Location, Scale and Quality Flashcards
Define Optimal Location
A business location that gives the best combination of quantitative and qualitative factors
What are the problems that can occur if a business is a non-optimal location?
- High fixed site costs
- High Labour Costs
- Low Unemployment Rates
- Lower consumer disposable incomes
- Poor transport infrastructure
What are the Quantitative Factors a Business should consider while choosing an optimal location?
- Fixed and Variable Costs
- External Economies or Diseconomies of Scale
- Transport Costs
- Government Grants
- Profit and Revenue Estimates [might need to be compared with other costs]
What are the Qualitative Factors a Business should consider while choosing an optimal location?
- Safety
- Ethical Considerations
- Areas for further expansion [relocation is expensive]
- Environmental Concerns
- Infrastructure
Define Offshoring
The relocation of a business process from one country to another
widely adopted approach due to globalisation
What are some benefits of offshroing?
- Lower costs
- Supply of qualified workforce
- Avoid Protectionism
- Access to Global Markets
Define Reshoring
Transferring of business operations that was overseas back to the original country location
What are the reasons for reshoring?
- Language and communication barriers
- Cultural Differences
- Supply chain concerns
- Ethical Concerns
Define Scale of Operations
The maximum output that can be achieved using the available inputs
Define Economies of Scale
Factors that cause reductions in unit average costs of product as a business their scale of operations
What are some internal economies of scale?
- Purchasing
- Marketing
- Managerial
- Technical
- Financial
Define Diseconomies of Scale
Factors that cause unit average costs of production to increase when a business increases their scale of production
What are some diseconomies of scale?
- Communication
- Alienation of Workforce
- Poor Coordination
How could diseconomies of scale be prevented?
- Management by Objectives : it gives all departments agreed objectives
- Decentralisation : Gives some divisions autonomy and responsibility
Define Quality Product
A good/service that meets customer expectations and therefore fulfils its intended purpose
What is the importance of Quality?
- It creates customer loyalty
- Reduces costs of customer complaints
- Reduces advertisment costs through brand image
- Prolongs the product life cycle
- Acts profitable [USP]
How is Business Competitveness affected by quality?
- Improving quality may be better than lowering prices in markets
- Consistency in quality can improve customer satisfaction and create a USP
- Consumer incomes are increasing, making it important for differentiation
Define Quality Control
Checking based on the inspection of products or sample products
What are the 3 stages of Quality Control?
- Prevention
- Inspection
- Correction and Improvement
What are 2 benefits and 2 limitations of Quality Control?
Benefits
- Prevents faulty products reaching customers
- Skilled inspectors can identify the source of problems easily
Limitations
- It can be expensive to hire specialist trained inspectors
- Employees may not feel responsible for quality
Define Quality Assurance
A system of agreeing and meeting quality standards at each stage of production to ensure customer satisfaction
What are 2 benefits and 2 limitations of Quality Assurance?
Benefits
1. Quality is checked at each stage of production which can save costs [including check of components]
2. Employees will feel responsible over quality which can act as a form of job enrichment
Limitations
1. Relies on employee commitment - quality needs to be instilled in the culture of the business
2. Training costs can be high and it may require frequent appraisal
It can also gain ISO 9000 : an accreditation of quality assurance
Define Total Quality Management [TQM]
An approach to quality that aims to involve all employees in quality improvement
It is a philosphy - not a technique
What are 2 benefits and 2 limitations of TQM?
Benefits
1. Boosts employee motivation through teamworking - internal customer and zero defects
2. It eliminates the need for a separate quality control department
Limitations
1. Relies heavily on employee commitment
2. Expensive and time-consuming to implement
Define Benchmarking
Comparing a business against the performance standards of the best businesses in the same industry
What are 2 benefits and 2 limitations of Benchmarking?
Benefits
- It allows for external comparisons which can be more effective in solving business problems [areas of greater customer significane etc.]
- Workforce involvement can lead to greater motiviation and crossover of ideas
Limitations
1. It depends on retrieving up-to-date information about businesses
2. It can discourage incentives by merely copying ideas
What are some evaluation points to consider about the importance of Quality?
- Fundamental towards business success
- It has many cost-advantages long term
- It needs to be drilled into the culture of the business
- The meaning of quality should not be forgotten
- Type of market / good matters
- Marketing mix matters - customers need to percieve quality
