Business MYE
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Business MYE - Details
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200 questions
🇬🇧 | 🇬🇧 |
Production | Provision of a product or a service to satisfy consumer wants and need |
Factors of production | Land, labour, capital, enterprise |
Production process | Production process |
Typical manufacturing business has | Factory manager, purchasing manager, research and development manager |
Factory manager responsibilities | Quantity and quality of products coming off a production line, includes maintenance of the production line and other necessary repairs |
Purchasing manager responsibilities | Providing materials, components and equipment required for the production |
Research and development manager responsibilities | The design and testing of new production processes and products |
Productivity | Output measured against the inputs used to create it |
Productivity equation | Productivity = output/quantity of input |
Labour productivity equation | Labour productivity = output (over a given period of time)/number of employees |
How to increase productivity and efficiency | Introduce new technology, use more automation, motivate employees more effectively, improve training |
Benefits of increasing productivity and efficiency | Reduced inputs needed for the same output level, lower cost per unit (average cost), fewer workers needed potentially leading to lower wage costs, higher wages might be paid to workers which increases motivation |
Buffer inventory level | Inventory held to deal with uncertainty in customer demand and deliveries of supplies |
Seven types of waste that can occur in production | Overproduction, waiting, transportation, unnecessary inventory, motion, over processing, defects |
Lean production | Used by businesses to cut down on waste and increase efficiency, by reducing the time it takes for a product to be developed and become available for sale |
Advantages of lean production | Less storage of raw materials or components, improved health and safety leading to less time off work due to injuries, cutting out some processes which speeds up production |
Lean production methods | Kaizen, JIT, cell production |
Kaizen | Continuous improvement through the elimination of waste (making things easy to access and in order to improve flow) |
Advantages of kaizen | Increased productivity, reduced amount of space needed for production process, work-in-progress is reduced |
JIT | Involves reducing or virtually eliminating the need to hold inventories or raw materials or unsold inventories of the finished product |
Advantages of JIT | Reduces inventory costs, warehouse space is not needed, finished product is sold quickly increasing cash flow |
Cell production | The production line is divided into separate self contained units (cells). each making an identifiable part of the finished product instead of having a flow production line |
Cell production advantages | Improves workers morale which improved efficiency, feel more valued so are less likely to strike or cause disruption |
Methods of production | Job, batch, flow |
Job production | A single product is made at a time |
Advantages of job production | Suitable for one off products, meets exact customer requirements, workers often have more varied jobs which can increase employee motivation and give greater job satisfaction |
Disadvantages of job production | Skilled labour is often used and raises costs, takes a long time, materials have to be specially purchased, any errors can be expensive to correct |
Batch production | A quantity of one product is made then a quantity of another item will be produced |
Advantages of batch production | Still gives some variety to workers jobs, allows more variety to products, production may not be affected to a great extent if machinery breaks down |
Disadvantages of batch production | Warehouse space is needed for inventories of raw materials, machines have to be reset between production batches leading to a delay in production, semi-finished products need to be moved to the next production stage which can be expensive |
Flow production | Large quantities of a product are produced in a continuous process (flowing down a production line) |
Advantages of flow production | High output of a standardized product, can benefit from economies of scale in purchasing, automated production lines can operate 24 hours a day |
Disadvantages of flow production | Boring system for workers so lack job satisfaction so lack of motivation, significant storage requirements, capital costs of setting up the production line can be high, one machine breaks the whole production line has to stop |
Production in action | A business may use a combination of all three types of production at different times depending on product or customer needs |
Factors affecting which method of production to use | Size of the market, size of the business, nature of demand, nature of the product |
Size of market | If demand is higher and more products will be sold in smaller quantities then batch production is used, businesses in niche markets will use job or batch production whereas international markets will use flow |
Size of the business | If the business is small and doesnt have access to a large amount of capital then its more likely to use job or batch production. Larger business will operate on a larger scale and use flow production |
Nature of demand | If there is a large and steady demand for a product its economical to use flow production. if demand is less then its more likely to be produced using batch or job production |
Nature of the product | If a unique product then job production will be used, if the product is mass produced then flow production will be used |
Automation | Where the equipment used in the factory is controlled by a computer to carry out mechanical processes |
Mechanization | Is where the production is done by machines but operated by people, like a robot which is a machine that is programmed to do tasks |
CAD | (computer-aided design) is computer software that draws items being designed more quickly and allows them to be rotated to see the item from all sides instead of having to draw it several times. (theater) |
CAM | (computer-aided manufacture) is where computers monitor the production process and control machines or robots on the factory floor. |
CIM | (computer-integrated manufacturing) is the total integration of computer aided design (CAD) and computer-aided manufacturing (CAM) |
EPOS | (electronic point of sale). This is used at checkouts where the operator scans the barcode of each item individually |
EFTPOS | (electronic funds transfer at point of sale). This is where the electronic cash register is connected to the retailer’s main computer and also to banks over a wide area computer network. |
Contactless payment | It is a fast, easy and secure way to pay for purchases that are less than a small amount, for example, in the UK this is £30 or less |
Advantages of new technology | Productivity is greater because better production methods are used, boring jobs are now done by machines leading to greater job satisfaction, better quality products are produced because of more accurate production methods |
