Presentations text content in Cost effectiveness
One of the main ways a business can become cost effective and therefore competitive to have reduced variable costs.
Firms can use cheaper materials or they can become as efficient as possible by raising productivitySlide2
ProductivityThe amount that can be produced with the resources available.Its all about reducing costs per item produced
LABOUR PRODUCTIVITY =
NUMBER OF WORKERSSlide3
In 2009, 100 workers produce 500 t-shirts per hour
500/100 = 5 t-shirts per worker
In 2010 the same workers produce 600 t-shirts
= 6 t-shirts per hour
WHICH IS BEST FOR THE BUSINESS?
WHICH YEAR HAS THE LOWEST PRODUCTION COSTS?Slide4
WAYS OF INCREASING PRODUCTIVITY
Expensive at first but can increase skills and speed of
workers, they make less mistakes and therefore less wastage and more produced per worker
Can reduce time to undertake tasks, fewer staff needed can reduce costs
MORE EFFECTIVE WORK PRACTICES
Can reduce waste and find more efficient ways of productionSlide5
Increasing productivity is not achieved by taking on more staff, it is achieved by getting staff to produce more in the time given.
You can of course take on more staff, this will allow you to produce more BUT that does not mean that the productivity per person increases.Slide6
METHODS OF REDUCING COSTSSlide7
WAYS OF REDUCING COSTS
Buy cheaper raw materials
costs are reduced, they might be of lower quality and dissatisfy customers
Relocation to a cheaper site
Fixed costs reduced, but is this convenient for customers?
Cutting overhead costs –
. Staff wages, power
Could effect staff motivation, may
on ability to met customer