3.4.3 Increasing efficiency and productivity

Question 1

3 what happens if capacity is too low

Answer 1

managers need to consider whether investment is worth it to expand
costs, return, risk involved

Question 2

3 what happens if capacity is too high

Answer 2

increase demand, through more promotions
downsize by closing parts of facilities

Question 3

3 what is capacity utilization

Answer 3

percentage of potential output being achieved

Question 4

3 what is the equation for capacity utilisation

Answer 4

(actual output / maximum output) x 100

Question 5

3 what is capacity utilization if the Eden Hotel has 320 rooms, but only 250 rooms are occupied?

Answer 5

250/320 x 100 = 78%

Question 6

3 why is capacity utilisation important

Answer 6

the higher the capacity utilisation, the higher the output from existing resources, unit cost will fall
low utilisation is wasteful, and may require downsizing
good to have some spare capacity - 95% etc

Question 7

4 what i the importance of efficiency

Answer 7

help bring the price down
maintain competitiveness
match competitors pricing
make higher profits with the same prices

Question 8

4 what are economies of scale

Answer 8

advantage an organization gains due to an increase in size
they cause an increase in efficiency
improve labour productivity

Question 9

4 what are diseconomies of scale

Answer 9

disadvantage due to an increase in size
cause decreased efficiency and increased unit cost of production

Question 10

4 what are technical economies of scale

Answer 10

modern equipment improves efficiency
mass production, high trained, large transportation all improve efficiency and decrease unit cost

Question 11

4 what are specialisation economies of scale

Answer 11

large firm: skilled specialists, division lof labour, high salaries
small firm: diverse specialists, specialist areas, lower salaries

Question 12

4 what are purchasing economies of scale

Answer 12

bulk buying, reduces costs
suppliers offer discounted prices

Question 13

4 what is marketing economies of scale

Answer 13

large firm: expensive research to persuade customers
reduce overall advertising and marketing costs

Question 14

4 what is financial economies of scale

Answer 14

large firm: safer to get loans more easily
easier access to funds

Question 15

4 what are research and development economies of scale

Answer 15

develop more innovation
easier to create new goods

Question 16

4 what are social and welfare economies of scale

Answer 16

large firm: provide social benefits like health care
improve motivation, easier to recruit

Question 17

4 what are managerial and administrative economies of scale

Answer 17

large firms employ best managers and adopt cost-effective procedures

Question 18

4 what is co-ordination diseconomies of scale

Answer 18

loss of control, disobedience, rigid and inflexible demands

Question 19

4 what are communication diseconomies of scale

Answer 19

too much hierarchy can reduce effectiveness
span of control widens too

Question 20

4 what is motivational diseconomies of scale

Answer 20

assess the needs, managers don’t know employees
less time for recognition and reward

Question 21

4 what are technical diseconomies of scale

Answer 21

large scale production, hard to organise

Question 22

4 what are excessive bureaucracy diseconomies of scale

Answer 22

management levels increase, slowing decisions

Question 23

4 what are staff problems diseconomies of scale

Answer 23

high staff turnover is not good

Question 24

4 what are less flexible diseconomies of scale

Answer 24

growing firms, fail to meet the needs of customers

Question 25

4 how can you increase efficiency

Answer 25

‘maximise output achieved from given inputs’
lean production techniques
optimal resource mix
use technology
capacity utilisation
labour productivity

Question 26

5 what is lean production

Answer 26

cutting waste and improving efficiency
just in time
kaizen

Question 27

5 what is Just In Time

Answer 27

minimise stockholding at each stage, minimise costs

Question 28

5 what is Kaizen

Answer 28

small but frequent improvements to minimise waste at the end

Question 29

5 advantages of Just In Time

Answer 29

no extra storage costs
less risk of stock being damaged or stolen
less faulty stock hold
less/no waste

Question 30

5 disadvantages of Just In Time

Answer 30

might not arrive in time
rely on suppliers
surge in demand is unaccommodated for
bulk buying is cheaper
frequent deliveries means high costs and more pollution
complex start up required

Question 31

5 what is inventory

Answer 31

raw materials
work in progress
finished goods

Question 32

5 what influences the choice between capital or labour intensive workforces

Answer 32

method of production
relative costs
customers
standard or personalised products
size and financial position of business

Question 33

5 what does Kaizen mean

Answer 33

Kai = change
Zen = good

Question 34

5 what does Kaizen do

Answer 34

focuses on small but frequent improvements in every aspect of the production process
all members involved (could be bad)
quality circles (Kaizen groups)
any level of hierarchy
requires high commitment and motivation

Question 35

5 what is Kaizen a big part of

Answer 35

Total Quality Management

Question 36

5 what is Total Quality Management

Answer 36

check quality at every stage of production

Question 37

6 what are the four factors of the resources mix

Answer 37

land
labour
capital
enterprise

Question 38

6 what is the optimal resource mix

Answer 38

best way of combining the factors of production in order to meet these requirements with financial constraints

Question 39

6 what is land

Answer 39

where the business is

Question 40

6 what is labour

Answer 40

employees

Question 41

6 what is capital

Answer 41

machinery used

Question 42

6 what is enterprise

Answer 42

risk taking
innovation

Question 43

6 advantages of capital intensive

Answer 43

standard quality, added value
higher output, increased speed
need only a few people

Question 44

6 disadvantages of capital intensive labour

Answer 44

expensive to set up
less motivation
if there’s a fault, production comes to a stop
running costs are high

Question 45

6 advantages of labour intensive

Answer 45

cheaper in low wage location
workforce can easily adapt to change
multiskilled
continuous improvement: kaizen
new ideas, government funding to protect jobs

Question 46

6 disadvantages of labour intensive

Answer 46

industrial relations: strikes
lack of skilled workers, demands aren’t high enough
high wage costs
HR costs are high to recruit, select and train staff

Question 47

6 what is technology

Answer 47

used to improve efficiency

Question 48

6 what is robotics

Answer 48

programming robots to carry out task more traditional
production process
logistics
quality assurance

Question 49

6 advantages of robotics

Answer 49

accuracy and consistency
speed and reliance
hazardous environments can be worked in

Question 50

6 disadvantages of robotics

Answer 50

initial costs and maintenance costs are high
loss of human touch
lack of initiative and adaptability

Question 51

6 when would you choose a capital intensive workforce

Answer 51

secondary sector, manufacturing

Question 52

6 when would you choose a labour intensive workforce

Answer 52

tertiary sector, services

Question 53

7 what is automation

Answer 53

use of machines to control a process
more accurate stock predictions through analysis
automated stock control levels and reordering
asses data on stock and location
use Electric point of sale (barcodes, scanners)

Question 54

7 what is design technology

Answer 54

use of computers in design stage of developing a product
Computer Aided Design
3D simulation to allow more manipulation
easily altered
changing conditions testing