luilncss - Profilr 2c. . «mnls if a customer desirod a variation lu .1 produci .

n Z c llv J S J b u r i n s can make adjustment* to meet |llta| f »m at, UH*,n> h t respond in Ihi® w ay to m ark * conditio*, 41

O F ™ " ■ ? , r»«v .u ,- - p i , ^ v Z * burinwae. contribute to the competitive spirit o the e c o n o * * , f V T a '™ n trv by competing with " > « p r r v e * ^

thorn from having .1 monopolistic position.

S m a l l business incubatorThe Idea o f the small businc* incubator .5 relatively new. but cen t* , h„ V(,been established to provide:

>• essential business services >■ consultancy and training> .i flexible working space for the new businesses.

The incubator is seen as a lool that can be used In bring about economic growth «n industrialising developing nations A major objective o f the incubator is to encourage innovations and the incubator w ill then provide M im e resources and training for the small to medium-sized businesses ^ incubator w ill provide space, shared office facilities, advisory services, nkilU development in small business management, assistance and speed in securing office space, and access to 'seed money* through a loan scheme.

Small businesses are often born out o f cottage industries (see below ) or other community self-help projects. Many are fam ily businesses with limited capital These businesses often find it difficult to obtain a loan from the established financial institutions that tend to focus their attention on the larger, well-established businesses. I lowever, small businesses have .in Important role in the economy.

> They contribute to the economic life o f the country by provid ing employment

> They provide a service that is needed by the population, especially in small communities that are not easily serviced by the businesses in the towns and cities.

> Because o f the size o f the business, customers' personal preferences .ire identified and met

Cottage industriesA cottage industry is one o f the extremes o f small business As the name suggests, cottage industries are carried on in the home, although increasingly they are to be found in community centres, parish halls or some other similar village facility. Frequently such businesses w ill in vo lve handwork carried on at home but the term also applies to many other forms o f employment, often when.* workers supplement their normal earnings in cottage industries after their day's work is completed

f oftage industries originated as w.iys o f increasing income without leaving home I hey also satisfy the psychological need to use one's spaa* time productively. Today they are recognised as playing an essential part in the C aribbean economies.

I ci iplr who have skills in handicrafts have for a long time successfully used ree or relatively cheap local materials to produce a variety o f goods.

the demand* o f the tourist trade This not only provides spare time In UCeTS ° ilems bu* also makes sensible use or Iheu provide riu- rr^T™ ®xamP,es lt can also provide employment tor other- who

enals or w ho sell the finished product on behali o f the makers

i nvol vvH1 ^ r° <f ntinLU’a to *u ™ v e in the Caribbean Kvau-*- those

; r d‘v and mcrc ** «»* <* ***f K * ucts Produced by cottage industries include: pastries, straw

ate garments, embroidery, basketry, jams and Jellies, string arts flower rangements, as well as direct services such as ta iloring beautv culture,

catering, knitting, smocking and crocheting.

Throughout the Caribbean region various governments have tried to encourage production in this manner. For example. Caribbean governments may arrange major exhibitions and competitions, provide skills training, assist in the marketing o f products, and may even make factory space available

Apart from the aforementioned reasons for the continued existence o f cottage industries, they have other important contributions to make to the economy o f their countries. During a time o f high unemployment they provide income and independence for many people. W e also have to remember that the m oney earned by those engaged in the cottage industries is eventually spent - thus p rovid ing w ork for others

Linkage industriesIn Chapter 1 w e said that there are three types of productive industries

i l Primary: the industries concerned w ith the extraction o f basic materials provided by nature (farm ing, fishing and mining).

■ Secondary. the industries that change raw materials and partly produced goods into a finished product (manufacturing and construction).

■ Tertiary; the service industries (such as transport or tourism).

The linkages between these aspects o f production are important because they facilitate a series o f relationships between the productive sectors mentioned above. These linkages are o f crucial importance to Caribbean development l or exam ple, agriculture is an important econom ic base in many o f the territories and the linkage industries make an agricultural-industrial d r ive possible

A linkage industry* is one that is linked w ith another. It is sometimes called a 'screw -driver' industry o r a 'sp in-off' because it has com e about as a result o f som e other developm ent. For exam ple, canning and preservation o f foods are 'sp in-offs' o f agriculture (fo rw a rd linkage); one industry is producing the ran material for another industry. Conversely, manufacturers of farm machinery w ill supply to agriculture (backw ard linkage).

