Buss3-Chapter12-Scale And Resource Mix

Front 1

Economies of Scale Definition

Back 1

The advantage that an organisation gains due to an increase in size. These cause an increase in productive efficiency.

Front 2

Technical economies

Back 2

Low unit costs and improve quality.
Mass production improves productivity.
Reduced Distribution costs due to large scale.
Improves efficiency in both admin and production.
Improved communication
=better customer service.

Front 3

Specialisation economies

Back 3

Depending on the size of the business they can employee a skilled workforce.
Encourage divison of labour.
Skills can be improved/developed via training.
Skilled staff can become more specialised in their role increasing efficiency.

Front 4

Purchasing Economies

Back 4

If firms can buy in bulk then suppliers can lower their costs.
Suppliers may offer greater discounts in order to guarantee a contract with a large customer.

Front 5

Marketing economies

Back 5

A large firm can spread its advertising and marketing budget over a large output and it can purchase its inputs in bulk at negotiated discounted prices if it has sufficient negotiation power in the market

Front 6

Financial economies

Back 6

smaller firms often face higher rates of interest on their overdrafts and loans.Large firms have favourable rates of borrowing.

Front 7

Research and development economies

Back 7

Large R&D expenditure enables new products and easier ways to produce goods.

Front 8

Social and welfare economies

Back 8

Pensions and medical care make it easier to recruit employees and increase morale thus having a highly motivated staff.

Front 9

Managerial and Admin economies

Back 9

Employ best managers and adopt cost effective admin procedures.

Front 10

Diseconomies of scale definition

Back 10

The disadvantages that an organisation experiences due to an increase in size. These cause a decrease in productive efficiency.

Front 11

Coordination diseconomies

Back 11

Loss of control by management
Less responsive if the level of control is reduced.
More rigid and inflexible

Front 12

Communication diseconomies

Back 12

Too many levels=less effective communication.
Harder for management to meet subordinates.
Large firms usually use ineffective communication methods.
Omitted employees may feel demotivated.

Front 13

Motivation diseconomies

Back 13

Difficult to assess needs of individuals.
Less time for recognition and rewards in large firms.
Large hierarchies create illusion of distance.

Front 14

Other diseconomies

Back 14

Technical-Hard to organise
Excessive bureaucracy large hierarchy slows decision making.
Staff problems-Industrial relation problems and high staff turnover
Less Flexibility-Can't change needs to meet the needs of the customer.

Front 15

Capital Intensive Production

Back 15

Methods of production that use a high level of capital equipment in comparison to other inputs, such as labour. A fully automated factory and a nuclear power station are capital intensive.

Front 16

Labour Intensive Production

Back 16

Methods of production that use high levels of labour in comparison to capital equipment. Many service industries, such as retailing, restaurants and call centres, use a large number of people in comparison to equipment.

Front 17

Factors influencing the choice between capital-intensive and labour-intensive.(Method Of Production)

Back 17

Large Scale production=Capital intensive.

Front 18

The skills and efficiency of the factors of production

Back 18

A business that depend on the skill of their workforce will be labour-intensive.

Front 19

The relative costs of labour and capital

Back 19

Labour is expensive in western europe so capital intensive is appropriate, wher labour is cheaper labour intensive is appropriate.

Front 20

The size and finanical position of a business.

Back 20

Capital equipment is expensive to buy for small business' so labour intensive is appropriate for large business' capital intensive is appropriate.

Front 21

The product or service

Back 21

A more standardised product should use capital intensive

Front 22

The customer

Back 22

If a customer want personal contact then labour intensive is appropriate.