IB Business and Management Unit 5
Terms in this set (55)
The management of systems or processes that create goods and/or provide services
occurs when economic growth meets the needs of the present population without endangering the ability of future generations to meet their needs
ensuring that the business makes profit
identifying and managing business impacts, both positive and negative, on people.
where a single product is made at a time
Advantages of job production
- Higher prices can be charged as the product is unique and made to customer requirements
- Products can match exact requirements, which increases customer satisfaction
- Employees are more motivated as each project is different
- The business can gain a competitive edge by offering unique products
- Simple organisation
Disadvantages of job production
- High wages need to be paid to the highly skilled staff required
- High costs can push up the price, making it too high, putting customers off who are looking for value for money
- Expensive tools and machinery may be required, which often lie idle during different jobs
- Lead times can be lengthy meaning customers cannot walk in and purchase the product
- Materials may need to be ordered for each different job, so the business misses out on bulk buying discounts (purchasing economies of scale)
producing a limited number of identical products - each item in the batch passes through one stage of production before passing on to the next stage
Advantages of batch production
- Batches can be adapted to meet customer requirements
- Batches can be adapted to take advantage of demand (e.g Christmas-themed cupcakes)
- Machinery can be standardized, saving on costs
- Less need for highly skilled workers so wage costs are lower
- Materials can be bought in bulk so discounts can be obtained (purchasing economies of scale)
Disadvantages of batch production
- Equipment and staff often lie idle between batches as machines and tools need to be cleaned and reset
- If a mistake is used it can ruin an entire batch
- Employees are demotivated as the tasks are repetitive
- Small batches can raise the unit cost of each item in the batch
- High stock levels are required, so overstocking can occur
Large-scale production of a standard product, where each operation on a unit is performed continuously one after the other, usually on a production line
Advantages of flow production
- Huge amounts of products can be produced (mass production), leading to high sales
- Workers become specialised in the same routine task, speeding up production
- Often capital intensive, increasing consistency, quality and the amount that can be produced
- Economies of scale gained from buying bulk
Disadvantages of flow production
- Products cannot be adapted to meet customer requirements
- Workers can become demotivated through the boredom of repeating the same routine tasks
- If there is a fault, all production grinds to a halt, leaving staff and machines idle
- Massive amounts of investment are needed to equip and tool factories
the production of products with similar process characteristics on small assembly lines called cells
a management approach that organizes resources such as people and machines around the flow of business processes and that only produces units in response to customer orders
Advantages of lean production
- Less waste
- Greater Efficiency
Disadvantages of lean production
- Equipment failure could severely disrupt business
An inventory-management approach in which supplies arrive just when needed for production or resale
Just in case (JIC)
A situation where a company keeps a small stock of components (or complete items) or ones that take a long time to make, just in case of a rush order.
Continuous Improvement (Kaizen)
the implementation of a large number of small, incremental improvements in all areas of the organization on an ongoing basis
a manual system that signals the need for parts or materials
An alert system that can be visual or audible, facilitating quick response to any problems in the process or system.
are particular areas, departments or sections of a business to which costs can be directly attributed.
A good or service that meets customers' expectations and is therefore 'fit for purpose'
the processes an organization uses to maintain its established quality standards
How is quality control performed
By monitoring specific project results in compliance with relevant quality standards and determining corrective actions as needed
Why is quality important?
More satisfied customers
A better reputation
Lower costs as wastage is reduced
Quality can affect demand for the product
Total Quality Management (TQM)
the philosophy that everyone in the organization is concerned about quality, throughout all of the firm's activities, to better serve customer needs
In any business, there is a series of suppliers and customers. The chain is intact if the supplier satisfies the customer. It is broken if a person/item/equipment doesn't satisfy the customer.
Accountability and empowerment
TQM stresses the role of the individuals and aims
to make everyone accountable for their performance. Empowering workers to be
their own "quality inspectors" leads to increase in their motivation.
constantly finding possible improvements
collaborative efforts of people to accomplish common objectives
TQM involves being committed to customers. This means that
production process and product itself need to be highly responsive to changes in
people's needs and expectations.
This policy aims to ensure every product manufactured is free from
defects, which leads to increase in reputation.
a process by which a company compares its performance with that of high-performing organizations
where a business is located
hiring or contracting another business to do work that was previously done by the business itself
Advantages of Outsourcing
High strategic flexibility
Low investment risk
Improved cash flow
Access to state-of-the-art products and services
Disadvantages of outsourcing
Reduces technical know-how for future innovation
Reduces degree of control
Increases vulnerability of your strategic information
Increases dependency on other organizations
a practice in which a company contracts with a specialist firm to handle all or part of its supply chain operations
Moving operations from the country where a company is headquartered to a country where pay rates are lower but the necessary skills are available.
moves jobs back from foreign to domestic locations
Stock control charts
Overall objective of stock control is to maintain stock levels so that the total cost of holding stock is minimised.
capacity utilization rate
a measure of how close the firm is to its best possible operating level
capacity utilization rate formula
capacity used/best operating level X100
research that relies on what is seen in field or naturalistic settings more than on statistical data
research that collects and reports data primarily in numerical form
CTB = Price x Quantity
Cost to make (CTM)
the process of managing a company's reputation when some negative event threatens the organization's image
Stakeholders will want to be kept informed of what is happening. They will want to know that safety is the priority.
Senior managers will need to communicate in an objective way, despite the temptation to give biased reports to different stakeholders because they are concerned with the image and reputation of the business.
Senior managers will need to act promptly. This can be a challenge because rushed and not well-thought-out decisions will not always be the best ones.
The situation should be put under control as soon as possible. This is directly concerned with limiting the damage for different stakeholders.
Planning for unexpected events, usually involving a range of scenarios and assumptions that differ from the assumptions behind the core plans.