2.3 Productive Efficiency Flashcards
Define production
The process of turning inputs into outputs
Define productivity
Output per worker
Give the formula for productivity
Number of Staff
It takes a German worker __ days to produce what an English one can in 5
4
Define Human Capital
Knowledge and skills embodied in people that raise productivity
Define Physical Capital
Tools and machines that make labour more efficient
Define efficiency
Using scarce resources in the most economically productive way through reducing costs and maximising human and physical capital
Give 6 factors that can increase productivity
- Human Capital
- Physical Capital
- Infrastructure
- Organisation
- Wages
- Workforce Motivation
Explain the relationship between productivity and pay
- Improving production adds is likely to lead to an increase in wages
- An increase in wages is likely to lead to an increase in productivity
Explain the relationship between productivity and economic growth
- High productivity increases GDP as it allows for business expansion
Explain how increased productivity could disadvantage the economy
COuld increase physical capital intensity and make people redundant
Explain how productivity creates a competitive advanatge
- Cost per unit will fall which allows for a lower price, providing a more competitive price
- Added profits spent on R&R
- Increased morale will increase the quality of the good or service
Define Capital intensity
Using large amounts of capital for production rather than labour
Define Labour Intensity
Using a majority of labour for production
Give a reason why Capital Intensity may not be suitable for a dynamic market
ore difficult to reprogramme machines than to retrain staff
Define capacity utilisation
A measure of the extent to which a business is using its productive potential
Give the formula for Capacity Utilisation
Maximum possible output
Define Under-Utilisation
Where a firm’s demand is too low and they cannot find enough orders
Give 4 possible causes of Under-Utilisation
- Seasonal demand
- New competitors
- Changes in fashion
- Wrong balance of the marketing mix
Give 3 benefits of Under-Utilisation
- More time for maintenance and staff training
- Less stress for employees
- Can cope with orders well
Give 4 disadvantages of Under-Utilisation
- Higher fixed cost per unit
- Can’t be fixed by lowering the price of the good
- Spare capacity can portray the image of being poor quality
- Staff can become demoralised
Give 5 possible solutions of Under-Utilisation
- Try to find a new business
- Rationalisation
- Short-term work
- Redundancies
- Extending the product range
Define Rationalisation
Selling off or shutting down parts of a business
Define Over-Utilisation
Where a firm is struggling to cope with demand
Give 4 causes of Over-Utilisation
- Seasonal demand
- Competitor dropping out of the market
- Fashion changes
- Successful marketing
Give a benefit of over-utilisation
Revenue is high
Give 3 disadvantages of Over-Utilisation
- Average costs higher than necessary
- Efficiency low
- The business is not as competitive as it should be
Give 4 possible solutions to Over-Utiliastion
- Extra shifts
- Temporary staff
- Outsourcing or subcontracting
- Expansion
Define Lean Management
An approach to management that focuses on minimising waste and cost whilst ensuring quality
Define Quality Control as a method of production
The traditional method of checking products are adequate to sell after production is finished
Define Quality Assurance as a method of production
Ensuring that quality standards are agreed and met throughout the production process
Define Total Quality Management as a method of production
Employees all involved in taking responsibility for their team’s work
Order these 3 methods of production in order of most to least strict (Quality Assurance, Quality Control, Total Quality Management)
Total Quality Management
Quality Assurance
Quality Control
Define Kaizen production
Continuous improvement where the whole company strive for improvements constantly
Define lead time
The time it takes for a decision to produce a good to its arrival on the market
Give 2 ways in which lean production can lead to a competitive advantage
- Gain a first movers advantage
- Allows an advantage in a price elastic market where they wouldn’t be able to otherwise
Define ‘Just in Time Production’
A stock control system that removes the need to store large quantities of stock
Give 5 advantages of ‘Just in Time Production’
- Reduced rent costs
- Increased capital intensity cuts wages
- Less likelihood of stock perishing
- Allows adaptation to trend changes
- Avoids the buildup of low demand products
Give a disadvantage of ‘Just in Time Production’
Can’t deal with unexpected, high-demand orders
How can minimising waste give a business a better perception?
They will have a better reputation which will attract more cutomers
How do reduced lead times benefit a business?
Makes the firm more market orientated and allows them to respond to changes in consumer demand