The linkage industries are important in the Caribbean at both national and regional leve ls because they:

>■ p rov ide increased em ploym ent and an im proved standard o f living> assist regional self-sufficiency (reduced dependence on imported goods)

>■ reduce wastage o f the country's resources>■ increase opportunities for combined research and developm ent

► encourage m ore skills in the labour force forge closer Caribbean links at the social, econom ic and political levels

Chaptef 12 - Production

►>■ prom ote earnings o f foreign exchange

* ^ u l y 'Z mCCt1 ,ht* denun^ » of lh<* toum i trade Thi* not only provide* soarr »mu. i PIW*U®H* Item* but a b o make* sensible u%r o l theirnrnvif-i n *" mt> rx,1mPk''' 11 can also provide emplovmcnt tor other* whoI v raw material* or who v l l the fo b b e d product on behaU ol the makers

i? dus,r?*"' ***** continued to eurvtvr in the Caribbean because tho*e « * ye diversified and increas'd the range and «copr 01 their p uc s. Product** produced by cottage industries include pastries, straw nats. garments, embroidery, basketry, »ams and fr-llM. stnng am , (low rr arrangements, as well as direct services such as tailoring, beauty culture, catering, knitting, smocking and crocheting.

rhroughout the Caribbean region various government* have tried to « ncourage production in this manner For example, Caribbean government* may arrange major exhibitions and competitions, provide skills training, assist >n the marketing o f products, and rnay even make factory space available

Apart from the aforementioned reasons for the continued existence o f cottage industries, they have other important contributions to make to the economy o f their countries. During a time o f high unemployment they provide income and independence for many people. We also have to remember that the money earned by those engaged in the cottage industries is eventually spent thus provid ing work for others

Linkage industriesIn Chapter 1 we said that there are three types o f pnnluctive industries

9 Primary: the industries concerned with the extraction o f basic materials provided by nature (farm ing, fishing and m ining;

■ Secondary: the industries that change raw materials and partly produced goods into a finished product (manufacturing and construction).

»a Tertiary: the service industries (such as transport or tourism)

The linkages between these aspects o f production are important because they facilitate a series o f relationships between the productive sectors mentioned above. These linkages are o f crucial importance to Caribbean development. For example, agriculture l s an important economic base in many o f the territories and the linkage industries make an agricultural-industrial d r ive possible.

A linkage industry is one that is linked w ith another It is sometimes called a 'screw -driver' industry o r a 'sp in -o ff because it has com e about as a result of some other developm ent. For exam ple, canning and preservation o f foods are 'spin-offs' o f agriculture (fo rw ard linkage); one industry is producing the raw material fo r another industry. Conversely, manufacturers o f farm machinery

w ill supply to agriculture (backward linkage).

The linkage industries are important in the Caribbean at both national and

regional levels because they:

► provide increased em ploym ent and an im proved standard o f living► assist regional self-sufficiency (reduced dependence on imported goods)

>• reduce wastage o f the country's resources>• increase opportunities for combined research and developm ent

► encourage m ore skills in the labour force► forge closer Caribbean links at the social, economic and political levels

>• prom ote earnings o f foreign exchange

Chapter 12 - Production

175

--------------- : Prtrdeum pU***. * P ha'tCrude oU (reftn.ng) Cam#y ^Sugar cane canningFrurt BasketsBamboo Road-buildingAspba»t leather goodsLivestock ---------------------

Benefits of local and regional linkagesi » r immunity (CAR1COM) has been established to encour

The Caribbean m {ht. ^g jon . The organisation has been seelur, * *economic deve tp ^ ^ ^ j ^ v e s and one o f these is to establish h i ’ and means u * 1 w,thin the region. The argument is that » **

Z l u Z Z - to do wcU economically, the,, lin k a g e between in d u * ! * B ,

worthwhile alternative to cunvnl practices.

