Effectiveness: Test Your Learning
7. a) Creating value is the difference between the value of the final goods and services and the cost of the bought-in items. b) A business may create more value by making their production process more efficient; the less resources used up, the more value can be created. 8. a) Operations management oversees the planning, coordination and control of the transformation process turning resources into outputs. b) Effective operations management leads to a higher volume of output of improved quality which will increase profits. 9. A business may adopt a capital intensive process over a labour intensive process because a higher volume of output can be produced with higher quality (a capital intensive process uses more machinery than labour). 10. Employees may resist attempts to increase labour productivity since they feel it is unfair that they are being made to produce more unless they are offered higher rewards in exchange for increased productivity.
Data Response. 1. a) Productivity is the number of output produced per worker per time period, it is a measure of labour …show more content…
Another advantage is that lower average costs are achievable if the volume is high, the costs are spread over many units.
However a capital intensive process can be expensive to set up as the machinery and equipment will cost a lot when buying and installing. Another disadvantage of a capital intensive process is that it is relatively inflexible, that is only one version of the product will be produced. However, with advances in technology, this aspect is improving.
A labour intensive process is relatively flexible. Another advantage is that the set-up costs are lower than that of a capital intensive process.
However, a labour intensive process could have lower output levels since the production process is manual, meaning productivity could be lowered. The fact that high volumes are relatively expensive is also a disadvantage; higher volumes of output means that higher amounts of labour are needed, this means more wages have to paid which will in turn increase costs for the