AQA A2 Business Studies Unit 3: Strategies for success Operational strategies

Unit 3: Strategies for success Operational strategies True or False “Mass production techniques used to improve productivity” is an example of Technical Economies TRUE! Whiteboards

Unit 3: Strategies for success Operational strategies True or False Division of Labour is another term for Specialisation TRUE!

Unit 3: Strategies for success Operational strategies True or False “Large hierarchies create feelings of distance between decision makers and employees” is an example of a managerial economy of scale FALSE! Motivation Diseconomy

Unit 3: Strategies for success Operational strategies True or False The three economies of scale you need to MOST remember are Technical, Purchasing and Marketing FALSE! Technical, Purchasing And Specialisation

Unit 3: Strategies for success Operational strategies True or False When the average cost per unit of production decreases we call it DISeconomies of scale FALSE!

Unit 3: Strategies for success Operational strategies True or False As output increases, a business’s total costs will also increase TRUE!

Unit 3: Strategies for success Operational strategies True or False The Minimum Efficient Scale is the point at which the firm is at its least efficient. FALSE! Most efficient, i.e. Lowest cost per unit Aka Maximum productive efficiency

Unit 3: Strategies for success Operational strategies By the end of this lesson you will be able to… Contrast capital and labour intensity with industrial examples Examine the factors influencing the choice between capital and labour intensive production

Unit 3: Strategies for success Operational strategies Understanding operational objectives Operational objectives: quality cost targets volume targets innovation efficiency environmental targets Identify a business that would prioritise quality as an operational objective, another business that would prioritise cost targets, and so on for all six operational objectives. Explain your reasoning and evaluate the most important operational objectives for UK businesses as a whole.

Unit 3: Strategies for success Operational strategies CELL Cast your minds back to AS level… What does CELL stand for? Enterprise Capital Land Labour Whiteboards

Unit 3: Strategies for success Operational strategies CELL What do we call these elements? Enterprise Capital Land Labour Factors of Production AKA Resources used by a business to produce outputs through the transformation process

Unit 3: Strategies for success Operational strategies What do we call these elements? Enterprise Capital Land Labour Factors of Production Enterprise and Land tend to be unique. Enterprise Land However, labour and capital are often interchangeable, so a business must decide whether its transformation process or production methods will be predominantly based on the use of capital or the use of labour.

Unit 3: Strategies for success Operational strategies Labour Intensive Labour versus Capital intensity Production relies on using labour resources Capital Intensive Production relies on using capital resources

Unit 3: Strategies for success Operational strategies Operational strategies: resource mix Capital-intensive production: methods of production that use a high level of capital equipment in comparison to other inputs, such as labour. A fully automated factory, such as Fiat cars, and a nuclear power station are examples of capital-intensive production. What factors that would encourage a business to use capital-intensive methods?

Unit 3: Strategies for success Operational strategies Operational strategies: resource mix Labour-intensive production: 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. What factors that would encourage a business to use labour-intensive methods?

Unit 3: Strategies for success Operational strategies Scale and Resource mix In the same way as firms use information on economies and diseconomies of scale in order to plan their most efficient size. Choosing the optimal resource mix is about weighing up the different factors before deciding whether to use capital or labour intensive production. These are both Operational Strategies used by businesses to achieve operational objectives.

Unit 3: Strategies for success Operational strategies Examples of labour / capital intensive industries Whiteboards Food processing Oil extraction & refining Car manufacturing Web hosting Intensive arable farming Transport infrastructure Hotels & restaurants Fruit farming Hairdressing Coal mining Split your whiteboards and tell me which is which

Unit 3: Strategies for success Operational strategies Examples of labour / capital intensive industries Labour intensiveCapital intensive Food processingOil extraction & refining Hotels & restaurantsCar manufacturing Fruit farmingWeb hosting HairdressingIntensive arable farming Coal miningTransport infrastructure

Unit 3: Strategies for success Operational strategies Implications of intensity Labour intensiveCapital intensive Labour costs higher than capital costs Capital costs higher than labour costs Costs are mainly variable = lower breakeven output Costs are mainly fixed = higher breakeven output Firms benefit from access to sources of low-cost labour Firms benefit from access to low- cost, long-term financing

Unit 3: Strategies for success Operational strategies Contrast capital and labour intensity with industrial examples Examine the factors influencing the choice between capital and labour intensive production

Unit 3: Strategies for success Operational strategies Homework