Business analysis and decision making
To what extend do you agree with the statement that “a growing product market is a necessary precondition for achieving superior productivity”? Discuss using an extended example.
According to Haslam, Neale and Johal (2000), `the total factor productivity us in general defined in two main types; the Level of labour and capital and their efficiency of production; and the productivity of the firm. The productivity of capital and labour is calculated as: total outputs divided by inputs of labour and capital`. Labour cost in a company makes a major part of the production cost and should be therefore most cost efficient. The total employment divided to the total physical output equals the total labour productivity....EXAMPLE... If a company produces more the one product or provides service rather the manufactured it can be difficult to recognise the physical output. Therefore, financial proxies such as value added or net output of employment are used. In order to compare the figures fair with each other, financial indexes can be produced. `This is possible by dividing the total number of labour hours into the value added`, (Haslam, Neale and Johal, 2000). The result of this calculation is the value added generated by labour hour. This index can be compare not just with the past years of production of a firm, in addition it is possible to compare with other companies to obtain a broad prospective about labour productivity and how efficient labour is used. Furthermore, over the years inflation changes the purchasing power of money and capital productivity varies. Assts may change value due to depreciation or capital consumption. Therefore, companies analyse the value added per £ of fixed assets. `Capital productivity is calculated as capital stock (before depreciation or capital consumption) divided into the net output or value added figure`, (Haslam, Neale and Johal, 2000).
The relationship between a growing...
Please join StudyMode to read the full document