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What are the 3 options for production?
1. Job production
2. Batch production
3. Mass production
What is job production?
1. It involves making the products one at a time so each one is individual and unique.
2. The business makes the product to the exact specifications of the customer.
3. For example, a dressmaker makes a wedding dress after having measured the customer and designed it as the customer specified.
What is needed to carry out job production?
1. Job production usually uses machines that are flexible and capable of doing many jobs. This is because each customer will ask for something different and the machines must be capable of doing any job needed.
2. Because it uses highly skilled labour and each product has to be made individually for the customer, it tends to be expensive.
What is batch production?
It involves making a large amount of the product all in one go (production run). The product is the same for all customers. For example, newspapers and books are batch-produced.
It is made in advance and ready for the customer when she comes into the shop looking for it.
What are some features of batch production?
1. Usually uses machines that are flexible and capable of doing many jobs. A printing business may be printing atlases in the morning and pocket-sized notebooks in the evening
2. Cheaper than job production. This is due to economies of scale. This means that the more products a business makes, the lower the cost of making each individual product.
What is mass production?
It involves making the same product continuously. Therefore, mass production is suitable only for products that are in continuous demand by consumers. For example, toilet paper and KitKats are mass-produced.
What are some features of mass production?
1. Capital-intensive. It mainly uses machines for production rather than workers. These machines specialise in one job. For example, Nestlé has a machine that only makes KitKats.
2. Uses unskilled workers in an assembly line to make the products.
3. Because of the huge economies of scale, it has the lowest cost of all three production options.
What are the short-term sources of finance for a startup?
1. Accrued expenses
2. Bank overdraft
3. Trade credit
What are the medium-term sources of finance for a startup?
1. Hire purchase
3. Medium-term loan
What are the long-term sources of finance for a startup?
3. Equity capital
What is a business plan?
It is a written document a businessperson uses when starting a major business venture. In it, she sets out the objectives she intends her business to achieve and the strategies she proposes to use to achieve them. It is like a map for the business to reach success.
What are the points in a business plan?
1. Description of business
2. Market analysis
3. Marketing plan
4. Production plan
5. Finance plan
Description of business
The entrepreneur sets out details of her business proposition, including the people starting the business, its products and its long-term objectives.
The entrepreneur must show that there is a viable market for her product and how she intends to beat the competition. She describes her target market, market trends, the competition and her competitive advantage over them.
The entrepreneur describes her marketing strategy. She will give the details of the 4Ps- the product she intends to sell, the price she intends to charge, the promotion methods she will use and the different places she will sell her product.
The entrepreneur describes how she will make the product in terms of the manufacturing process (job, batch or mass), the equipment and how she will monitor quality.
The entrepreneur describes how much it will cost to finance the business, how much money she has and how much she still needs. She sets out any collateral she has for the loan, a projected Profit and Loss Account, Balance Sheet and Cash Flow Forecast for the next few years.
Importance of a business plan
1. Can be used to convince investors that the business represents a sound investment proposal as it includes a projected Profit and Loss Account that will show them the business plans to generate sufficient profits to repay the loan and provide a decent return.
2. List of targets can be used to hold the business accountable for its actual performance as the two can be compared so that if the business falls short, action can be taken immediately. This ensures better control.
3. Sets out a series of well thought-out steps to be followed to guide the business to success. This gives a more organised and therefore more successful approach.
4. Helps the entrepreneur to anticipate problems. She can then prepare solutions in advance to avoid business failure.
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