GCSE Business Studies Revision Guide (CHAPTER 6)

GCSE Business Studies Revision Guide (CHAPTER 6) Chapter 6
Production
A good goes through several stages in its journey from raw materials to final consumer. The main stages of prediction are:
• Obtaining raw materials
• Processing, refining or manufacturing
• Distribution and retailing

Chain of production

The chain of production describes the path of product from raw material to final consumer. Most products pass through three distinct stages and industry can be put into categories that reflect these stages.

Primary industry

The first stage of the process is called primary production. This involves extracting raw materials. It includes any industry that takes a material in its natural state and turns it into a resource that can be used in the production process.

Secondary industry

The second stage of the process is called secondary production. Secondary production industry involves taking the raw materials and turning them into finished or part-finished goods.

Tertiary industry

The third stage of process is called tertiary production. Tertiary industry is not just the final stage in a product’s life- but also includes all the other services that are provided to support primary and secondary industry.
The complete chain of production also includes:

 Wholesaler
 Retailers

Transformation

Transformation is what is happening in the chain- one material is being transformed into another.

Categories of countries

The stage of development that a country has reached is sometimes stated in terms of its main types of industry.

Methods of production

Production or transformation is the process by which raw materials and other inputs, such as components, are turned into outputs, and eventually into the final product. The method of production depends on the nature of the product and the nature of the customer. The main method of production are job, batch and flow.

Batch production

In batch production the same machinery and labor can be used to produce different batches of groups of product. Batch production takes place in any manufacturing process where different size or color are needed.

Flow production

Flow production is also called mass, continuous or process production. This involves a product being assembled or built as it moves along a production line.

Economies and diseconomies of scale

Business can gain benefits large-scale production. These are either internal or external. Internal economies are:
 Technical
 Managerial
 Trading
 Financial

External economies include those gained from location, such as the availability of a skilled labor force or the reputation of an area.

Lean production

Lean production involves being more efficient by the use of all the inputs necessary for production, especially time. The main version of lean production is the just-in-time (JIT) approach.

Management of quality

A quality good or service is one that does what it is supposed to do. It is therefore vital that businesses make products that are reliable and that consumers will continue to buy. A business usually sets up own quality system to make sure that production standards are even better than the consumer expects.

Quality control systems

Traditional quality control systems check that the finished product has reached the required standard. The problem with product is that the product has already been made, and must therefore be wasted if it is not up to scratch.

Statistical process control

Statistical process control is part of quality control system. Inputs, outputs and machinery are all checked at regular intervals.

TQM

TQM stands for total quality management. This is a system that was first developed in Japan. The idea is that every single person involved in production is responsible for quality.

Kaizen

Another Japanese idea linked to quality is kaizen. This means continuous improvement and states that it is every worker’s job to see how their process could be made more efficient.

ISO 9001

This is an international standard that has to be renewed every year to show that the business is still maintaining quality.

Business location

Business need to decide not only what they are going to sell, but also where they are going to sell from. All businesses, even online ones, need somewhere to trade from. The ideal location will not be too expensive, but will help the business to attract customer.

Natural factors

Some business can only be located near natural factors that are essential to them. The most obvious of these are those businesses dealing in extracting raw materials. For other business, there could be other requirements –for example:
 A source of water for washing textiles
 Hazardous operations
 A particular climate for growing a crop.

Bulk increasing and decreasing

The production process takes goods from raw materials to finished product.

Customers

Customers need to be able to buy from the business. To do this, they may need to visit a shop or other retail outlet.

Suppliers

Suppliers need to be able to access the business in order to deliver goods and service.

Workers

In some cases, a business may need a large workforce, or a workforce with particular qualifications or specialism.

Government

There are government grants and other packages of assistance to help businesses set up in certain areas.