For example. Trinidad and Tobago is a major producer o l pitch which » , h . product o f oil - one o f their major resources. O ther islands could form linkages with this industry in order to obtain the raw materials for their purposes- For example, with further processing asphalt used in road construction can be obtained from the piti. h

Another example is the hospitality and tourism sector w hich is a major o n * o f foreign currency for most Caribbean islands. Because o f the nature 01 the hospitality and tourism product, it is an area in which considerable co­operation and linkages are needed Hor example, linkages can be established between the agricultural sector and the hospitality and tourism sector bocauy large volumes o f farm produce an* consumed by this sector on an annual basis Information about the <jualilv. quantity and variety o f the produce required by the sector is o f importance to the fanners. Farmers would then tv in a better position to produce to meet the product specifications o f the hospitality and tourism sector.

The design and management ol facilities an* important aspects o f the hospitality and tourism sector. Training o f managers to develop these skills and competencies would complement their existing general management skills

This type o f training is best delivered by a building services engineer, allowing building services engineer* and hospitality and tourism to work co­operatively.

Knally, craft items are produced by many local artisans tor the hospitality and tourism sector. Yet, in the marketing o f the tourist product, limited attention is given to this often small but important sector.

It is. therefore, dear that the opportunities tor linkages at the local and regional lt.*\ eU exist, but a concerted effort must be made bv the decision-makers to bring these sectors together so that they complement each other. In this way decisions can be made about how much o f what is earned in one sector, lor example, hospitality and tourism, should t v ploughed back into other sector such as cralt and small farming, in order to im prove the quality o f their products In other words, the backward sector could benefit from the modem or tei hnologicallv advanced sector for their mutual benefit This can only be achieved it a concerted effort is made by the decision-makers to forge the necessary linkages. This would help to reduce or prevent economic dualism

Regional linkages can result in:

► providing outlets for raw materials (at the primary and secondary levels) assisting in the development o f the region at a faster pace

► assisting in reducing unemployment>■ provid ing opportunities lor countries to develop their expertise in the

production o f specific products► giv ing the opportunity for the region, in the long-run. to compete in the

glob.il market-place

► preventing scarce resources from being used to obtain products from outside the region which could, with greater co-operation, be produced within the region. This would then leave the savings free to obtain pnnlucts that are necessary, but for which there would be no clear comparative advantage if attempts are made to produce them locally or regionally.

The role of governments in developing regional linkageGovernments can contribute to the ideal o f regional linkage bv:

► outlining the benefits to be gained by C A R IC O M countries from regional strategies. Through C AR ICO M , regional strategies and policies could be identified and pursued.

► educating business organisations about the benefits to be derived from regional linkages Encouraging businesses to use the raw materials oi the region, as w ell as buying locally produced goods. In this manner both local and regional businesses w ill be supported and helped to survive and develop.

>• financing trade fairs at which both local and regional persons could be brought up-to-date on what is being produced in the region, and thus encourage businesses to obtain their supplies from both local and regional markets

>• ascertaining the skills and competencies needed tor the industries and collaborating in provid ing the necessary training o f ihe labour force to handle the tasks to be carried out

► pooling resources in order to obtain the capital needed by various industries.

12.6 Location of businessA major decision that all firms have to take is where to site their premises. A variety o f factors w ill influence this decision, including the size of the organisation and the expected scale o f its operations, but most choices o site are a com prom ise between several advantages and disadvantages. T e summary chart, figure I2.t». on the fo llow in g page, shows the main influencing factors.

12.7 Business expansionBusiness riskBeing in business is risky. Som e o f the risks in vo lved can be insured, e.g. a*, debts, dam age or theft H ow ever, som e cannot. For example, it is not possi to insure against a business making a loss. The main risk a business a that it w ill fail to make a profit; and even worse, if this continues over a period o f time, the business w ill be forced to cease trading.

