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Chapter 06

What is meant by the “design mix”?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
The design mix is a combination of three elements: 1. Function – what the product does and how well it performs. 2. Cost – the cost of producing the product and how this relates to image and
quality. 3. Appearance – the look, style and aesthetics
(appearance) of a product.
Chapter 06 Explain the benefits of research and development to a business Edexcel 2BS01 Business Studies GCSE Unit 3.2
  • It’s a method of differentiating
  • Enhances the brand
  • Allows the firm to stay ahead of the competition
  • Allows the firm to charge a premium (higher) price
Chapter 06

What is meant by appearance?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
In relation to the design mix, stylish, elegant, beautiful products are more likely to sell than products that have no style and so how something looks, is important
Chapter 06

What is meant by cost?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
In relation to the design mix, this means producing a product which has lower production costs than your competitors
Chapter 06

What is meant by function?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
In relation to the design mix, this is about how well a product works and the extent to which it does what it is supposed to do
Chapter 06

Why is design a key approach to product differentiation? Edexcel 2BS01 Business Studies GCSE Unit 3.2
Design gives the product an Unique Selling Point Design allows you to target a specific  Target
Market Design allows you to charge a Premium (higher) Selling Price
Chapter 06

Why is product design is most likely to help a business? Edexcel 2BS01 Business Studies GCSE Unit 3.2
Design gives the product an Unique Selling Point Design allows you to target a specific  Target
Market Design allows you to charge a Premium (higher) Selling Price
Chapter 06

Why is there a need for scientific research to provide the basis for product development? Edexcel 2BS01 Business Studies GCSE Unit 3.2
Scientific research  allows you to find the best  materials and processes and then make sure they are safe and reliable
Chapter 06

Would designing new features be effective in improving sales? Edexcel 2BS01 Business Studies GCSE Unit 3.2
Possible Points (Designing new features - positive):-
  • Differentiation
  • Attract a new market
Possible Points (Designing new features - negative):-
  • Time consuming
  • Expensive
Chapter 06

Would increasing advertising be effective in improving sales in a business?   Edexcel 2BS01 Business Studies GCSE Unit 3.2
Possible Points (Increasing advertising - positive):-
  • Stronger brand
  • Increased repeat purchases
 Possible Points (Increasing advertising - negative):-
  • Expensive
  • Not guaranteed to work
Chapter 07 What is the formula used to calculate how many weeks it will take for stock to arrive after re-ordering?
Edexcel 2BS01 Business Studies GCSE Unit 3.2
Stock arrival date – Re-order date = Lead time
Chapter 07 What is meant by maximum stock level?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
Used in traditional “Just in Case” stock control. The highest amount of stock to be kept by a business
Chapter 07

Explain how just-in-time stock control might not benefit a business.

Edexcel 2BS01 Business Studies GCSE Unit 3.2
Possible points:
  • Requires close relationships with suppliers in
    order to work
  • Systems will need to be developed so may
    increase costs
  • Having a JIT system means that all members of the workforce need to be committed
Chapter 07

How does stock control work in theory? Edexcel 2BS01 Business Studies GCSE Unit 3.2
It works by ensuring the following:  Holding too little stock can mean not satisfying customer needs on time and damaging reputation.  This is needed because:  Having larger amounts of stock can mean taking advantage of economies of scale through bulk buying. Holding stocks creates costs such as storage, monitoring and insurance. Stock also ties up capital (money) that could be used elsewhere. If a good is perishable then holding too much can be
very costly and impractical.
Chapter 07

How is the bar gate stock graph used to calculate buffer stock? Edexcel 2BS01 Business Studies GCSE Unit 3.2
By identifying the minimum stock level line
Chapter 07

How should a bar gate graph be interpreted?
Edexcel 2BS01 Business Studies GCSE Unit 3.2
When the stock level reaches the re-order level, it triggers a new order. This helps a business to ensure it doesn’t run out of stock.
Chapter 07

What are the advantages of adopting a Just in Time (JIT) method of stock control? Edexcel 2BS01 Business Studies GCSE Unit 3.2
Possible advantages:
  • Lower levels of stock = reduced costs
  • Higher profit
  • Lower costs
  • Excellent relationships with suppliers
    can help solve problems quicker
  • Increases efficiency
  • Increases cash flow
Chapter 07

