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AQA A2 Business Studies
Unit 3: Strategies for success
Operational strategies
Unit 3: Strategies for success
Operational strategies
True or False
“Mass production techniques used to improve
productivity” is an example of Technical
Economies
TRUE!
Whiteboards
Unit 3: Strategies for success
Operational strategies
True or False
Division of Labour is another term for
Specialisation
TRUE!
Unit 3: Strategies for success
Operational strategies
True or False
“Large hierarchies create feelings of distance
between decision makers and employees” is an
example of a managerial economy of scale
FALSE!Motivation Diseconomy
Unit 3: Strategies for success
Operational strategies
True or False
The three economies of scale you need to MOST
remember are Technical, Purchasing and
Marketing
FALSE!
Technical, PurchasingAnd Specialisation
Unit 3: Strategies for success
Operational strategies
True or False
When the average cost per unit of production
decreases we call it DISeconomies of scale
FALSE!
Unit 3: Strategies for success
Operational strategies
True or False
As output increases, a business’s total costs will
also increase
TRUE!
Unit 3: Strategies for success
Operational strategies
True or False
The Minimum Efficient Scale is the point at which
the firm is at its least efficient.
FALSE!
Most efficient, i.e.Lowest cost per unit
Aka Maximum productiveefficiency
Unit 3: Strategies for success
Operational strategies
By the end of this lesson you will be able to…
• Contrast capital and labour intensity with
industrial examples
• Examine the factors influencing the choice
between capital and labour intensive production
Unit 3: Strategies for success
Operational strategies
Understanding operational objectives
Operational objectives:•quality•cost targets•volume targets•innovation•efficiency •environmental targets
Identify a business that would
prioritise quality as an
operational objective, another
business that would prioritise
cost targets, and so on for all
six operational objectives.
Explain your reasoning and
evaluate the most important
operational objectives for UK
businesses as a whole.
Unit 3: Strategies for success
Operational strategies
CELL
Cast your minds back to AS level…
What does CELL stand for?
Enterprise
Capital
LandLabour
Whiteboards
Unit 3: Strategies for success
Operational strategies
CELL
What do we call these elements?
Enterprise
Capital
Land
Labour
Factors of Production
AKA
Resources used by a business to produce outputs through the
transformation process
Unit 3: Strategies for success
Operational strategies
What do we call these elements?
Enterprise
Capital
Land
Labour
Factors of Production
Enterprise and Land tend to be unique.
Enterprise
Land
However, labour and capital are often interchangeable, so a business must decide whether its transformation process or production methods will be predominantly based on the use of capital or the use of labour.
Unit 3: Strategies for success
Operational strategies
Labour IntensiveLabour Intensive
Labour versus Capital intensity
Production relies on using labour resources
Production relies on using labour resources
Capital IntensiveCapital Intensive
Production relies on using capital resources
Production relies on using capital resources
Unit 3: Strategies for success
Operational strategies
Operational strategies: resource mix
Capital-intensive production: methods of production that
use a high level of capital equipment in comparison to other
inputs, such as labour. A fully automated factory, such as
Fiat cars, and a nuclear power station are examples of
capital-intensive production.
What factors that would encourage a business to use
capital-intensive methods?
Unit 3: Strategies for success
Operational strategies
Operational strategies: resource mix
Labour-intensive production: methods of production that
use high levels of labour in comparison to capital equipment.
Many service industries such as retailing, restaurants and call
centres use a large number of people in comparison to
equipment.
What factors that would encourage a business to use
labour-intensive methods?
Unit 3: Strategies for success
Operational strategies
Scale and Resource mix
In the same way as firms use information on economies and
diseconomies of scale in order to plan their most efficient size.
Choosing the optimal resource mix is about weighing up the different
factors before deciding whether to use capital or labour intensive
production.
These are both Operational Strategies used by businesses to achieve
operational objectives.
Unit 3: Strategies for success
Operational strategies
Examples of labour / capital intensive industries
Whiteboards
Food processing
Oil extraction & refiningCar manufacturing
Web hosting
Inte
nsi
ve a
rable
far
min
g
Transport infrastructure
Hotels & restaurants
Fruit farmingHairdressingCoal mining
Split your whiteboards and tell me which is which
Unit 3: Strategies for success
Operational strategies
Examples of labour / capital intensive industries
Labour intensive Capital intensive
Food processing Oil extraction & refining
Hotels & restaurants Car manufacturing
Fruit farming Web hosting
Hairdressing Intensive arable farming
Coal mining Transport infrastructure
Unit 3: Strategies for success
Operational strategies
Implications of intensity
Labour intensive Capital intensive
Labour costs higher than capital
costs
Capital costs higher than labour
costs
Costs are mainly variable
= lower breakeven output
Costs are mainly fixed
= higher breakeven output
Firms benefit from access to
sources of low-cost labour
Firms benefit from access to low-
cost, long-term financing
Unit 3: Strategies for success
Operational strategies
• Contrast capital and labour intensity with industrial examples
• Examine the factors influencing the choice between capital and
labour intensive production
Unit 3: Strategies for success
Operational strategies
Homework