Flashcards in Production, Finance And External Environment Deck (55):
What is mechanisation
When machinery is used but workers are still required to operate the machinery. E.g a driver is needed for a combine harvester
What is automation
When machinery is used and a computer controls its operation, e.g Amazon robots
2 advantages of automation
1. Less mistakes are made
2. Large amounts can be produced quicker so productivity increases
2 disadvantages of automation
1. Buying and maintaining machinery is expensive
2. The system could break down
Advantages of job production
1. More motivated, not doing repetitive tasks
2. Better quality
3. Meets customer needs
Disadvantages of job production
1. The cost of production is normally higher
2. Labour costs increase because of skill required
What is batch production
When there are set stages that the production needs to go through. One process has to be completed before the next can begin.
What is flow production (mass production)
A continuous movement of items through the production process. This means that when one task is completed the next tasks immediately begins
What is added value
The increased worth a business creates for a product (branding, design, quality)
3 ways of increasing efficiency in a business
2. Just in time
3. Total Quality Management
Why might a business need to raise money
1. Start up business
2. Invest in growth (new product)
3. Buy new equipment
4. Solve cash flow problems
5. Move location
Price elasticity of demand:
What might affect the sensitivity of a chance in price of a product?
- If it's luxury
- Are there cheaper alternatives
- Competitor price
Define break even
The point at which the sales are exactly the same as the costs
Break even advantages
Can set business targets
Useful for getting a bank loan
Can help when choosing whether to increase prices and reduce costs
Break even disadvantages
Forecast figures may be different to actual
Figures tend to relate to one product
Break even assumes all output it sold
Advantages of high unemployment rate
More available workers
Business can employ workers cheaply
Disadvantages of high unemployment rate
Workers are demotivated by a threat of job loss
People have less disposable income
What are the 3 ways a business is
affected by interest rates
1. The cost to business of borrowing
2. The cost to customer on mortgage etc
3. The reward for saving
What are the impacts of poor profitability?
1. Staff fear losing jobs
2. Shareholders reduced dividends
3. Management reduced bonuses
4. Share price falls and business is at risk of takeover
5. The business has a lack of profit to reinvest
What are advantages of being in the EU?
1. Access to single market
2. More potential employees
3. Increases Market size
4. Common standards
What are the disadvantages of being in the EU?
1. Environmental standards
2. Minimum wage laws
What is the definition of globalisation?
The process by which business activities in different countries are becoming more connected to each other
Why might China not benefit from GG toys locating a factory there?
1. Exploitation of workers
3. Local culture
What is inflation?
When prices of goods and services are generally rising
Why does inflation occur?
1. When expenses increase business put prices up
2. If there is increased demand businesses can charge more
How can the Bank of England control inflation?
By reducing interest rates to reduce disposable income thus reducing demand for goods thus prices fall
What is income tax?
A tax on income where the money goes from the earnings straight to the central government
What is national insurance tax?
A tax deducted to support the NHS and state pensions. Government will collect more of this tax as employment increases
What is corporation tax?
A tax limited companies pay. The government will collect more tax from GG toys if they make higher profits
What are business rates?
A tax paid by business on the property that they use. Bowton council would collect this money
What is council tax?
A tax paid by homeowners on the property that they live on
What is VAT?
A tax on spending, most goods have a 20% vat charge
What is a monopoly market?
A market dominated by one seller
What is perfect competition?
A market in which there are a large number of sellers
What are the features of a monopoly market?
Low choice of products
What are the features of a competitive market?
Lots of sellers
High choice of products
How can GG Toys be better than rivals?
Range of products
Improved customer service
Unique selling point
What are the pressures of operating in a highly competitive market?
Making prices not too high or low
Match delivery (Amazon same day)
Pressure on revenue and profits
Pressure to be more efficient in order to be able to reduce prices
When does a monopoly market exist, by law?
When a business has a market share of at least 25%
How does business activity impact upon the environment?
Using non renewable energy
What are negative externalities/external costs?
When business activity creates negative impacts to a third party
How could GG Toys behave more sustainably?
Use recycled materials for products/packaging
Move production back to Bowton instead of China
Reduce amount of packaging used
Use renewable energy to power factory
What are ethical issues related to GG Toys?
Unsafe working conditions
Poor health and safety
What is meant by ethical behaviour?
What is morally right and morally wrong
What are the advantages of operating as an ethical business?
More customers as a result
What is a disadvantage of operating as an ethical business?
What are unit costs?
(total costs/amount sold)
What is purchasing economies of scale?
A business is given a discount for buying in large quantities
What are financial economies of scale?
Bigger firms are likely to get cheaper loans (interest) because they have more security (assets) to offer the bank
What are managerial economies of scale?
Employing specialist managers to increase efficiency (productivity) that means costs are reduced
What are marketing economies of scale?
Larger firms can benefit from being able to use more effective methods of marketing which reach more people (Chanel)
What are technical economies of scale?
As a firm gets bigger, it can use better methods and equipment. For example, a distribution business can use a bigger lorry which would still only need one driver
What are risk bearing economies of scale?
Large firms (Virgin) can spread risk by diversifying into different products or taking over suppliers
What are diseconomies of scale?
When unit costs rise with production increase