Modern Production Processes

The intended result of all production management activities is a high level of productivity. Productivity means that the outputs (goods and services) are more valuable than the total of inputs consumed in producing them. Productivity is increased by pro­ducing more goods and services while using the same number of or fewer inputs. Increases in productivity typically depend on three factors: standardization of parts and processes, spe­cialization of labor, and mechanization of work.

Standardization involves adopting uniform, consistent parts and processes in producing a good or service. If an employee always uses the same type of screw or rivet, time will be saved and skills increased. If, however, the employee uses a different type of screw or rivet for each separate operation, time will be wasted looking for the right tools and parts. Thus, standard­ization saves both time and costs in the manufacture of many goods today.

The advantages of standardization are highlighted by problems faced by Electrolux, a Swedish appliance maker. Although there are 325 million European consumers, local and regional customs prevent standardization. Northern Europeans want large refrigerators because they shop once a week. But southern Europeans want small ones because they shop for fresh produce each day. Northerners want freezers on the bottom, southerners on the top. Britons insist 60 percent of the refrigerator be devoted to freezer space. In Europe Electrolux is only one of over 100 appliance makers, yet it must produce over 120 basic refrigerator designs with 1,500 variants. Manufacturing expenses necessitated by the great variety of designs have depressed Electrolux's profits for years.

Specialization is an element of job design. It can enhance productivity. As employees become increasingly skilled at the limit­ed variety of activities they perform, they can reach high levels of productivity. In addition to having employees simply repeat a few rather than many activities, managers of production processes can take other steps. For example, they can conduct time-and-motion studies, in which they carefully observe workers on the job to see exactly what move­ments they use while performing a task, such as bending over or "grasping" a tool. By doing this, they discover any repetitive movements or unnecessary "small" movements.Then they can work to minimize these movements and thus help employees speed up the performance of their tasks. Another form of specialization is collaboration with anoth­er organization to perform the work.

All processes may be continuous or intermittent. Continuous processes run for long periods of time with few pauses or changes. Chemical plant, steel mills usually operate around the clock for months with no essential changes in their production activities. Intermittent processes operate for shorter period, in batches and are easier to change.

Text 4

Consumer Products

Consumer goods fall into three general categories: convenience, shopping, and specialty prod­ucts. This classification describes the products involved and it is actually based on the consumer's reasons for buying, the consumer's need for information, and the consumer's shopping and purchase behaviors.

Convenience productsare relatively inexpensive, are purchased on a regular basis, and are bought without a great deal of thought. Convenience products reflect the consumer behaviour of buying goods or services with a minimum of shopping effort. People buy these products at the most convenient locations (hence the term). Milk, shoe shines, soft drinks, and bread, are convenience products. How far out of your way would you go to buy a quart of a particular brand of milk? The answer to this question helps determine whether a given product is a convenience product.

Shopping productsare goods and services that generate a great deal of consumer effort Consumers feel the need to make product comparisons, seek out additional information, examine merchandise, or otherwise reassure themselves about quality, style, or value before purchasing a shopping product. In other words, prospective buyers of products such as clothing, shoes, furniture, and tableware want to shop around.

Decisions about shopping products are not made on the spur of the moment. Buyers want to mull things over before committing themselves. This is partly because shopping products are generally priced higher than convenience products. There is also greater consumer involvement with the purchase. Thus, the risks associated with shopping products, both monetary and social, are fairly high. The distribution strategy for shopping products differs from that for convenience products. Since people are willing to shop around, the product should not be available everywhere rather, it should be placed in selected spots.

Consumers believe they know exactly what they want. They have selected the brand in advance and will not accept substitutes. At the moment of purchase, they no longer need to make shopping com­parisons among alternatives. They have thought about their purchase. They regard the brand as having a particular attraction other than price. Products that are the object of this type of consumer concern are called specialty products.Many of these products are seldom-pur­chased items such as stereo equipment, pianos, wedding receptions, or expensive cars. Potential buyers may have gathered a great amount of information prior to making the pur­chase decision. At the time of purchase, they may spend considerable time and effort to get to the appropriate store that carries the item, but they no longer need to make shopping com­parisons. Their minds are made up.

Some products do not fit neatly into this product classification scheme. However, classifying products into convenience, shopping, and specialty products does help in planning marketing strategy for most consumer products.

Unit 4. Business Organization

Text 1

Entrepreneur

Entrepreneur is a loan word from French that refers to a person who undertakes and operates a new venture, and assumes some accountability for the inherent risks. Most commonly, the term entrepreneur applies to someone who establishes a new entity to offer a new or existing product or service into a new or existing market, whether for a profit or not for-profit venture, a business entrepreneur. Business entrepreneurs often have a strong beliefs about a market opportunity and are willing to accept a high level of personal, professional or financial risk to pursue that opportunity.

Research has demonstrated that there is such thing as an “entrepreneurial type”, with certain characteristics linked to the probability of someone being an entrepreneur themselves. There is little good evidence, however, that entrepreneurial type is linked to ultimate success of an entrepreneurial venture. Business entrepreneurs are often highly regarded in US culture as being a critical component of its capitalistic society. Famous entrepreneurs include: Henry Ford (automobiles), J. Pierpont Morgan (banking), Thomas Edison (electricity/ light bulbs), Bill Gates (computer operating systems and applications), Steve Jobs (computer hardware, software), Richard Branson (travel and media) and others.

There is a question: “Are entrepreneurs born or made?” The answer lies in what one author writing in Business Horizons calls “the galaxy of personality traits which characterize individuals who have a propensity to behave entrepreneurially”. He lists nine as being more salient: a desire to achieve: the push to conquer problems, and give birth to a successful venture; hard work: are mostly workaholics; nurturing quality: willing to take charge of, and watch over a venture until it can stand alone; acceptance of responsibility: are morally, legally, and mentally accountable for their ventures; reward orientation: desire to achieve, work hard and take responsibility, but also want to be rewarded handsomely for their efforts, rewards can be in the forms others than money, such as recognition and respect; optimism: live by philosophy that is the best of times, and that anything is possible; orientation to excellence: often desire to achieve something outstanding that they can be proud of; organization: are good at bringing together the components (including people) of a venture; profit orientation: want to make a profit, but the profit serves primarily as a meter to gauge their success and achievement.

The concept of the entrepreneur is intimately associated with three elements: risk bearing, organizing and innovation. Thus, an entrepreneur can be defined as a person who tries to create something new, organizes production and undertakes risks and handles economic uncertainty involved in enterprise.

Entrepreneur as a risk bearer. Richard Cantillon, an Irish man living in France was the first who introduced the term entrepreneur and his unique risk bearing function in the early 18^th century. He defined an entrepreneur as an agent who buys factors of production at certain prices in order to combine them into a product with a view to selling it at uncertain prices in future. Uncertainty is defined as a risk, which cannot be insured against and is incalculable.

Entrepreneur as an organizer. Jean-Baptiste Say, an aristocratic journalist, developed the concept of an entrepreneur a little further. His definition associates an entrepreneur with the functions of co-ordination, organization and supervision. According to him, an entrepreneur is one who combines the land of one, labor of another and the capital of yet another, and, thus, produces a product.

Entrepreneur as an innovator. Joseph A. Schumpeter, for the first time in 1934, assigned a crucial role of innovation to the entrepreneur. Schumpeter considered economic development as a discrete dynamic change brought by an entrepreneur by instituting new combinations of production, i.e. innovation. He also made a distinction between an inventor and an innovator. An inventor is one who discovers new methods and new materials, and an innovator utilizes inventions and discoveries in order to make new combinations.

Text 2

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