BUSS 3 Key Terms

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Capital intensity

The extend to which production or operations depends on investment in and use of capital e.g. machinery, it, systems, buildings etc.

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Critical path analysis

Project managment tool that uses network analysis to help manage complex and time sensitive operations.

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Diseconomies of scale

Factors which result in higher unit costs as production output reaches too high a level.

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Economies of scale

Cost advantages that a business can exploit as a result of expanding its scale of production. Economies of scale reduce the average unit cost of production

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Efficiency

A measure of the ability of a business to achieve the required level of production whilst minimising the use of resources.

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Industrual inertia

Where a business decides to stay in its existing location despite potentially better locations being available to it.

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Innovation

Putting a new idea or approach into action - the commercial exploitation of ideas.

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Just in time

Method of lean production, where production resources arrive at the moment they are required rather than being held in stock.

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Kaizen

A cultural approach to lean production and quality assurance - involves encouraging employees to constantly seek and impliment small incremental changes to production in order to improve quality and efficiency.

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Labour intensity

The extent to wwhich production or operations depend on investment in and use of labour e.g. peoople, training

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Labour productivity

The level of output per unit of labour

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Lead time

The period of time between an order being placed and being recieved

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Lean production

An approach to managment that focuses on cutting out waste while ensuring quality still

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Marketing economies

Where marketing costs per unit sold can be lowered by spreading marketing costs over larger output.

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Minimum efficient scale

The minimum output a business needs to achieve in order for it to be able to minimise unit costs

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Multinational

A business which owns operations in more than one country

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Network analysis

Breaking a project down into seperate activities and their requirments

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Offshoring

Where a business has work, done for it overseas

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Outsourcing

Where a business has work done for it by someone else

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Productivity

Measures of how effective a business is in turning resources (e.g. labour hours) into output.

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Purchasing economies

Cost savings that arise from buying in bulk or from a more powerful relationship with a supplier due to increased output.

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Quota

A restriction on the volume or quantity of a good that can enter or be sold in a market (form of trade barrier)

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Scale

The size or output of a business, best measured relative to that of direct competiors

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Subcontracting

Part of outsourcing - where another business is used to provide part of the production process

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Tariff

A tax levied on imports to increase their price compared with domestic goods (form of trade barrier)

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Technical economies

Reductions in unit costs arising from the effective use of technology.

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Unit costs

The key measure of productive efficiency - calculated as total costs by total output (over a specific period)

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