25. Glossary

Question 1

Outsourcing

Answer 1

Using another business (a third party) to undertake a part of the production process rather than doing it within the business using the firms’s own employees.

Question 1

Capacity utilisation

Answer 1

The proportion of maximum output capacity current being achieved

Question 2

Maximum (full) capacity

Answer 2

The highest level of sustained output that can be achieved

Question 3

Excess capacity

Answer 3

This exists when the current levels of output are less than the full capacity output of a business; also known as spare capacity

Question 4

Rationalisation

Answer 4

Reducing capacity by closing factories/production units

Question 5

Capacity shortage

Answer 5

When demand for a business’s products exceeds production capacity

Question 6

Business process outsourcing

Answer 6

A form of outsourcing that uses specialist contractors to take responsibility for certain business functions, such as human resources and finance.