Chapter 12 - Production

177

Principles of Business - Profile 2

INFLUENCES ON LOCATION OF BUSINESS

Transport access - Siting n* * to good road. rail, sea or links can save in distribution costs or in the movement of raw materials

Industrial inertia - Sometime-; firms stay at a particular site even though the original reason for siting in that area (e g near source of raw

raw materials or to the port where they enter the count > may influence choice of site

materials) no longer apples

Land - Availability of sufficient suitable land, at an economically viable pnce. in a suitable position wil attract business

Labour - Availability of suitable labour with a good no stnke record This will be influenced by availability of social amenities such as housing and medical facilibes

Environment - Climaoc condibons are important to some businesses, particularly those involved in agricultural products.

Fuel or power - Closeness to fuel or power is less important today than m the past, but some firms still need to locate near to sources such as water

Market pull - Businesses are attracted to sites close to where potential customers can be found, shops near where the shoppers will be. hotels near tourist areas

M0<OI

«T

.mcsN'O %V • MH>X>

Government influences - Some governments try to influence the location of businesses, e g. to improve regional balance and reduce overcrowding in cites and towns

Linkage Industries - Firms will locate near other businesses on which they depend, or near to other firms in a similar line of business

Fig. 12.6 A business will lukr many fucton into ucivunt when decuimg where to locate »l» premises Lm L at the example* £ij**n Utu Where cjm you see examples of the*e influences on businesses in your locality7

178

One o f the obvious ways a business can reduce risks is by being successful and increasing profitability. .-\s a firm becomes more successful, it tends to grow in size. Through this growth, it usually creates further profitability and success and so increases its chances o f surviving, and the growth continues The most obvious way that this growth is seen is in the organisational structure o f the firm For example, the structure o f a large business w ill be more complex and versatile than that o f a small business (see figure 12-7 for comparison)

The benefits of business expansionThe main aim o f a business is to create a profit for its owners. The larger the protit the greater capital is generated, and the more satisfied the owners w ill be because the chances o f survival and continued grow th w ill have increased. P rofit is what remains after all the costs o f running the business have been meL Costs include things such as wages paid to employees, rent o f buildings, and payment for stock and equipment Anything that reduces these costs increases profitab ility.

Chapter 12 - Production

Advertising SalesM anager Manager

Sales Representatives Sales Representatives

F ig .12.7 77t«* size o f a business xv ill in flue tice its s tru c tu re

G row th can help to increase profitability in the fo llow in g ways:

Economies o f scaleA s a business g row s it usually generates econom ies o f scale. This means that as the business size increases, its unit costs fall; the cost o f each thing the business sells is reduced because unit costs are m ore w idely spread Thus, it

is cheaper to produce goods on a larger scale.

Internal econom ies o f scale occur as a result o f various factors w ithin the business, and these are related to its size For example, a larger business can

179

rnncipies of Business ProH*- -

CEV W O R D Sind our the business* la ted meaning o f each the following terms

rite a separate sentence r each term to show ur understanding.

porting potential

tage industry

rkct pull

kage industry

?mal economies o f Ic

•mal economies o f e

fit

rialist labour

istrial inertia

4 t a d t o u * b e t t e r M t a o t W . * - ^ * *V T tht. tc jtU of production, thus further increasing econom y

Other internal economics of scale include being able to employ 'P « ia l i . t U b o u X n g -W e to buy in bulk and finding it easier to raise further capitai

External economies o f scalc refer to the benefits gained by all the b u s i n g m a particular industry. S om etim e lor example, buswessa wxth similar u u rr^ t o t e in a particular area This can benefit all such related bus,nev*s other suppcVung b u s in ess (e g. those- p r o v in g ~ * * f e e *in the region, making access to them easier Similarly slulled labour will n * » , into the area to benefit all the businesses In such ll,N'n^ s "layco-operate to create ,oint research facilities which benefit them all

Increased share of the marketWhen a business is becoming more successful, it w ill be obtaining an increased share o f the market, and it w ill be achieving this increase at the expense o f its competitors This increased market w ill, in many cases, includr exporting potential In order to satisfy- the increased number of customers, the business w ill have to expand to meet the extra demand it crates.

