Key Concepts in Production, Marketing, and Business
Key Concepts in Production and Business Operations
Productive Resources and Productivity
Productive capital resources and labor are essential elements in any business operation. Productivity refers to the ratio between the output volume and the volume of productive resources used to obtain it. It essentially links the production function with the resources employed.
Technical efficiency is achieved when full advantage is taken of available resources, maximizing the units produced. Economic efficiency is attained by selecting the most cost-effective combination among technically efficient alternatives. Examples of this include implementing social responsibility or environmental quality management systems, prioritizing health and safety, and demonstrating respect for the environment.
Cost of Production
The cost of production is the value of productive resources used to create a good or a service. Costs are categorized as:
- Fixed Costs: Costs that do not vary with changes in production quantity. Examples include venue hire and production facility costs.
- Variable Costs: Costs that depend directly on the production level. Examples include raw materials and labor.
Break-Even Point
The break-even point is the sales level at which a company begins to generate profit, covering all its costs.
Short-Term Planning Levels
Short-term planning involves three key levels:
- Production: Adjusting production and distribution based on stock levels.
- Commercial: Avoiding stock breakage.
- Financial: Managing resources to determine the time needed for new orders.
Stock Valuation
Stock valuation can be performed as a unitary valuation based on:
- Purchase Price: The total purchase amount from the supplier’s invoice, plus all expenses like transportation and insurance.
- Production Cost: The purchase price of raw materials and materials consumed in manufacturing, plus the share of indirect manufacturing costs.
Raw materials are those that, through transformation or development, will become part of the manufactured products. Goods are items purchased by the company for subsequent sale without any transformation.
Joint stock valuation criteria include the Weighted Average Price and FIFO (First-In, First-Out) methods.
Marketing and Business Strategy
Marketing Fundamentals
A stock ledger consists of auxiliary records, with as many entries as there are products to be stored. Marketing involves market research, serving as a business tool to meet customer needs in exchange for a benefit.
A marketing plan is a document outlining goals, action plans, and timetables for implementing a customer-oriented company’s trade policy. Market research is the process designed to obtain relevant environmental information to make informed decisions.
Market Segmentation
Segmenting involves sketching cards or types of customers the company targets. Market segmentation criteria include demographic, social, and psychological factors.
Market research involves collecting, processing, and analyzing environmental information that influences and conditions a company’s performance. Analyzing marketing demand determines whether the number of common and potential buyers is in a period of growth, stabilization, or decline.
Intellectual Property and SWOT Analysis
A patent is a legal right granting exclusive exploitation of an invention to its creator for a certain period. A SWOT analysis identifies business opportunities by linking internal and external factors.
- Offensive Strategies: Use strengths to take advantage of opportunities.
- Reorientation Strategies: Minimize weaknesses by leveraging opportunities.
Branding and Product
A brand is a name, symbol, or design that identifies a company’s product in the market. A product is anything that constitutes a good or service a company offers to the market, fulfilling a need.
Promotion and Sales
The main forms of promotion include advertising, sales promotion, personal selling, public relations, and merchandising. The three stages in the personal selling process are presentation, argumentation, and closing.
Franchise and Taxation
A franchise is a business arrangement where a parent company grants the right to use elements of its business idea in exchange for a fee. A tax is compulsory revenue provided to the public. A fee is paid in return for a public service.
- Direct Tax: Levied on the income of individuals or companies. Example: Income tax.
- Indirect Tax: Levied on the performance of certain acts. Example: Consumption of goods and services through VAT.