Optimal resource mix Flashcards
What is the optimal resource mix
The optimal resource mix is the combination of production resources that best enables a business to achieve their corporate objectives.
In other words: The business has got to decide: how much labour, how much capital, which natural resources to use, to enable the business to achieve their corporate objectives.
What are some considerations
Costs
Quality
Brand image
What is labour intensive production
Labour Intensive Production occurs when the majority of a firm’s production costs are spent on human inputs to the production process.
What are some examples of Labour intensive production
Hair dressing
Tailoring
Personal training
Financial services
What are some pros to labour intensive production
Each product can be adjusted to suit the needs of the customers
Work tends to be varied, which could improve motivation
Workers ideas can be used ti improve the production process
What are some cons to labour intensive production
Highly skilled workers may demand high wages
Training cost and time
Difficulties recruiting at the high skill level
What is capacity intensive production
Capital Intensive Production occurs when the majority of a firm’s production costs are spent on technological inputs to the production process
What are some examples of Capital Intensive Production
Production line produced goods (Example - Canned goods, cars, mobile phones).
High tech
Pharmaceuticals
Pros of capital intensive production
Products are standardised and made to the same specification
Higher output = economies of scale
Useful for mass production and mass customisation
What are some cons of capital investment production
High set up and maintenance costs
Lack of innovation
Can be expensive to change for new products/ variation
What is the optimal resource mic
The optimal resource mix is the combination of production resources that best enables a business to achieve their corporate objectives.