Securing sources o f supplyWhen a business has to relv on others to supply it with materials or sennces, u can be at a disadvantage For example, if the supplier receives a better offer from other buvers, it may bargain for a better price. Similarly, when a supplier is finding that demand for its goods or services are particularly good, it will be more discerning about to whom it w ill provide them. A business may become large enough through expansion to create its ow n sources o f supply and avoid having to rely on other businesses For example, a tinned food manufacturer may extend into farming, thus becoming its ow n supplier.

Securing outletsGrowth can enable a business to create its ow n outlets for its products. For example, a clothes manufacturer could expand to set up its ow n retail outlets or a mail order company.

Methods of business expansionThere are four main ways a firm can grow :

1 Working existing plant and machinery' harder and more efficiently, and as close to capacity as possible.

2 Extending existing capacity by m oving to a n ew b igger site3 M erging with another company. A merger is where tw o or more

companies join together to form a single business. A horizontal merger occurs where two or more businesses at the same stage o f production join together, for example a producer o f custom furniture joining with another in the same trade. A vertical merger is where tw o businesses at different stages o f production join together, for example a cheese processing company buying a dairy* farm.

4 The take-over o f another business This d iffers from a merger in that the company being taken over has not agreed to the developm ent. This is achieved by buying a controlling interest in the other business. (See section 2.6 in Chapter 2.)

12 8 Labour versus technologySome terms o f production arc said to t v labour-intensive, that is, they arc h ighly dependent on labour, e.g. farming Where labour is relatively cheap and capital is expensive then firms w ill be inclined to use large amounts ot labour in their production processes. In some cases tirms have no choice but to depend on labour because of the nature o f the business For example, a hairdresser remains labour-intensive irrespective o f the cost ot capital

Production is said to be c jp ila l-tn tcn s iw when it uses a considerable amount o f expensive plant, equipment, etc W here capital is relatively cheap and labour is comparatively expensive firms w ill be inclined to use large amounts o f capital in their production processes and be more inclined to automate (see below ).

Chapter 12 - Production

Fig. U S Gwtfufr* vy-,Vm

In develop ing countries there $8 a painful transition through which each country must pass in its movement towards international competitiveness This means that tower labour-intensive methods are used and m odem technology increasingly becomes the norm Dunng the process there are many problems ot adjustment tor workers and businesses as the new technologies

are embraced.

Throughout the w orld , each sector o f industry has been transformed by now technology. Lean production is the name g iven to m aking the host use ot technology and labour techniques in order to continuously im prove the production methods ot a business In the forefront ot loan production is automation computer-aided design (C A D ), computer-aided manufacture (C A M ) and computer-aided instruction (C A D

AutomationThe term automation refers to changing a task so that it can be earned out by machines. Automation in the modern sense involves the u seo t sophisticated machinery, which is electronically or com puter controlled, to carry out manufacture w ith m inim al human intervention Autom ation has been with us tor a long time, but rap id ly changing technology has led to automation being increasingly computer driven, as explained in the fo llow in g sections.

12.8 Labour versus technologySome forms o f production an; said to be labour-intensive, that is. they arc highly dependent on labour, e.g. farming. Where labour is relatively <. leap arid capital is expensive then firms w ill be inclined to use large amounts o labour in their production processes In some caw.-" firms have no choice m to depend on labour because ol the nature o f the business For examp e. a hairdresser remains labour-intensive irrespective ol the cost o f capita

Production is said to be capital-mlensivi when il uses a considerable amount o f expensive plant, equipment, etc. W here capital is re ativi n c and labour is comparatively expensive, firms w ill be inclined to use urge amounts o f capital in their production processes and be more inclined u automate (see below).

Chapter 12 - Production

Fig. 12.8 Cumf/ulfr syali'm

In developing countries there is a painful transition through which each country must pass in its movement towards international competitiveness.I his means that fewer labour-intensive methods are used and modern technology increasingly becomes the norm. During the process there are many problems o f adjustment tor workers and businesses as the new technologies are embraced.

Throughout the world, each sector o f industry has been transformed by new technology, Lean production is the name given to making the best use o f technology and labour techniques in order to continuously im prove the production methods o f a business. In the forefront o f lean production is automation, computer-aided design (C A D ), computer-aided manufacture (C A M ) and computer-aided instruction (CA1).

