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

AQA A2 Business Studies

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



True or False

Division of Labour is another term for

Specialisation

TRUE!



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



True or False

The three economies of scale you need to MOST

remember are Technical, Purchasing and

Marketing

FALSE!

Technical, PurchasingAnd Specialisation



True or False

When the average cost per unit of production

decreases we call it DISeconomies of scale

FALSE!



True or False

As output increases, a business’s total costs will

also increase

TRUE!



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 productiveefficiency



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



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.



CELL

Cast your minds back to AS level…

What does CELL stand for?

Enterprise

Capital

LandLabour

Whiteboards



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



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.



Labour IntensiveLabour Intensive

Labour versus Capital intensity

Production relies on using labour resources

Production relies on using labour resources

Capital IntensiveCapital Intensive

Production relies on using capital resources

Production relies on using capital resources



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?



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?



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.



Examples of labour / capital intensive industries

Whiteboards

Food processing

Oil extraction & refiningCar manufacturing

Web hosting

Inte

nsi

ve a

rable

far

min

g

Transport infrastructure

Hotels & restaurants

Fruit farmingHairdressingCoal mining

Split your whiteboards and tell me which is which



Examples of labour / capital intensive industries

Labour intensive Capital intensive

Food processing Oil extraction & refining

Hotels & restaurants Car manufacturing

Fruit farming Web hosting

Hairdressing Intensive arable farming

Coal mining Transport infrastructure



Implications of intensity

Labour intensive Capital 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



• Contrast capital and labour intensity with industrial examples

• Examine the factors influencing the choice between capital and

labour intensive production



Homework

Documents

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