2.3 Flashcards
(52 cards)
what does the long tail mean?
specific and niche goods that are in less demand can produce an effective market as they have a big enough distribution channel
what does the long tail allow?
consumers to compare prices more easily
what is productivity?
a measure of efficiency in the use of resource inputs
it is the output per unit of input in a given time period
what is efficiency?
the use of scarce resources in the most economically achievable way, costs can then be minimised which means competitive advantage could be achieved
what are the 6 factors influencing productivity?
R&D
educating and skills training
infrastructure
new tech
management skills
investment
what is infrastructure?
all public available services such as transport, communication facilities, basic services such as water drains and energy supplies and also telephone systems, bridges ports and airports
what does increasing productivity mean?
using fewer resources to produce more, so unit costs fall, prices can be cut, sales rise, then profits increase and the product is more competitive
what happens when output per worker increases?
worker’s contribution to firm revenue increases causing demand for workers to increase also
what happens as wages are determined by supply and demand?
an increase in demand will imply an increase in wages, so if we produce more we may get paid more so productivity is closely related to standards of living and economic growth
what is GDP?
the most common measure for the size of an economy, it measures the value of total final output of goods and services provided in a period of time by that economy
what does increasing efficiency often require?
investment in human capital ie training people and encouraging them to acquire new skills, this can be quite costly but has enormous potential to raise productivity, it applies to almost all aspects of the work of the firm
what is capacity?
the amount something can produce
what is capacity utilisation?
measures the extent to which the capacity of the firm is in use taking actual output as a % of total capacity
what is under-capacity utilisation?
demand is insufficient to justify working at full capacity
what is over-capacity utilisation?
when demand grows, some firms seek to stretch output without adjusting their capacity
what is the formula for capacity utilisation?
current output / full potential output x 100
what does capacity utilisation measure?
how much of the maximum possible output is produced
what are causes of low capacity (supply and demand)?
supply:
new competitors
demand:
product less fashionable
seasonal product
income elastic in a recession
what are the consequences of low capacity?
high fixed costs per unit reducing profitability
if visible could give a poor impression
underused staff
is low capacity a problem (long-term and short-term)?
long-term = yes because high FC/unit will make the firm uncompetitive
short-term = possibly not because the firm can react quickly to an order (useful if expanding) and there is time for maintenance and staff training
why is full capacity a positive?
because FC/unit are lower
why is full capacity a negative?
there is no time for maintenance which could lead to breakdowns
it is also not possible to take on unexpected orders and the only way to increase output is to buy a new machine
what percentage capacity utilisation is optimum?
85-90%
what are the 4 ways to increase efficiency?
lean management
JIT
kaizen
TQM
