Management and Information systems Flashcards
Overview
The process of globalisation has been accelerated by the way companies manage flows, be that flows of labour, products, services, information or capital.
The way companies are managed have changed due to the global relationships and systems in place. There are now common systems in the majority of global companies to make these companies more efficient.
Economies of scale
An economy of scale is the concept of increasing profits by producing a larger amount of products, as overall the average price to manufacture each product is lowered. Companies can save money by upscaling their production:
● Raw products can be bought in bulk, meaning they are cheaper.
● A large amount of products can be made quickly on production lines, meaning
less money is spent on labour.
● Large amounts of products can be shipped, meaning overall it costs less to send a
large shipment rather than many small ones.
Overall, if a company is willing (and has enough money) to spend more on initially buying larger factories, shipping equipment, and raw materials, they will save in the long run. Economies of scale require management by companies to ensure profits are heightened.
Global supply chains
A supply chain is the organised management of product flows, from when they are manufactured to when they are delivered to consumers.
Due to the ability to communicate information and transport products, companies can now have different stages of production in different countries. This overall minimises costs because each stage of production is specialised rather than having one factory that has to control every aspect of production, saving time and money.
outsourcing
Outsourcing is the hiring of other companies to complete company tasks that are essential, but are not necessary to complete by the company itself (e.g. call centres, final manufactures, advertising etc.).
Companies can outsource due to the ability to communicate information to the companies they hire. Overall this saves money, especially when outsourcing is done in low income countries due to lower labour costs.
offshoring
Offshoring is relocating a company process abroad. Due to communication systems, easier transport and the ability to transfer money, a lot of companies use offshoring to minimise costs. This management strategy saves money when relocating to low income countries, as labour costs are lower. Companies may also relocate due to lower taxes and availability of materials.
