cost-effective operations and competitiveness
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2.4_cost_effective_operations_and_competitiveness.pptx | |
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2.4_cost_effective_operations_and_competitiveness_starter_activity.docx | |
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productivity_grid.docx | |
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In a highly competitive world, success depends crucially on continually raising the productivity of your workers. Productivity is output per worker. Productivity is important because if workers increase the amount they produce, assuming that no costs of production have changed, then the cost per item produced will fall. There are a number of ways productivity can be increased:
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Training
It costs money to train workers in the short-term. However, in the long-term, better trained workers tend to be more productive. They are better at doing their job. They may also be able to perform new tasks with a higher level of output.
It costs money to train workers in the short-term. However, in the long-term, better trained workers tend to be more productive. They are better at doing their job. They may also be able to perform new tasks with a higher level of output.
Better Equipment
Workers will be more productive if they are provided with better equipment. Better machinery or state of the art technology can allow workers to become more productive, although it may have high short-term costs to buy.
Workers will be more productive if they are provided with better equipment. Better machinery or state of the art technology can allow workers to become more productive, although it may have high short-term costs to buy.
More effective work practices
Businesses tend to find over time that they can improve how people work. Inefficiencies in the system become apparent. Reorganising workers can mean that the same amount of work can be achieved using fewer workers. Or higher levels of output can be gained using the same number of workers. This may however lead to decreased motivation if workloads increase or redundancies are made.
Businesses tend to find over time that they can improve how people work. Inefficiencies in the system become apparent. Reorganising workers can mean that the same amount of work can be achieved using fewer workers. Or higher levels of output can be gained using the same number of workers. This may however lead to decreased motivation if workloads increase or redundancies are made.
Performance related pay
If businesses introduce piece-rate pay or commission, it may lead to increased output from employees. They know that if they work harder they will be financially rewarded. This may however, lead to a decrease in the quality of output, or aggressive selling techniques for example, being used.
If businesses introduce piece-rate pay or commission, it may lead to increased output from employees. They know that if they work harder they will be financially rewarded. This may however, lead to a decrease in the quality of output, or aggressive selling techniques for example, being used.
Increase motivation
Motivated staff tend to work harder and their output increases. If they are happy with what they doing and feel that their hard work is being rewarded, they will work harder and tend to stay with the business reducing staff turnover and therefore recruitment costs. Motivational techniques could include praise, fringe benefits, flexible working hours or team days out. This can lead to additional costs however.
Motivated staff tend to work harder and their output increases. If they are happy with what they doing and feel that their hard work is being rewarded, they will work harder and tend to stay with the business reducing staff turnover and therefore recruitment costs. Motivational techniques could include praise, fringe benefits, flexible working hours or team days out. This can lead to additional costs however.
proctivity_and_costs_table.docx | |
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Improving productivity is just one way in which a business can reduce its costs and become more competitive. There are many other ways a business can put downward pressure on its costs and make its operations more cost-effective.
Improved purchasing
Businesses may look to find a cheaper supplier in order to reduce costs. Or they may find a supplier with highly quality materials for a only a slightly higher price. This means quality can be increased and a higher price can be charged. Firms will also look to negotiate lower prices with existing suppliers. Bulk buying can also lead to cheaper costs (economies of scale).
Businesses may look to find a cheaper supplier in order to reduce costs. Or they may find a supplier with highly quality materials for a only a slightly higher price. This means quality can be increased and a higher price can be charged. Firms will also look to negotiate lower prices with existing suppliers. Bulk buying can also lead to cheaper costs (economies of scale).
Relocation
Some businesses can relocate part or all of their activites to reduce costs. Eastern Europe or the Far East have lower labour, land and building costs. Taxes may also be lower in other parts of the world. This however can lead to a short-term disruption of production. Workers may also not be as skilled here.
Some businesses can relocate part or all of their activites to reduce costs. Eastern Europe or the Far East have lower labour, land and building costs. Taxes may also be lower in other parts of the world. This however can lead to a short-term disruption of production. Workers may also not be as skilled here.
Better design
Better design can reduce costs. A new design may use fewer or better designed materials to achieve the same effect. It may also be easier to manufacture reducing labour costs.
Better design can reduce costs. A new design may use fewer or better designed materials to achieve the same effect. It may also be easier to manufacture reducing labour costs.
Cutting overhead costs
These are not directly linked to production. E.g. research and development or rent costs can be reduced leading to an overall fall in costs.
These are not directly linked to production. E.g. research and development or rent costs can be reduced leading to an overall fall in costs.
Competitive prices
Businesses face a competitive challenge. They need to sell their products to be successful. There are many factors which decide whether or not a customer will buy a product. Price is an important factor. When competing, a business has to be price competitive. If prices are too high then nobody will buy the product. Prices need to be right in order to control costs. A profit needs to be made in order to survive long-term. If costs can be cut then a business can offer its products to its customers at a lower price. In the long-term this will give it a competitive advantage provided it can sustain the advantage and rivals cannot imitate or copy its ideas.
Businesses face a competitive challenge. They need to sell their products to be successful. There are many factors which decide whether or not a customer will buy a product. Price is an important factor. When competing, a business has to be price competitive. If prices are too high then nobody will buy the product. Prices need to be right in order to control costs. A profit needs to be made in order to survive long-term. If costs can be cut then a business can offer its products to its customers at a lower price. In the long-term this will give it a competitive advantage provided it can sustain the advantage and rivals cannot imitate or copy its ideas.