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Business IGCSE > Unit 5 - Business operations > Flashcards

Unit 5 - Business operations Flashcards

1
Q

Economies of scale

A

Cost benefits that a firm gets with growth that reduces average unit cost

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2
Q

Types of Internal economies of scale

A
  • Purchasing economies
  • Marketing economies
  • Technical economies
  • Financial economies
  • Managerial economies
  • Risk-bearing economies
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3
Q

Purchasing economies

A

Large firms can buy resources from a supplier in bulk to get a discount - reducing average unit cost

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4
Q

Marketing economies

A

Large firms can advertise with fixed money, then costs can be used otherwise - reducing average unit cost

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5
Q

Technical economies

A

Large firms can use the latest technology, improving efficiency - reducing average unit cost

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6
Q

Financial economies

A

Large firms have more sources of money e.g. selling shares or putting pressure on banks for loans at lower interest rates - reducing average unit cost

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7
Q

Managerial economies

A

Large firms can afford specialist managers that can improve efficiency - reducing average unit cost

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8
Q

Risk-bearing economies

A

Large firms can have wider product ranges with different markets - reduces risk for a business

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9
Q

Types of external economies of scale

A
  • Skilled labor
  • Infrastructure
  • Ancillary and commercial services
  • Cooperation
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10
Q

Skilled labor

A

Build-up of labor skills and work experiences lowers training costs - reducing average unit cost

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11
Q

Infrastructure

A

In case of a particular industry dominating a region, infrastructure can be shaped to its needs

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12
Q

Ancillary and commercial services

A

Established industries encourage ancillary suppliers to set up close by which can let both businesses benefit

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13
Q

Cooperation

A

Large firms located closely can cooperate with each other so both can gain

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14
Q

Diseconomies of scale

A

The disadvantages to large growth in a business , causing average unit cost to rise

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15
Q

Types of diseconomies of scale

A
  • Bureaucracy
  • Labor relations
  • Control and coordination
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16
Q

Bureaucracy

A

Large businesses have too many resources being used in administration, spend too much time doing paperwork, decision making is slow and resources are wasted - increasing average unit cost

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17
Q

Labor relations

A

With larger firms relations between workers can deteriorate, management can fail, workers can become demotivated, conflicts can happen and resources can be wasted solving them - increasing average unit cost

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18
Q

Control and coordination

A

Very large businesses can be difficult to control and coordinate, many employees over the world makes running organizations demanding and raises cost

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19
Q

Other limits to growth in a business

A
  • Lack of finance
  • Nature of the market
  • Lack of managerial skills
  • Lack of motivation
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20
Q

Lack of finance

A

Some businesses can’t grow because they don’t have the capital needed

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21
Q

Nature of the market

A

Some markets are too small for large companies

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22
Q

Lack of managerial skills

A

Some businesses can’t grow since owner’s don’t have the skills to run large operations

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23
Q

Lack of motivation

A

Some owners might not want to grow their business and keep it small

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24
Q

Production

A

The conversion of raw materials into goods and services

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25
Q

Productivity

A

The measure of output in relation to the input

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26
Q

Methods of production

A
  • Job production
  • Batch production
  • Flow production
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27
Q

Job production

A

Employing all factors to complete one unit of output at a time, specialized to the customer e.g. a wedding dress

28
Q

Advantages of job production

A
  • Most suitable for personal services or one-off products
  • Workers often have varied jobs
  • More varied work increases motivation and job satisfaction
  • Flexible and used for high quality goods and services - often expensive
29
Q

Disadvantages of job production

A
  • Skilled labor often used - raises costs
  • Costs are higher since it is labor intensive - more human labor than machines
  • Products are specially made to order - errors can be expensive
  • Material may be specially purchased - higher costs
30
Q

Batch production

A

Similar products are made in batches and certain numbers of products are used

31
Q

Advantages of batch production

A
  • Flexible way of working and production - can be easily changed
  • Variety to worker’s jobs
  • Allows a variety of products - gives consumers a choice
  • Production may not be affected to any great extent if machinery breaks down
32
Q

Disadvantages of batch production

A
  • Can be expensive
  • Machines have to be reset between production batches - output is lost
  • Warehouse space will be needed for inventory of raw materials and finished products - can be expensive
33
Q

Flow production

A

Large quantities of standardized products produced in a continuous process - can be known as mass production

34
Q

Advantages of flow production

A
  • High output of standardized product
  • Costs of making products are low - prices are low
  • Capital intensive - reduces labor cost + increases efficiency
  • Capital intensive - allows workers specialize in specific repeated tasks - requires workers of any level - little training needed
35
Q

Disadvantages of flow production

A
  • Very boring system for workers - little job satisfaction and lack of motivation
  • Significant storage requirements - costs of storing raw materials and products is very high
  • Capital costs of setting up can be high
  • Once machine breaks - whole production line has to be halted
36
Q

Labor intensive

A

More human labor used than machinery

37
Q

Capital intensive

A

More machinery used than human labor

38
Q

Productivity formula

A

Productivity = Output ÷ Quantity of input

39
Q

Labor productivity formula

A

Labor productivity = Output (over a given period of time_ ÷ Number of employees

40
Q

Capital productivity formula

A

Capital productivity = Total output ÷ Capital employed

41
Q

Ways to increase labor productivity

A
  • Improve employee motivation
  • Introduce new technology
  • Improve inventory control
  • Train staff to be more efficient
  • Use machines instead of people (automation)
  • Improved quality control / assurance reduces waste
42
Q

