- Created by: noe
- Created on: 20-03-20 22:03
- Production methods that make more use of labour relative to machinery.
- More flexible than capital.
- Cheaper for small-scale production.
- Cheaper for large-scale production in developing countries like China.
- People are creative and can solve problems and make improvements.
- People are more difficult to manage than machines - they have feelings and react.
- People can be unreliable - they may be sick or leave.
- People cannot work without breaks and holidays.
- People need to be motivated to improve performance.
- Production methods that make more use of machinery relative to labour .
- More cost effective if large quantities produced.
- Machinery often more precise and reliable.
- Machinery can operate 24/7.
- Machinery is easier to manage than people.
- Huge set-up costs.
- Huge delays and costs if machinery breaks down.
- Can be inflexible as most machinery is highly specialised.
- Often poses a threat to the workforce and can reduce motivation.
Factors affecting production
- The nature of the product: everday products with high demand are mass produced in huge plants using large quantities of machinery but services tend to be labour intensive.
- The relative price of the two factors: if labour costs are rising it may be worth it for a company to employ more capital but in countries where labour is cheap, labour-intensive production methods are preffered.
- The size of the firm: if a firm grows and the scale of production increases, it tends to employ more capital but smaller businesses will use more labour.
Short product lead-in times
- Businesses can gain a competitive advantage if the can reduce the amount of time it takes to develop and lauch new products as, if they can be the first into the market (first-movers), they can exploit some advantages:
- They can make a lasting impression on customers, which can result in improved brand recognition and lasting brand loyalty.
- They may charge premium prices.
- They have more time to develop their production processed to help perfect their products or services.
- They may be able to control resources in the industry, for example, win exclusive contracts with key suppliers or important human resources.
- They may enjoy a strategic advantage if it is expensive for customers to switch products at a later date.
However, there are some disadvantages of being first-mover:
- It involves high costs of product development that copy businesses are likely to avoid.
- Followers in the market may learn from mistakes made by first-movers and make modifications to products so that they are superior to those of first-movers.
- It is possible first-movers, in fear of missing market opportunities, launch products before they are properly ready.