BUSINESS OPERATIONS

Question 1

What are economies of scale?

Answer 1

When average costs of running a business fall as a firm increases its output/size.

Question 2

What are internal economies of scale?

Answer 2

Cost advantages that a firm experiences as it increases its output, leading to a decrease in average costs.

Question 3

Name one type of internal economy of scale.

Answer 3

• Purchasing Economies
• Managerial Economies
• Financial Economies
• Technical Economies
• Risk-bearing Economies
• Marketing Economies

Question 4

What are purchasing economies?

Answer 4

Occurs when a business buys goods in bulk and benefits from discounts.

Question 5

What are managerial economies?

Answer 5

Occurs when a large firm can employ specialist workers to complete tasks and can spread the cost.

Question 6

What are financial economies?

Answer 6

Occurs when a large business can borrow money at a lower rate of interest than a smaller business.

Question 7

What are technical economies?

Answer 7

Occurs when a business invests in new technology and is able to increase production, reducing production costs per unit.

Question 8

What are risk-bearing economies?

Answer 8

Occurs when a business produces a range of products, reducing dependency on just one product.

Question 9

What are external economies of scale?

Answer 9

Cost advantages that accrue to firms as a result of external factors, such as industry growth.

Question 10

Name one type of external economy of scale.

Answer 10

• Skilled labour
• Infrastructure
• Ancillary and commercial services
• Cooperation

Question 11

What is diseconomies of scale?

Answer 11

When average costs are rising as a firm becomes too big, often due to inefficiency.

Question 12

What is bureaucracy in the context of diseconomies of scale?

Answer 12

If a business is too bureaucratic, many resources and time are wasted, slowing down decision-making and increasing costs.

Question 13

What is the impact of lack of finance on business growth?

Answer 13

Some businesses would like to grow but cannot raise the finance needed for expansion.

Question 14

What is labour-intensive production?

Answer 14

Production where lots of workers are used rather than machines to make goods.

Question 15

What is capital-intensive production?

Answer 15

Production where businesses use machines/robots rather than workers.

Question 16

What is job production?

Answer 16

Products made specifically to order, where each order is different.

Question 17

What are the advantages of job production?

Answer 17

• Good for one-off products
• Meets exact customer requirements
• Varied work increases employee motivation
• High quality of output due to skilled workers

Question 18

What are the disadvantages of job production?

Answer 18

• High production costs
• Production takes longer
• Errors are expensive to fix

Question 19

What is batch production?

Answer 19

A quantity of a product is made, then a batch of another product is made.

Question 20

What are the advantages of batch production?

Answer 20

• Unit costs are lower
• Reduced need for highly skilled staff
• More use of machinery

Question 21

What are the disadvantages of batch production?

Answer 21

• Expensive machinery may be required
• Staff may be less motivated
• If batches are small, costs will be high

Question 22

What is flow production?

Answer 22

Large scale production of a standard product where ingredients flow from one end to the other.

Question 23

What are the advantages of flow production?

Answer 23

• Lower unit cost
• Bulk discounts
• Huge quantities can be produced
• Output produced very quickly
• Machinery can work 24/7

Question 24

What are the disadvantages of flow production?

Answer 24

• Huge set-up costs
• Individual customer requirements cannot be met
• Equipment may be inflexible
• Worker motivation can be low

Question 25

What is productivity?

Answer 25

Rate at which goods are produced and the amount produced in relation to work time and money.

Question 26

What is labour productivity?

Answer 26

Output per worker in a given time period.

Question 27

Name one way to increase labour productivity.

Answer 27

* Invest in training * Use financial incentives * Organize and manage labour effectively * Train workers for multiple jobs * Use flextime

Question 28

What is lean production?

Answer 28

Production that focuses on reducing the quantity of resources used and cutting out waste while ensuring quality.

Question 29

What are the advantages of lean production?

Answer 29

* Improved cash flow * No waste * More space available * Fewer suppliers * Stronger links with suppliers

Question 30

What are the disadvantages of lean production?

Answer 30

* Higher ordering costs * Relies on suppliers’ reliability * Vulnerable to supply disruptions * Hard to cope with changes in demand

Question 31

What is just-in-time production?