What are the disadvantages of adopting a Just in Time (JIT) method of stock control?
Edexcel 2BS01 Business Studies GCSE Unit 3.2
Possible disadvantage: Not being able to meet demand Suppliers may not be reliable Cannot respond to changes in the market
Chapter 07

What are the drawbacks of holding large stocks? Edexcel 2BS01 Business Studies GCSE Unit 3.2
Possible points:
  • Additional costs (storage, insurance)
  • Can be left with unwanted stock = Higher risk of having to de-stock
  • Makes it difficult to compete on price
  • Money tied up in stocks
Chapter 07

What are the key factors of effective stock management? Edexcel 2BS01 Business Studies GCSE Unit 3.2
  • The necessity for a thorough stock
    check at regular intervals
  • The effective training of all staff involved in stock handling
  • The need for the right level of buffer stock
Chapter 07

What are the possible benefits of effective stock control to a business? Edexcel 2BS01 Business Studies GCSE Unit 3.2
Possible points:
  • Reduction in costs as less stock is held
  • Opportunity to spend resources on something else
  • Less need for space to hold stocks
  • Less capital tied up in stocks
Chapter 07

What are the possible disadvantages of holding a large stocks? Edexcel 2BS01 Business Studies GCSE Unit 3.2
Possible points:
  • Additional costs (storage, insurance)
  • Can be left with unwanted stock = Higher risk of having to de-stock
  • Makes it difficult to compete on price
  • Money tied up in stocks
Chapter 07

What are the reasons why a business such as
might decide to hold buffer stocks?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
Possible points:
  • To avoid running out of stock
  • To prevent missing out on extra
    sales
  • Supplier reliability problems
Chapter 07

What is meant by a bar gate stock graph?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
Used in traditional “Just in Case” stock control. A graph which enables a business to manage its stock
levels
Chapter 07

What is meant by buffer stock (or minimum stock level)?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
Used in traditional “Just in Case” stock control. The lowest amount of stock to be kept by a business
Chapter 07

What is meant by Just in Case (JIC)?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
This is the traditional stock control method. Just In Case comprises of maximum and minimum levels of stock and a re-order level. It also
has a buffer stock level.   Buffer stocks are
needed to cope with unexpected demand or uncertainty.   Traditional stock control can be illustrated using a
‘bar gate’ diagram.
Chapter 07

What is meant by Just in Time (JIT)?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
A stock management system where stocks are only delivered when they are needed by the production
system, and so no stocks are kept by a business.  Relationships between suppliers and firms must be good and many firms have worked on building these relationships to the advantage of all.
Chapter 07

What is meant by re-order level?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
Used in traditional “Just in Case” stock control. The amount of stock held by a business at which an
order for new stock is placed with suppliers
Chapter 07

What is meant by stock control?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
How a business manages the amount of stock it
holds
Chapter 07

What is meant by stocks?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
Materials that a business holds.  Some could be materials waiting to be used in the production process and some could be finished stock waiting to be delivered
to customers
Chapter 07

Why is there a need for the use of Just In Time (JIT) stock control? Edexcel 2BS01 Business Studies GCSE Unit 3.2
Businesses do not want to hold large amounts of stock, of either raw materials or finished goods
because: It’s expensive
It wastes resources
It affects cash flow
Goods may go out of date / fashion
    To be successful JIT requires:
Good relationships between customers and
suppliers
Excellent communication between customers and
suppliers
Good transportation links
Chapter 08

How can a quality control system improve quality? Edexcel 2BS01 Business Studies GCSE Unit 3.2
Advantages:
  • Managers put controls in place
Disadvantages:
  • Workers rarely feel part of it
  • Workers feel it is a criticism of them
  • A lot of wastage
  • Most systems are flawed
Chapter 08

How can a quality culture system improve quality? Edexcel 2BS01 Business Studies GCSE Unit 3.2
Advantages:
  • Includes all staff
  • Improves motivation
  • Improves job satisfaction
Disadvantages:
  • Takes time to establish the culture
Chapter 08

What is meant by Kaizen?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
This means ‘continuous improvement’ in Japanese. To achieve the highest possible quality standards, a
business must continuously improve what they do.
Chapter 08

What is meant by quality assurance (quality culture)?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
Ensuring that quality is produced and delivered at every stage of the production process, often
through making quality the responsibility of every worker.  Quality becomes the culture of the whole
company. This is the modern approach.  Ultimately this should lead to a zero defects practice.  Customers are assured of the quality of the product.  This is a
PROACTIVE approach.
Chapter 08

