3.4 How do businesses operate 1
How do Businesses Operate?
3 stages: inputs process
output
What is Production? the making and
providing of both goods and services
This is also known as the production mix or IPO
3.4 How do businesses operate 2
What Resources does a Business Need
Capital
Factors of Production:
LabourEnterprise
Land
3.4 How do businesses operate 3
Methods of Production
Nature of the product Number of customers wanting to buy Labour Technology
Depends on:
3.4 How do businesses operate 4
3 Methods:
JOB PRODUCTION – a job is done from start to finish, then another job is started
ADV DISPersonal touch – made to customer requirements
Labour-intensive + skilled workers – probably expensiveMore motivating to
workersCost not recovered until job finished
3.4 How do businesses operate 5
BATCH PRODUCTION – number of similar lines of production and each line will be produced in a batch before the next batch is started eg bakery
ADV DIS
Can be suited to the needs of the customer
Careful planning required
Less skilled workers –cut costs
Reduced worker motivation
3.4 How do businesses operate 6
FLOW PRODUCTION – the product is passed down a line with a series of operations eg car manufacture ADV DIS Goods produced on a large scale – economies of scale
A lot of money required to set up
More capital intensive Products are identical
Lack of motivation
Breakdown – stop in production line
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Decision people or machine production?
Service industry – more labour-intensive eg Banking uses cash dispensers, phone banking, etc
Machine production – computer controlled
Changed over past 30 years
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Using machinesADVANTAGES DISADVANTAGES
Robots can do work which is dangerous
Breakdown – does a person have the skills to take over?
Lower labour costs Loss of personal contact and loss of jobs
Consistency – less error Machine can’t answer queries
Constant production
Increased speed and efficiency
Workers expected to be multi-skilled
3.4 How do businesses operate 9
Must find out who you are selling to Can produce a range of products for different types of customers
What about QUALITY?
Low quality + low price productHigh quality + high price product
Can produce:
3.4 How do businesses operate 10
What is meant by Quality? Means different things to different people Consumers now more aware of quality
Within production process: Quality of supplies
Quality of production – testing (TQM)
Customer services
3.4 How do businesses operate 11
Distribution - Product must reach consumer when they want it
3.4 How do businesses operate 12
Which distribution method?Depends on:
Product perishable/fragile – least handling possible low value – wholesaler (holds large stocks) specialist – personal link with customer
require special installation
3.4 How do businesses operate 13
Which distribution method?
Market
Depends on:
response time/service important – need direct link to customer
very large – need wholesaler to reach customer as early as possible
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How do businesses Control Stock? Purpose – to ensure a supply of stock (raw materials)
available for the production process and for distribution (finished goods).
Raw materials – resources for production
Types of stock:
Work-in-progress – semi-finished Finished goods – waiting to be distributed
3.4 How do businesses operate 15
Costs of holding stocks:
Benefits of holding stocks: Supplies available when needed
Bulk buying Discounts Customer orders/increases can be met
Money, and Warehousing, insurance, risk Labour costs of stock control
3.4 How do businesses operate 16
Re-order level – depends on production needs, delivery time, etc.
details of each item of stock Stock Control:
Maximum stock level – depends on space, delivery time, etc Minimum stock level – depends on buffer stock needed, etc
security of stock – cameras, etc to stop theft
3.4 How do businesses operate 17
Just-in-time system of stock control: Order only when materials needed for production
No emergency or back-up stock
Close link with suppliers
Cost savings (stock levels almost non-existent)
3.4 How do businesses operate 18
How can a firm assess itself?
Questionnaires to customers, suppliers, workers, etc
Why? – to find out customer attitudes, staff attitudes, levels of waste, need to change? etc
3.4 How do businesses operate 19
Customer Services
Politeness of staff
Quality of goods, etc
Reaction to complaints
Replacement of faulty goods
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Why are business now more consumer-led?
Monitoring + Improving Customer Satisfaction
To increase their market share Keep existing customers Attract new customers SURVIVE
Feedback from customers – questioned by staff, undercover customers, consumer panel
Customer questionnaires
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