Ways to increase capital productivity

A
  • Downsizing - reducing unprofitable regions
  • Relocation - moving to areas with cheaper rent or materials
  • Outsourcing - giving work to specialists at lower costs
  • Lean production - reducing resources used
43
Q

Impacts of productivity improvement

A
  • Financial impact - improves profitability
  • Competitiveness - improved efficiency gains competitive edge and market share
  • Workforce - have higher earnings and more interesting jobs or lose jobs
  • Customers - benefit from lower costs and better service provision
44
Q

Lean production

A

An approach to production aimed at reducing the quantitiy of resources used and hence reduce waste and increase efficiency

45
Q

Effect of lean production

A
  • Reduces costs
  • Cuts lead times
  • Reduces defective products
  • improves reliability
  • Speeds up product design
46
Q

Just-in-time (JIT) production

A

Highly responsive to customer orders and uses very little stock holding e.g. a restaurant

47
Q

Advantages of JIT

A
  • Cash flow improved
  • No waste, out-of-date or damaged stock
  • Space is released
  • No stock golding costs
  • Stronger links with supplier
  • Fewer suppliers
48
Q

Disadvantages of JIT

A
  • Higher ordering and administration costs
  • Relies hugely on supplier’s reliability
  • Advantages of bulk-buying may be lost
  • Hard to cope with changes in demand
  • Vulnerable to a break in supply
49
Q

Types of wastage

A
  • Overproduction - producing before orders
  • Waiting
  • Transportation - wastes time and risks product damage
  • Unnecessary inventory - takes up space and incurs cost
  • Motion - unnecessary moving of employees wastes time and cost
  • Over-processing - complex machinery for simple tasks wastes time
  • Defects - halts production and wastes time
50
Q

Kaizen

A

Continuous improvements in small increments in the work space to reduce wastage and increase efficiency

51
Q

Techniques for kaizen

A
  • Standardization
  • Team-working
  • Empowerment
  • Suggestion schemes
  • Quality circles
  • Multi-skilling
52
Q

Technology and production in the secondary sector

A
  • Robots - monitor and enhance efficiency 24/7
  • Computer aided design (CAD) - design products and allow 3D drawing that can be altered quickly and cheaply
  • Computer numerically controlled machines (CNCs) - carry out instructions from computers
  • Computer aided manufacturing (CAM) - Computers link and control design and production in manufacturing
  • Computer integrated manufacturing (CIM) - using computers for the entire production process
53
Q

Technology and production in the tertiary sector

A
  • Financial services - transactions carried out online or ATMs
  • Marketing - market research
  • Advertising - special effects + Internet
  • Retailing - sales an be recorded
  • Leisure industry - Tickets can be booked online
  • Administration and communication - computers can process huge amounts of data
  • E-commerce - buying and selling online
54
Q

Quality

A

To produce a good or service which meets the customers expectations

55
Q

Aspects of quality

A
  • Physical appearance
  • Reliability and durability
  • Special features
  • Suitability
  • Repairs
  • Customer service
56
Q

Importance of quality

A
  • Increased competition enforces quality
  • Government legislation enforces quality
  • Faulty products are costly, machine repairs expensive, late delivery and productivity can harm reputation
57
Q

Traditional quality control

A

Making sure that quality of a product meets specified quality standards

58
Q

Objectives for quality control

A
  • Satisfy customer’s needs
  • Operate in the way they should
  • Can be produced cost effectively
  • Can be repaired easily
  • Meet safety standards set down by legislation and independent bodies
59
Q

Quality assurance

A

Working methods that take into account customer’s wants when standardizing quality - involves guaranteeing quality standards are met

60
Q

Total Quality Management (TQM)

A

Managerial approach that focuses on quality and aims to improve effectiveness, flexibility and competitiveness of the business

61
Q

Features of TQM

A
  • Quality chains - Every worker has to meet quality standards
  • Everyone is involved - Every department accounts for quality
  • Quality audits - Stats to monitor quality standards and reduce anomalies
  • Teamwork - most effective for problem solving
  • Customer focused - committed to customer’s needs and expectations
  • Zero defects - zero defect policy
62
Q

Advantages of TQM

A
  • Focuses on customer’s needs
  • Quality improved in all aspects of business
  • Waste and inefficiencies removed
  • Helps develop ways of measuring performance
  • Improves communication and problem solving
63
Q

Disadvantages of TQM

A
  • High training and implementation costs
  • Will only work if everyone is committed
  • may be bureaucratic
  • Focus is on process not products
64
Q

Quality standards of British ISO 9000

A
  • Identifies staff training needs
  • Shows customers strive to improve quality
  • Records and investigates quality failures and customer complaints
  • Highlights products or design problems
  • Ensures orders are consistently delivered on time
  • Defines key roles, responsibilities ad authorities in a business
  • Motivates staff to get things right the first time
  • Examines and improves systems - lowers cost
65
Q

Unique selling point (USP)

A

Features of a product that no similar products have letting a business put a unique price

Business IGCSE (3 decks)

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