AutomationThe term automation refers to changing a task so that it can be carried out bv machines. Automation in the modern sense involves the use o f sophisticated machinery, which is electronically or computer controlled, to carry out manufacture with minimal human intervention Automation has been with us for a long time, but rapidly changing technology has led to automation being increasingly computer driven, as explained in the fo llow ing sections.

'Innplrt of (lutlnnu Profit** )

* . I I 10 in 4 i , i f pUnl

Computer-aided design (CAD)C A D tu n computer technology **» product* i*n lh»- im vn «•# * Wl%, d u v U y unit (VOU). The prototype' con »*r luilt up in pi. furr |«rmdHitbw u m n w u i , ......... . - ■ ...... « v , !,u .how diffrre.,1 * t * l ~ rhr d ~ ,*n car. even h* ittrd ,o ,*> *sm h 111*11 fur IomJ limit*. eu Voitou* a lte rn a te rmxlel* , hr .n a y ,, ,*and modified «m .rrreti. ami then p rin t*! « H •* hard copy I V , * r r* ( AI)thin manner flu- nnxl In ,>n*iurc esptm dve nw *M * a,«| p m M y * , *nuiur Hem* such a . ship*. brtdKe* <" *»rcr*fl In addition, fl«. »h o l* d ^p ro c r * (* now muc h qu ick s and ran be relatively modlfWd whrt,Anew model U needed f or example, a C A D pa* ka*» d e v e lo p ^ lo •uRnf„Hkitchen* ran readily l>e adapted lo many room* ..f different .hapet and

Computer aided manufacture (C AM)C A M ha* become commonplace in m odem manufai luring. wherr Urgr quantities are bem# produtcd by rn.iM or fU*w produ ilion * b *1*,playing an imreaMnnly important pari Industrial robotic* ha* bdrmiw « logical extension o f ctimpulerwed automation Robot k » in ideal f»»r c.irrytnr out work that i* repetitive ami borin g or dangtfoua They are U M -d . f,* example, in tar plant* for well! body part* ami spray paint, and even U> (ji windscreen* They are expensive !<• *et up, but use minimum labfiur

Computer-aided instruction (CAI)Even the process o f teaching people to UN* new let hnology has <l«*vridprd lu the *ta#e where Ihe instruction I* frequently carried out by romputrr Y<»u ran recognlae this to be true if you are familiar w ith using a computer: f**w computer* si>ipply manual* to help you learn about your Computer hcrsuw the m odem computer i* 'user friendly' and U w h*-s yrni much o f the know ledge you need Similar Instruction program m e* have been develop*] in thi* workplace to familiarise *taff about Ihe work they m u»t do

The uw* o f computer* in production can have the fo llow in g result*

P The 'londordhialiurt of product* results in m ore pronominal production, and lower price*Hutinen r ii! can I* tntzreantd because sophisticated, esjarnsive mmhlnrry m u»l be purchased well in advance td thr ta le td product*/ rufrpeople will fir emphnfrd,, and lh o «e dMplac 't l by autmnafum m -d u» find alternative form * o f employment.

■ U itu re time ctMlId th4*»^retk:ally be increa«e<i. e % by job «hanriK I The need for tertiary tfnHcet i » in rreavd Tertiary vTvK f-s im- ilw ^

buvinr^e* that are involved in the change of ownersh ip erf ffffodt and fhr provision (d •erviam.

KF;Y W O R D S

Find « j i th<- bunne *-related meaning <d f tuh tif the UdUn'/lnpi tw m i Write a •eparatf *^nfencw for each term U» *hrm you r umlerstaiuJinp;

iu rd copy computer-aided d »*i^n labour in len «iv r automated capital if i '*n,<,f

cornpute/'aided iru n u tM tu re automation rrrm pulet'aidffd ln*lru<lJon y

Principles of Business - Profile 2

Computer-aided design (CAD)CAD uses computer technology to design product.-* on the screen of display unit (VDU) The prototype' can tv built up in picture form and r„t' . to show different angles. The design can even be submitted to on-screen "» such as that for load limit#, etc Various alternative model* cm be com ^, , and modified on screen, and then printed out as hard i op\ flu- us<- of ('a .. this manner saves the need to produce expensive models and p r o t o t y p e ,n major items such as ships, bridges or aircraft In addition, the whole di process is now much quicker and can be relatively easily modified w h « , , new model is needed For example, a C A D package developed to dt-M<.n kitchens can readily be adapted to many rooms o f different shapes and

