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

3.4 How do businesses operate 7

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

3.4 How do businesses operate 8

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

 

3.4 How do businesses operate 14

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

3.4 How do businesses operate 20

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