What is meant by quality control?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
Ensuring that a product or service meets minimum standards, often through the testing of sample
products once they have been made. This traditional quality control method involves an individual, team or department who are
responsible for checking the quality of goods and services once they have been made or provided.   This approach is
REACTIVE.   Faulty goods would be altered, thrown away or sold as
‘seconds’.
Chapter 08

What is meant by quality standards?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
Where products are made to standards which are laid down by independent organisations. The British Standards Institution (BSI) is the main one in the UK, and products made to this standard will usually have a “Kitemark” on them. Some standards are also in place for the quality procedures rather than individual products. Examples are ISO 9000 (quality management systems) and ISO 9001 (quality assurance in design, development, production, installation and servicing)
Chapter 08

What is meant by quality?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
Achieving a minimum standard for a product or
service, or a production process, which meets customers’ needs
Chapter 08

What is meant by zero defects?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
All work meets the required quality standard at
every stage of the production process
Chapter 08

What is the difference between quality control and quality assurance? Edexcel 2BS01 Business Studies GCSE Unit 3.2
Quality Control – Ensuring that a product or service meets minimum standards, often through the testing of sample products once they have been made. V’s Quality Assurance - Ensuring that quality is produced and delivered at every stage of the production process, often through making
quality the responsibility of every worker. 
Quality becomes the culture of the whole company.
Chapter 09

How can costs be lowered? Edexcel 2BS01 Business Studies GCSE Unit 3.2
Costs can also be reduced in a number of ways. 1. Improved purchasing methods 2. Relocation 3. Better product design 4. Cutting overhead costs
Chapter 09

How can developing new products allow a company to increase its competitiveness?
Edexcel 2BS01 Business Studies GCSE Unit 3.2
Reasons why new product development increases competitiveness:
  • Gain more customers
  • Increased profitability
  • Better to launch new products before rivals
  • Enhances the brand
Reasons why new product development may not increase competitiveness:
  • Expensive to develop
  • Risk of failure
  • Other features may be more important (e.g.
    promotion)
  • Lack of competition = no need
  • Innovation can be easily copied
Chapter 09

How can productivity be increased? Edexcel 2BS01 Business Studies GCSE Unit 3.2
Labour productivity can be raised in a number of ways. 1. Training 2. Using better equipment 3. Using efficient working practices 4. Re-organising production lines and work spaces 5. Giving people more control over their working lives (maybe by working from home)
Chapter 09

How do lower costs feed through to lower competitive prices?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
Cutting costs can mean that lower prices can be offered. Prices need to remain competitive in order to survive.   If prices are too high then customers will not buy the goods or services.
Chapter 09

How can improving productivity improve the
competitiveness of a business?   Edexcel 2BS01 Business Studies GCSE Unit 3.2
Possible points - Improved productivity:
  • Lower units costs
  • Allows a lower price to be charges
  • Increases profit
  • Increased efficiency
Chapter 09

How can improving the quality of a product
improve the competitiveness of a business?  Edexcel 2BS01 Business Studies GCSE Unit 3.2
Possible points - Product quality:
  • Adds value
  • Allows a premium price to be charges
  • Higher profits
  • Makes demand price insensitives
  • Increases customer loyalty
  • Allows a business to out-compete rivals
Chapter 09

What are the benefits of improving productivity? Edexcel 2BS01 Business Studies GCSE Unit 3.2
Possible points:
  • Higher profits
  • Lower unit costs
  • Increased competitiveness
  • Lower break-even point
Chapter 09

What are the benefits to a business resulting from high quality design of its products?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
Possible points - Product quality:
  • Adda value
  • Allows a premium price to be charges
  • Higher profits
  • Makes demand price insensitives
  • Increases customer loyalty
  • Allows a business to out-compete rivals
Chapter 09

What is meant by productivity?

Edexcel 2BS01 Business Studies GCSE Unit 3.2
This is the total output per worker. It is calculated by the following formula: Total Output ÷ Number of workers = Productivity
Chapter 09

What is meant by the term ‘competitiveness’? Edexcel 2BS01 Business Studies GCSE Unit 3.2
Competiveness is where a firm has higher productivity than its rivals.  This allows the firm to have lower prices and win customers from their competition.
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