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Business AS CIE

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  1. enterprise as
    6 主题
  2. business-structure as
    6 主题
  3. size-of-business as
    3 主题
  4. business-objectives as
    3 主题
  5. stakeholders-in-a-business as
    2 主题
  6. human-resource-management as
    8 主题
  7. motivation as
    4 主题
  8. management as
    2 主题
  9. the-nature-of-marketing as
    7 主题
  10. market-research as
    3 主题
  11. the-marketing-mix as
    6 主题
  12. the-nature-of-operations as
    3 主题
  13. inventory-management as
    2 主题
  14. capacity-utilisation-and-outsourcing as
    1 主题
  15. business-finance as
    2 主题
  16. sources-of-finance as
    3 主题
  17. forecasting-and-managing-cash-flows as
    1 主题
  18. costs as
    4 主题
  19. budgets as
    1 主题
  1. Business AS CIE
  2. the-nature-of-operations as
  3. the-nature-of-operations the-transformational-process
课 12, 主题 1
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the-nature-of-operations the-transformational-process

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Exam code:9609

Using factors of production

  • Factors of production are the resources used to produce goods and services

Farmer on blue tractor, with factory, crops, and thought bubble with lightbulb, labelled as enterprise, labour, capital, and land.
The four factors of production are land, capital, labour and enterprise

  • The production of any good or service requires the use of a combination of all four factors of production

The four factors of production

1. Land

  • Non-man-made natural resources available for production

  • Some countries have a vast amount of a particular natural resource and are able to specialise in its production

    • E.g. Kuwait specialises in the product of oil, which accounts for 95% of its exports

2. Capital

  • Any man-made resource that is used to produce goods or services

  • Examples include tools, buildings, machines and computers

3. Labour

  • The human input into the production process, labour involves mental or physical effort

  • Not all labour is of the same quality

    • It can be skilled or unskilled

    • Some workers are more productive than others because of their education, training and experience

4. Enterprise

  • Enterprise involves taking risks in setting up or running a firm

  • An entrepreneur decides on the combination of the factors of production necessary to produce goods/services with the aim of generating profit

Stages of the transformational process

  • Businesses take inputs and transform them in order to produce outputs that customers will want to buy

The transformational process

Diagram of a firm showing the flow: raw materials and costs to the firm, producing goods, services, added value, leading to profit or loss.
The transformational process

  • Inputs used in the transformation process may be financial, human or physical resources, as well as enterprise

  • Outputs are goods and services, as well as by-products and waste

    • E.g. Rothaus brewery takes inputs including malts, hops and barley and uses the staff on the brewery premises in Freiburg, as well as equipment, such as mash tuns, to transform them by brewing these inputs into its main output — its range of beers — as well as by-products, such as compost

Operations and added value

  • Adding value is the process of taking raw materials and using them in such a way that the end product created is worth more than the cost of the raw materials used to create it – value has been added

    • E.g., customers pay more for potatoes when they are packaged as oven chips than they would be willing to pay for a bag of potatoes

    • If value is not added to the materials and components that a business buys, fixed costs cannot be paid and no profit will be made

A Diagram to Show Methods of Adding Value 
Some of the methods of adding value allow for product differentiation, which allows the business to charge a higher selling price

Method

Example

Branding

  • Apple has built a brand that many customers believe is superior to other brands

    • They use quality materials, innovative design and good marketing

    • This branding allows Apple to charge a higher price for its products, increasing added value

Convenience

  • Persil initially sold bottles of liquid for dishwashing machine use

    • This resulted in spillage as customers added the liquid to their machines

    • Persil developed tablets, which offer a more convenient option that can be sold at a higher price

Quality

  • Jo Malone perfume products are well known for their beautiful packaging, which creates an exciting opening experience for the customer

    • This allows the firm to charge a higher price for its products, increasing added value

Unique selling points (USPs)

  • MoonPig birthday cards can be completely customised (size, colour, design etc)

  • This customisation has helped Moonpig gain a competitive advantage

    • It can charge a high price for its cards, increasing added value

Design

  • Samsung Galaxy Watch 5 has robust health tracking tools built into it, along with a highly advanced screen,

    • These features allow the firm to charge a higher price for its products, increasing added value

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