Disadvantages of new technology | Unemployment rises because machines replace people, expensive to buy new tech and machinery, technology can become outdated quickly leading it too need to be replaced frequently |
Why businesses hold inventories (stock) | Allows a business to maintain production and satisfy customer demand quickly, to know when a business gets to its re-order point, economies of scale |
Why businesses hold inventories (stock) can be bad | Costs a lot to store, reduces cash flow as money is tied up in inventory |
Fixed costs | Costs which do not vary in the short run with the number of items sold or produced. They have to be paid whether the business is making sales or not |
Variable costs | Costs which vary directly with the number of items sold or produced |
Why costs are important | Compare revenue from one business to another, calculate profit and loss, helps managers make decisions, determine selling price |
Total costs | Fixed costs and variable costs combined |
Average cost per unit | Total cost of production/total output |
Use of cost data | Setting prices, decide weather to stop production or continue, decide on the best location |
Economies of scale | Factors that lead to a reduction in average costs as a business increases in size |
5 types of economies of scale | Purchasing, marketing, financial, managerial, technical |
Purchasing economies of scale | Business is able to buy large number of components and get it cheaper, reduces unit cost |
Marketing economies of scale | Transport costs are reduced by using larger vehicles, might be able to afford it's own vehicles to distribute goods |
Financial economies of scale | Larger businesses can often raise capital cheaper than smaller ones, bank managers often consider that lending to larger businesses as they are less risky |
Managerial economies of scale | Small businesses can't usually afford to pay for a specialist manager (marketing manager), tends to reduce their efficiency, larger companies can afford this which increases efficiency |
Technical economies of scale | Small businesses cant afford the equipment that large businesses can, the use of flow production and latest equipment will reduce average costs |
Dis-economies of scale | Factors that lead to an increase in average costs as a business grows beyond a certain size |
3 types of dis-economies of scale | Poor communication, lack of commitment from employees, weak coordination |
Poor communication dis-economies of scale | Can become more difficult to send and receive messages, mistakes can occur if there is slow/inaccurate communication leading to lower efficiency and higher average costs |
Lack of commitment | Workers may feel not important leading to lack of commitment and low efficiency |
Weak coordination | Takes longer for decisions to be expressed leading to different worker objectives |
Break even level of output/point | Quantity that must be produced/sold for total revenue to equal total costs |
Break even charts | Graphs which show how costs and revenues of a business change with sales. They show the level of sales the business must make in order to break even. |
Revenue | Income during period of time from the sale of goods or services |
Total revenue formula | Quantity sold x price |
Break even point | Level of sales at which total costs = total revenue |
Advantages of break even charts | Managers can figure out expected profit or loss, impact on profit or loss decisions can be shown by redrawing the graph, used to show the margin of safety |
Limitations of break even graphs | Doesn't show possibility of inventories not being sold, only concentrates on break-even point, fixed costs only remain constant if the scale of product doesn't change |
Margin of safety | Amount by which sales exceed the break-even point |
Contribution formula | Selling price - variable costs |
Quality | Produce a good or service which meets customer expectations |
Importance of quality | Establish brand image, build brand loyalty, increase sales |
If quality isn't maintained | Lose customers to other brands, replace faulty products raising costs, creates a bad reputation through word of mouth |
Quality control | Using quality inspectors to check for faults and for quality at the end of the process weather its the production of a product or a service, |
Advantages of quality control | Tries to eliminate faults or errors before the customer receives the product, less training required as inspectors are employed to check quality |
Disadvantages of quality control | Expensive to pay for inspectors, doesnt find why the fault occurred, higher costs if the products has to be scrapped |
Quality assurance | Checking for quality standards throughout the production process by employees |
Advantages of quality assurance | Fewer customer complaints, tries to eliminate errors before passing onto next production stage, reduced costs if products don't need to be re made |
Disadvantages of quality assurance | Expensive to train employees, relies of employees being committed to maintaining the standards set |
Total quality management | Continuous improvement of products and processes by focusing on quality at each and every stage of production |
Advantages of total quality management | Waste is removed and efficiency increases, reduced costs as products don't have to be reworked, no customer complaints so brand image is improved |
Disadvantages of total quality management | Expensive to train employees, relies of employees following TQM ideology and accepting responsibility for quality |
Factors affecting location of manufacturing business | Production methods, markets, raw materials, external economies of scale, availability of labour, government influence, transport and communications, climate |
Factors affecting location of a service sector business | Customers, personal preference of the owners, technology, availability of labour, climate, near to other businesses, rent/taxes |
Factors affecting location of a retailing business | Shoppers, nearby shops, customer parking, availability of suitable vacant premises, rent/taxes, access for delivery vehicles, security, legislation |
Factors that a business should consider when deciding in which country to locate operations | New markets overseas, cheaper or new sources of materials, difficulties with the labour force and wage costs, rent/taxes, availability of government grants, trade and tariff barriers |
What do finance departments do | Record all financial transactions, preparing final accounts, forecasting cash flows |
Main reasons reasons businesses need finance | Starting up a business, expansion of an existing business, additional working capital |
Start up capital | Finance needed by a new business to pay for essential fixed and current assets before it can begin trading |
Working capital | Finance needed by a business to pay its day-to-day costs |
Capital expenditure | Money spent on fixed assets which will last more than one year |
Revenue expenditure | Money spent on day-to-day expenses which do not involve the purchase of a long-term asset like wages |