Computer-aided manufacture (CAM)CAM has become commonplace in modern manufacturing, where largo cjuantities are being produced by mass or flow production. Robotics is also playing an increasingly important part. Industrial robotics has become a logical extension o f computerised automation. Robotics is ideal for carrvm. out work that is repetitive and boring, or dangerous. They are used, for K example, in car plants for weld body parts and spray paint, and even to fit windscreens. They are expensive to set up, but use minimum labour.

Computer-aided instruction (CAI)Even the process o f teaching people to use new technology has developed to the stage where the instruction is frequently carried out by computer. You can recognise this to be true if you are familiar with using a computer; few computers supply manuals to help you learn about your computer because the modem computer is 'user friendly' and teaches you much of the knowledge you need Similar instruction programmes have been develuped in the workplace to familiarise staff about the work they must do.

The use o f computers in production can have Ihe follow ing results;

I The standardisation of pnxlucts results in more economical production, and lower prices.

S Business risk can be increased because sophisticated, expensive machinery must be purchased well in advance o f the sale of products.

P- Fcuvr people will be employed, and those displaced bv automation need to find alternative forms of employment

■ Leisure time could theoretically be increased, e.g. by job sharing.The need tor tertiary services is increased. Tertiary services .ire those businesses that are involved in the change o f ownership o f goods and the provision o f services.

k e y w o r d s

Find out the business-related meaning o f each o f the fo llow ing terms, n c- a separate sentence for each term to show your understanding.

' ' ° inputcr-aidrd design labour intensive automalrd capital intensive

computer-aided manufacture automation computer-aided instruction j

Fig. 12.10 Robotia in a car plant

Things to doI h i * n e t H im . o i i i . t i i t i .1 . d r ii> iu ,.i

V c \ t 'H K e n I n In t . . y o u , umI i* i r v l f t l i u t u o l i n , I n I m t y » U I i.n it*n iU n illi<K » , u l ... , , r ,p „ . „ ...............„ m ,

S e a i v h n n d f in d

W. II- ...H II... q u f t l l c , ^,,.1 II... by b , .k th.oi.Kti II..' I r . l l » ln.n.rcviwliin m ile*.

I I W l m l *» » » * * n l h y « lw t e r m |,uihImcIIoi i 'T

f r l N i u i . i l ' i h r l l i i ' i ' i ' | *i i n i . i i y r u n ' l i f t

§ | In v\ li.ll tv.ty. would Vtin .„iy 11 i,it I In- nni<. nf |niin.uv .uul i h o i i i I.h v |'i»»lui’tlnn d lltii Unlit llu mm*. of InHiii v ]>11 h11ii lion •

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§ 3 How can bus,ness s i * affect .he otganiM .iond s .m c fu e o f a bus in g .?

1 3 Give two example. e « h o f in te n d and « ° n o m . « o f scale.

P I Describe the four mam ways a firm can grow.

§ 3 What factor* influence the location of a business’

E 3 Explain the difference between the terms labour-intensive* and ’capttal-intmMve*?

U A Explain the similarities and the differences between C A D and C AM

B 3 *CAI has taken the human element out o f learning Briefly discuss this statement

m Explain how a business can benefit from computer technology. A re there any disadvantage from the point o f v iew o f the business?______

GD Technological developments are gotni for business, but many workers tear the changes they bring.’ Discuss this statement

What do you know?W rite out fhe com p le te sentence and insert the m is s in g w o rd , w h ich can be chosen from

the list at the end o f the test.

1 The purpose o f production is to provide people with the things th e y .....or want to consumr

2 A major decision that a firm has to make is where t o ..... its premises,

3 occurs when a person leaves one area and moves to another

4 The ... o f value that a firm owns is usually referred to as its capital.

The .....level of production meets only the basic needs

6 In order to be able to export a country needs to be producing a .......

^ .....*s ^ human contribution to production.

