average costs.

Managerial: They can afford to hire specialist managers who are very efficient and reduce the business’ costs.

Technical: They can afford to buy large machinery such as a flow production line that can produce a large output and reduce average costs.

Q95. Explain 3 reasons for diseconomies of scale. [4]

Poor communication: As a business grows large, more departments and managers and employees will join, and communication can get difficult. Messages may be inaccurate and slow to receive, reducing efficiency and increasing average costs.

Low morale: When employees have non-contact with their senior managers, they may feel they need to be more valued by management. This would lead to inefficiency and higher average costs.

Slow decision-making: Its chain of command will get longer, slowing down communication, so any decision-making will also take time.

Break-even Analysis

Q96. Define ‘break-even level of output’. [2]

The output needed to be produced and sold to make a profit.

Total revenue equals total costs

Q98. Explain 2 advantages of break-even charts and how to calculate the margin of safety. [2]

Managers can change the costs and revenues and redraw the graph to see how that would affect profit and loss.

The chart can calculate the safety margin, the amount by which sales exceed the break-even point.

The margin of Safety = Units being produced and sold - Break-even Output

Q99. Explain 3 limitations of break-even charts. [4]

They are constructed with the assumption that all units being produced are sold. Fixed costs may not always be fixed if the scale of production changes. Break-even charts assume that costs can always be drawn using straight lines

Achieving Quality Production

Q100. Define ‘quality’ and state 5 reasons why it is important. [4]

Quality means to produce a good or service which meets customer expectations. The product should be free of faults or defects.

Attract new customers. Increase sales. Establishes a brand image. Builds brand loyalty. Maintains a good reputation.

Q101. State 3 effects if a firm has no quality. [2]

Bad reputation leading to low sales and profits. Have to replace faulty products and repeat poor service, increasing costs. Lose customers to other brands.

Q102. Define ‘quality control’ & state 2 pros & 3 cons. [4]

The checking for quality at the end of the production process, whether a good or a service.

Eliminates the fault or defect before the customer receives it, so better customer satisfaction. Not much training is required for conducting this quality check.

If the product has to be replaced and reworked, then it is very expensive for the firm. Quality control may find faults and errors but doesn’t find out the root cause of the problem. Still expensive to hire employees to check for quality

Q103. Define ‘quality assurance’ & state 3 pros & 2 cons. [4]

The checking for quality throughout the production process of a good or service.

Products don’t have to be scrapped or reworked as often, so less expensive than quality control. Eliminates the fault or defect before the customer receives it, so better customer satisfaction. Since each stage of production is checked for quality, faults and errors can be easily identified and solved.

Expensive to carry out. Employees may not follow quality standards well.

Q104. Define ‘Total Quality Management’ & state 3 pros & 2 cons. [4]

Continuous improvement of products and production process by focusing on quality at each stage of production.

No customer complaints and so improved brand image. Products don’t have to be scrapped or reworked, so lesser costs. Waste is removed and efficiency is improved.

Expensive to train employees. Employees may not be motivated to follow the procedures.

Q105. State how customers can be assured of the quality of a product or service. [2]

They can look for a quality mark on the product like ISO.

QK. How can quality be determined.

via

quality control

quality assurance

total quality management

ISO mark