Business failure/Resource management-Production, Productivity and Efficiency (2.3.3/2.4.1)

What is the main reason as to why businesses fail?
Poor cash flow management - without finance to pay the bills, these become unpaid bills and eventually debts.
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What are the 2 main internal causes of business failure regarding finance?
Efficiency - businesses must control their working capital. This ensures that they have enough cash/assets to convert to cash so they can pay expenses. Planning - Important for a business to stay afloat for years. Invest in their own futures =profit
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What are the 4 main internal causes of business failure regarding non financial factors?
Communication, Efficiency, Marketing and Innovation.
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Why is communication a non-financial and internal factor?
If communication is poor between employee/s and employer/s and also customers then this can cause confusion and staff may not know business objectives.
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Why is efficiency a non-financial and internal factor to business failure?
Businesses that use their raw materials in the most cost effective manner will have low cost of sales and high profits whereas businesses that waste their raw materials produce expensive goods and don't make profit.
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Why is marketing a non-financial and internal factor to business failure?
Firms need to promote their goods to as many customers as possible and to their target market. If done incorrectly then the business won't be able to promote their brand and products which will reduce sales.
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Why is innovation a non-financial and internal factor to business failure?
Businesses that fail to stay up to date with their markets (what customers want and need) will find it difficult to compete. Eventually another business will introduce a better product/service.
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What are the main external causes to business failure in relation to finance?
Economic recession - this factor is unforeseen, and businesses who rely on borrowing and high spending will be impacted. Currency strength - firms may purchase supplies from other countries where it is cheap. If their currency strengthens firms pay +
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What are the main external causes to business failure in relation to non financial factors?
National crises - e.g war, disease and earthquakes. Harm firms that used to buy supplies from the affected area. If a firm doesn't have a backup supplier then this would affect production+sales. Less export demand.
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Following on from the last question, why is less export demand an external factor in business failure?
Businesses value their key contracts because these generally purchase the largest amount of goods. Firms that rely mostly on customers from other nations to buy their goods can suffer long term. This could be affected by government policies to trade.
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What are the 4 main production methods?
Job, Batch, Flow and Cell.
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What is job production?
Often used by small businesses and sole traders, it involves making one product at a time.
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What is batch production?
Often used by businesses such as bakeries where different types of breads are produced. One type of bread will be produced in a batch then another type of bread will be produced in a batch and this is repeated..
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What is flow production?
Often used by businesses such as car manufacturers as a way to produce goods on a large scale. The products are made on a conveyer belt. Firms do this so then can dedicate one factory to making that product.
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What is cell production?
Used by manufacturing firms who produce electronic goods. This method is a way to efficiently divide production. Staff are split into teams, each team working in the same way but making different products. Works well for very large firms.
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What is meant by productivity in business?
Production is the volume of output a firm produces in a specific amount of time while productivity gives the hourly rate of output per each input. Outputs can include the amount of productivity per person, per factory/machine.
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What are the 5 main factors which increase productivity?
Increasing number of hours that staff work. Making changes to key business processes. Motivating the workforce. Purchasing new equipment, tech and premises. Increasing the amount of training that staff receive.
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What are the 4 main factors that decrease productivity?
Employees rarely choose to work long hours. Staff may not want extra training/development. Might want rewards for increased productivity. Changes that affect productivity may make people think about their job security.
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What are the main 4 reasons as to why firms concentrate on productivity as a method of becoming more competitive?
Firms that cannot produce enough to fulfil market demand will loose out to more productive firms-businesses must increase productivity to meet demand. Price elastic demand markets are competitive so need to reduce costs. +productivity= - costs
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How will service focused businesses concentrate on productivity to provide better customer experience?
The more goods/materials a business has available at any time, the more quickly it can respond to consumer demand and hopefully encourages further sales in the future.
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What is meant by efficiency in business?
This refers to the maximum output a business can achieve through a minimum number of units or average costs. Efficiency involves everything from a business's workforce to its procedures, scale, innovation and use of capital.
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How can efficiency be improved?
Either by a firm increasing the number of outputs it produces from its inputs or by producing its outputs using fewer inputs.
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What is labour intensive production?
This means that in order to produce goods it requires a significant amount of labour.
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What is capital intensive production?
This means that in order to produce goods it requires a significant amount of money or other financial resources.
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What is productivity of labour?
This encourages the workforce to increase their production e.g through assigning targets, motivation and/or better matching peoples skills to tasks.
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What is nature of processes?
This is when businesses must use the correct method of production, e.g a popular car manufacturer might use flow production since it needs to produce many goods all to the exact same standard.
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What is meant by capital utilisation?
The fixed costs of a business stay the same regardless of how many sales it makes and so a business must utilise these (i.e equipment, machinery) to their maximum capacity. Otherwise, goods/services will become more expensive to produce.
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What is meant by scale?
Businesses all look for profit so they can grow. This can lead to economies of scale, such as bulk purchasing, which helps a business lower costs overall. However, if a business grows too big it can suffer from diseconomies of scale, e.g poor comms.
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What is meant by innovation?
Firms are always looking for cost savers, ways to either produce their goods/services more efficiently or deliver them more cheaply. Retailers that move online, for instance, can save money on no longer needing a shop window.
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What is meant by lean production?
Businesses invest in methods to reduce waste, not only to help the environment but also as a way to save money. Less waste helps businesses lower their costs and improve efficiency.
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Card 2

Front

What are the 2 main internal causes of business failure regarding finance?

Back

Efficiency - businesses must control their working capital. This ensures that they have enough cash/assets to convert to cash so they can pay expenses. Planning - Important for a business to stay afloat for years. Invest in their own futures =profit

Card 3

Front

What are the 4 main internal causes of business failure regarding non financial factors?

Back

Preview of the front of card 3

Card 4

Front

Why is communication a non-financial and internal factor?

Back

Preview of the front of card 4

Card 5

Front

Why is efficiency a non-financial and internal factor to business failure?

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Preview of the front of card 5
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