8 I he chain of production shows th e .....between the three levels o f production

9 It an entrepreneur successfully predicts future demand they an? usually rewarded with

10 Large firms achieve bigger profits because they e n jo y .....o f scaleChoose the missing words from the fo llow ing;• irplu. need subsistence migration economies locate links p ro fit assets labour

Structured questionsC D T h e tab les 12.4 and 12.5 re late to a sm all firm w h ich specia lises in the production o f

h an d -m ad e d o lls . T h e firm has va ried its w o rk fo rce in o rder to assess the op tim umsize .

Chapter 12 - Production

Labour Total output Averageforce (per week) output

4 2005 2606 3247 3928 4569 504

10 54011 57212 576

Number of workers employed 10Number of dolls produced 540Weekly wages of each worker 51100Rent, rates, depreciation, etc. S 260Power S 100Raw materials S 500

Tab l e 12.5 The different c a ts incurred b y the firm during a five day w orking week

T a b l e 12.4 Varying the workforce

(a) Explain the difference between the terms 'output' and 'average output'

(b ) What docs the w ord ing 'optimum size' mean?

(c) What is the optimum sized labour force indicated by table 12 4 ’

(d ) Calculate the average output o f dolls for each o f the different sizes o f labour force.

(e ) Using the given data d raw curves on a graph to show average output

(f) G ive a reason w h y the firm may not w ish to produce its maximum output o f 576 dolls

per week. _________

(g ) If the dolls w ere selling for S I0 each(i) What w ou ld be the firm 's w eekly income?tii) Subtract the total production costs from the firm 's weekly income to calculate

the firm 's w eekly profit. __________ ____________________

©(a ) What do you understand by the term 'automation in relation to production?

(b> In what ways could automation im prove w orking conditions in a factory? _

<c) G ive three examples o f w ays that automation can 'increase technical innovation

(d ) W hy does automation often result in a need for retraining? 1 low can C A I assist in this

(e ) What are C A D and C A M and how do they contribute to automated production?

(f ) G ive examples o f what makes some production defined as 'labour-intensive and others

'capital-intensiw _____________ _ _ _ _ _______ _

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©(a ) Drtinr the terms below.

(i) economies o f scalediseconomies o f scale________________________

lb) Select one product being manufactured for the tourist mdusm in your cvnxntrv and explain to a manufacturer who could, but does no* currently benefit n w n large-s<ale business, four benefits to be derived from such an operation

(c) Since vou wish to provide some amount o f balance in y o u r discourse with the manufacturer in to) above, highlight four disadvantages which could result from large-scale business operations

© l - l ' - -(a ) Primary production is sometimes referred to as the extractive industries Whv i> it referred to in this w ay?___________________________________ ___

(b) H ow d o the extractive industries support the other forms o f production?

(c) What is secondary production? Name and define the two mam categories into which this form o f production can be divided

(d> Wholesalers, retailer?, exporters and importers are sometimes referred to as the distribution trades' Explain w hy they are referred to in this way.

(e ) Tertiary production is very different from the other forms o f production but it is fust as important.' Discuss this statement.

(/) Take a particular paxiuct and desenbe its development from primary through to the tertiary stage Explain w hy each stage is important to the others.

©(a ) What is the 'chain o f production’?

fb) Briefly describe the three types o f production that are normally involved in the cham o f production.

(c) W hy does the cham of production result m interdependence in the economy?

(d ) Draw a simple flow diagram to show comparison* o f the contrasting chains o f production o f each o f the fo llow ing items, a woollen sweater, a china vase, cheese

ie> Draw a simple table with three columns headed by the titles 'Primary'., 'Secondary' and Tertiary' production. Enter six o f the fo llow ing occupations in the appropriate columns, with at least tw o in each column: farmer, shopkeeper, road maker, fisherman, builder, bank cashier, lorry driver, miner, o il driller, market trader, engineer, insurance agent, dressmaker, carpenter.

©fa) Name two o f the basic needs o f people

<b> State one w ay that secondary production helps to meet the basic needs o f people

(c> Describe three w ays that tertian- production helps both producers and consumers.

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