Economics For Managers Product Efficiency

Question: Discuss about theEconomics For Managersfor Product Efficiency. Answer: Introduction Product efficiency refers to using the minimum resources or inputs with minimum costs to produce the maximum quantity of the right product. To be productively efficient, an economy or business should be producing along its possibility frontier curve (Emrouznejad et al, 2008). This means that it they should be using the optimal input combination to produce maximum outputs. Therefore, every business must make sure that every resource i.e. labor, management, input, technology, materials to name a few must always be put into effective use to enhance efficiency of the product production (Briguglio et al, 2009). Product efficiency will enable Aldi to improve in the production of well packed, good quality and cheap products compared to their competitors. Therefore, this helps them have better market share and segment in the industry (Prenshaw et al, 2011). Also they will be able to keep their competitive advantage aspect and create a strong barrier for new sellers to enter the market. Aldi Supermarket can use the lean production to be able to beat its competitors. Apparently, Aldi uses lean production for its success reasons. For Aldi Supermarket, their aim for lean production is to reduce the costs of production, labor, time, space, wastes, materials and other resources. However, they are also concerned very much about extending the same to their customers whereby they will save their costs, time and space during and after product purchase. Lean production is generally based upon a number of efficiency concepts which are: Continuous improvement whereby the employees keep on improving the product quality and most importantly their service quality. This is possible through frequent check-ups, performance evaluations, trainings and employee motivations. Just in time production whereby the customers almost immediately receive their purchased or ordered products. This means that they will receive better and fast service, the desired type of product and at the right time. Time based management which is the management that requires high experience and expertise to manage different fields or departments for the business. This reduces the time that is wasted in the overall business operations and hence productive efficiency is improved. Total Quality Management meaning to ensure that all the workers do the right thing and do it right no matter what. This will be able to help them improve their service quality and therefore increase production efficiency. By involving the lean production, the Aldi will be able to reduce all the overall costs involved in production which means that they will be in a better position than their competitors. They have excellent service provision for their customers, effective management and efficient production. This will therefore keep new sellers at bay and help Aldi keep their competitive advantage. Figure 1: Product efficiency curve The above diagram is a product possibility frontier (PPF) which is a curve that indicates the production trend of a product verses the inputs used to produce it (Costa, 2014). Apparently, the curve for every business should always move outwards instead of inwards to show that their production is increasing with time relative to production costs. Therefore with the increase in units of outputs, the costs decreases. Economies of Scale This refers to the advantages that a business accrue due to the increase in the output production. The average costs in the end decrease because of the output volume has increased. Therefore this means that these advantages are mostly cost related. Economies of scale vary according to the business size and type. A large business enterprise is expected to have more economies of scale than a small one (Celli, 2013). However, there are factors that give a business better chances of having increased economies of scale, e.g.: Increasing the speed of business operations- this entirely relates to employee service. The employees should have fast and quality service to the customers, complaint response and problem solving should be fast and effective and production should be efficient and effective to name a few things. Purchasing of products in bulk where a business buys its products in bulk, the selling price will probably be lower because of the discounts offered. Therefore, this increases its chances of reducing its prices as well therefore more sales and profits from the sales. Managerial specialization whereby every business should make sure that its management team is well specialized, experienced and skilled for their duties and responsibilities. This will enable them perform their jobs with professionalism and perfection therefore better business overall performance. Financial status whereby every business should make sure that its finances are well accounted for and that the business is financially stable. This will help it be able to borrow funds from banks or other money lending organizations in lower rates and therefore not cost them much when paying. Technological support which means that every business must have good, modern, effective and most importantly functional technology to use for its product production. It will help them lower their costs, time and raw material wastage therefore efficient production. Marketing techniques. Every business should improve its marketing techniques all over its market area to enable it increase its sales, market share and segment. This includes things like advertisements, conducting promotions, giving free product samples and discounts, better branding and packaging among other ways. This will attract more customers and therefore increase sales. When Aldi considers all of the above factors, it will be able to manage its business operations correctly and reduce production costs. This will also give them an added advantage over their competitors because their goods and services will certainly be better, product quality higher, prices affordable among other things. This therefore will give Aldi a chance to retain its competitive advantage and create a strong barrier for new sellers to enter the market. Figure 2: Economies of scale curve The figure above shows an economies of scale curve. When the output is high, the cost of production is low (Truett et al, 2007). However, the increase in output is limited if the business does not take heed of the production issues. Therefore, for the economies of scale to always remain, a business should be aware of all the business operations that are related to production. Conclusion Therefore, this concludes the fact that economies of scale and product efficiency are some of the concepts that a business can use to gain competitive advantage and cost leadership in its industry or markets. Therefore, both concepts concentrate on reduction of production costs therefore better prices and sales in the end. This will give a business a better place in the market compared to other businesses and can be very useful to Aldi Supermarket to help it achieve its said goals and objectives. References Emrouznejad, A., Parker, B. R., Tavares, G. (2008). Evaluation of research in efficiency and productivity: A survey and analysis of the first 30 years of scholarly literature in DEA.Socio-economic planning sciences,42(3), 151-157. Briguglio, L., Cordina, G., Farrugia, N., Vella, S. (2009). Economic vulnerability and resilience: concepts and measurements.Oxford development studies,37(3), 229-247. Celli, M. (2013). Determinants of Economies of Scale in Large BusinessesA Survey on UE Listed Firms. Prenshaw, P. J., Taylor, S. W. (2011). Insights Into The Importance Of Economic Concepts To Other Introductory Business Courses.Journal of College Teaching Learning (TLC),4(5). Costa, L. A. (2014).Illumina: The sustainability of its competitive position(Doctoral dissertation, Nova School of Business and Economics). Truett, L. J., Truett, D. B. (2007). A cost-based analysis of scale economies in the French auto industry.International Review of Economics Finance,16(3), 369-382.