Answer 31

Production technique that is highly responsive to customer orders and uses very little stock holding.

Question 32

What are the advantages of just-in-time production?

Answer 32

* Cost Reduction * Efficiency Improvement * Quality Improvement * Lead Time Reduction * Flexibility and Adaptability

Question 33

What are the disadvantages of just-in-time production?

Answer 33

* Supply Chain Vulnerability * Dependency on Suppliers * Risk of Stockouts * Higher Setup Costs * Less Economies of Scale

Question 34

What is Kaizen?

Answer 34

The practice of continuous improvement.

Question 35

What are the advantages of Kaizen?

Answer 35

* Continuous Improvement * Employee Engagement * Cost Reduction * Enhanced Quality * Flexibility and Adaptability

Question 36

What are the disadvantages of Kaizen?

Answer 36

* Time-Consuming * Resistance to Change * Resource Intensive * Lack of Immediate Results * Potential for Burnout

Question 37

What is the impact of new technology in the primary sector?

Answer 37

Use of tractors and mechanical harvesters raised productivity in agriculture.

Question 38

What is the impact of new technology in the secondary sector?

Answer 38

* Material handling robots transport goods * CAD allows for accurate 3D drawings * CNCs perform tasks quickly and accurately * CAM links design and production * CIM controls the entire production process

Question 39

What are the advantages of new technology in production?

Answer 39

* More product choice * Higher productivity * Lower costs * Less waste * Improved health and safety

Question 40

What are the disadvantages of new technology in production?

Answer 40

* High setup costs * Technology breakdowns are expensive * Workers may lose jobs * Reduced motivation for machine workers * Existing staff need retraining

Question 41

What are the factors of production?

Answer 41

* Land * Labour * Capital * Enterprise

Question 42

What is specialization in production?

Answer 42

Production of a limited range of goods.

Question 43

What are the advantages of specialization?

Answer 43

* Workers’ skills improve * Increases efficiency * Saves time * Easier organization of production

Question 44

What are the disadvantages of specialization?

Answer 44

* Production delays affect the whole process * Workers may become bored * Absenteeism can disrupt production

Question 45

What is quality in the context of production?

Answer 45

Features of a product that allow it to satisfy customers’ needs and wants.

Question 46

What is traditional quality control?

Answer 46

Ensuring that the quality of a product meets specified standards through end-of-production checks.

Question 47

What is quality assurance?

Answer 47

Commitment by a business to maintain quality throughout the organization.

Question 48

What is total quality management (TQM)?

Answer 48

An approach focusing on quality to improve effectiveness, flexibility, and competitiveness.

Question 49

What are the advantages of TQM?

Answer 49

* Focuses on customer needs * Improves quality in all aspects * Removes waste and inefficiencies * Develops performance measurement methods

Question 50

What is competitive advantage?

Answer 50

Unique strengths and capabilities that enable a business to outperform its rivals.

Question 51

What are the advantages of having a competitive advantage?

Answer 51

* Market Leadership * Increased Profits * Customer Loyalty * Innovation * Economies of Scale

Question 52

What are the disadvantages of competitive advantage?

Answer 52

* Costs of Development * Imitation by Competitors * Technological Obsolescence * Market Changes * Legal and Ethical Concerns

Question 53

What can erode a company's competitive edge over time?

Answer 53

Advantage erosion

Question 54

What is the term for advancements that may render a company's competitive advantage obsolete?

Answer 54

Technological Obsolescence

Question 55

What must businesses do to maintain their competitive edge in light of technological advancements?

Answer 55

Continually adapt and invest in new technologies

Question 56

What external factors can impact the relevance of a competitive advantage?

Answer 56

Market changes, consumer preferences, economic conditions

Question 57

True or False: Businesses must remain inflexible to adapt to changing market conditions.

Answer 57

False

Question 58

Fill in the blank: Some competitive advantages may involve _______ or ethical issues.

Answer 58

legal

Question 59

What may aggressive marketing tactics or exclusive contracts attract?

Answer 59

Regulatory scrutiny

Question 60

What can damage a company's reputation in relation to competitive advantages?

Answer 60

Legal or ethical issues