UNIT 4. Chapter 20: The nature of operations

Question 1

What’s the aim of production?

Answer 1

Added value: the difference between the cost of purchasing raw materials and the price of the finished goods.

Question 2

What are the operations managers concerned with? (3)

Answer 2

• Efficiency of production - keeping the cost low
• Quality - The good or service must be suitable for the purpose intended
• Flexibility - the need to adapt to new processes and new products

Question 3

What does the value of added value depend on? (3)

Answer 3

• The design of the products: does the quality enable high pricing?
• The efficiency with which the input resources are combined and managed.
• The impact of the promotional strategy on convincing consumers to pay more for the product that the cost of the inputs.

Question 4

What are the stages of operations process before the selling of good or services? (4)

Answer 4

• Converting a consumer need into a product/service
• Organising operations so that production is carried out efficiently
• Deciding on suitable production methods
• Setting quality standards

Question 5

What are the inputs of the production process? (3)

Answer 5

Resources:
•Land: where the business would operate
•Labour: workers and they're abilities
•Capital: tools, machinery, computers
Resources

Question 6

What is the difference between production and productivity?

Answer 6

•Production is the process of converting inputs into outputs
•Productivity is the ratio of outputs to inputs during production
e.g labour productivity = total output per time / total workers
Capital productivity = total output/capital employed

Question 7

How to raise productivity levels? (4)

Answer 7

• Improve the training of staff to raise skill
• Improve worker motivation
• Purchase more technologically advanced equipment
• More efficient management.

Question 8

Drawbacks of raising productivity? (3)

Answer 8

• Raising productivity may not guarantee business success considering if the products are not sold.
• Greater effort contributions from workers may require high wages
• Even though it is efficient, it may not be effective.

Question 9

Difference between efficiency and effectiveness?

Example of an efficient but ineffective business.

Answer 9

• Efficiency: producing output at the highest ratio of output to input
• Effectiveness: Meeting the objectives of the enterprise by using inputs productively to meet customers’ needs.

A business that has low unit costs and high level of outputs but low sales revenue.

Question 10

Difference between labour intensive and capital intensive businesses?

Answer 10

• Labour intensive: involving high level of labour input compared with capital equipment. E.g furniture that is hand made. Tend to be applied in job production.
• Capital intensive: involving high quantity of capital equipment (such as machinery) compared with labour input. E.g Making soda drinks. Tend to be applied in flow production.

Question 11

Which approach, between capital/labour intensity, depends on what? (3)

Answer 11

• The nature of the product and the product’s image
• The relative prices of the two inputs- if labour costs are high, then should use more capital equipment.
• The size of the firm and its ability to afford expensive capital equipment.