20. The nature of operations

Question 1

What are the inputs of operations?

Answer 1

• Resources
• Land
• Capital
• Labour

Question 2

What are the outputs of operations?

Answer 2

• Goods
• Services
• Components for other firms

Question 3

Operations are concerned with:

Answer 3

• Efficiency of production - keeping costs as low as possible
• Quality
• Flexibility - the need to adapt to new processes

Question 4

Factors affecting the degree of value added to inputs

Answer 4

• The design of the product
• The efficiency with which the input resources are combined and managed
• The impact of the promotional strategy on convincing consumers to pay more for the product than the cost of the inputs

Question 5

Define capital

Answer 5

Wealth in the form of money or assets, taken as a sign of the financial strength of an organization, and assumed to be available for development or investment.

Question 6

Define production

Answer 6

Converting inputs to outputs

Question 7

Define level of production

Answer 7

The number of units produced during a time period

Question 8

Define productivity

Answer 8

The ratio of outputs to inputs during production. Concerned with how efficiently inputs are converted into outputs

Question 9

What is labour productivity?

Answer 9

• Number of units per worker

- Total output in a given time period/ total workers employed

Question 10

What is capital productivity?

Answer 10

• Output/Capital employed

Question 11

How to raise the productivity level?

Answer 11

• Improve the training of staff to increase skill levels
• Improve worker motivation
• Purchase more technologically advanced equipment
• More efficient management

Question 12

Is raising productivity always the answer?

Answer 12

• Increasing productivity does not guarantee success - if the product is unpopular with consumers => not profitable
• Greater effort and contribution form workers to increase productivity will lead to higher wage demand => increase unit costs
• Greater productivity => does not require a lot of workers => unemployment

Question 13

Define efficiency

Answer 13

Producing output at the highest ratio of output to input

Question 14

Define effectiveness

Answer 14

Meeting the objectives of the enterprise by using inputs productively to meet customers’ needs

Question 15

Difference between efficiency and effectiveness

Answer 15

• Being effective is about doing the right things, while being efficient is about doing things right
• Effectiveness focuses more on results
• Efficiency focuses on the production process

Question 16

Define labour intensive

Answer 16

Involving a high level of labour input compared with capital equipment

Question 17

Define capital intensive

Answer 17

Involving a high quantity of capital equipment compared with labour input

Question 18

Benefits of labour intensive

Answer 18

• Provides jobs to the local economy
• Employees can use initiative when it is required
• Cheaper than purchasing and maintaining equipment

Question 19

Limitations of labour intensive

Answer 19

• The accuracy and quality of work from person to person can vary => no product standardisation
• Human errors
• It costs money to recruit, select and train new employees
• Employees become tired and bored of repetitive tasks that have to be carried out

Question 20

Benefits of capital intensive

Answer 20

• Machines can work 24/7 without the need for breaks

- Machines can produce a consistent and standardised accuracy and quality of work

Question 21

Limitations of capital intensive

Answer 21

• Individual customer requirements can’t be met due to standardisation
• Costs of maintenance
• Breakdowns occur which can be expensive to rectify

Question 22

How to increase the level of labour productivity?

Answer 22

• Improve worker motivation: increasing pay, involving them in decision making process, financial and non financial methods
• Improve recruitment and training