Capital vs Labour Intensive Organisations

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Questions and Answers

What is the primary difference between a capital-intensive organisation and a labour-intensive organisation?

The level of investment in fixed assets (correct)

The level of human resource development

The level of technology used

The level of marketing strategy

Which industry is likely to require higher investment in fixed assets due to technology upgradation?

Cement manufacturing

Computer hardware (correct)

Textile manufacturing

Furniture manufacturing

What is the primary reason for a company to create higher capacity in anticipation of growth?

To meet the anticipated higher demand quicker (correct)

To reduce financing costs

To reduce fixed capital requirements

To reduce labour costs

What is the likely outcome of a textile company diversifying into cement manufacturing?

An increase in fixed capital requirements Signup and view all the answers

What is the advantage of leasing facilities over outright purchase?

It reduces the need for fixed capital requirements Signup and view all the answers

Which of the following scenarios would require higher investment in fixed assets?

A company expanding into a new market Signup and view all the answers

What is the primary purpose of creating higher capacity in anticipation of growth?

To meet the anticipated higher demand quicker Signup and view all the answers

What is the significance of leasing facilities in high-risk lines of business?

It is a strategy to avoid huge sums required for asset purchase Signup and view all the answers

What is the primary assumption of the marketing concept?

That customer satisfaction is the primary objective of the organisation Signup and view all the answers

What is the ultimate goal of an organisation that adopts the marketing concept?

To satisfy customer needs and wants Signup and view all the answers

From whose perspective are all decisions taken in a marketing-oriented organisation?

The customers Signup and view all the answers

What is the key factor that determines the features and price of a product in a marketing-oriented organisation?

The customer's needs and wants Signup and view all the answers

What is the outcome of an organisation that focuses on satisfying customer needs and wants?

Long-term success and maximisation of profits Signup and view all the answers

What led to the shift in the focus of business activity from quantity of production to quality of products?

Customers' desire for superior quality, performance, and features Signup and view all the answers

What was the primary assumption of the Selling Concept?

Customers would buy products if they were adequately convinced and motivated Signup and view all the answers

What was the primary goal of a firm under the concept of product orientation?

To maximize profit through quality improvement Signup and view all the answers

What was the result of the increase in the scale of business?

Increased competition among sellers Signup and view all the answers

What was the primary reason for the shift from product orientation to the Selling Concept?

Increased competition among sellers Signup and view all the answers

What was the consequence of the focus on aggressive selling techniques?

Neglect of customer satisfaction Signup and view all the answers

What was the primary objective of firms under the Selling Concept?

To make sales through aggressive selling techniques Signup and view all the answers

What was forgotten in the long run under the Selling Concept?

The significance of customer satisfaction Signup and view all the answers

Study Notes

Factors Influencing Fixed Capital Requirements

Capital-intensive organisations require higher investment in plant and machinery, resulting in higher fixed capital requirements.
Labour-intensive organisations require less investment in fixed assets, resulting in lower fixed capital requirements.
Assets that become obsolete quickly, such as computers, require higher fixed capital to purchase replacements.
Organisations with high growth prospects require higher investment in fixed assets to meet increased demand.
Diversification of operations, such as a textile company starting a cement manufacturing plant, increases fixed capital requirements.
Availability of leasing facilities as an alternative to outright purchase can reduce fixed capital requirements, especially in high-risk businesses.
Collaboration between organisations to share facilities, such as a bank using another's ATM, reduces the level of investment in fixed assets.

Working Capital

Working capital facilitates smooth day-to-day operations of a business.
Current assets, such as cash, inventory, and accounts receivable, are usually more liquid but contribute less to profits than fixed assets.
Examples of current assets, in order of their liquidity, include:
- Cash
- Accounts receivable
- Inventory
- Others

Shift from Quantity to Quality

With an increase in product supply, customers started looking for superior quality, performance, and features, leading firms to shift their focus from quantity of production to quality of products.
Product improvement became the key to profit maximization under the concept of product orientation.

The Selling Concept

Increased competition among sellers led to a business philosophy that customers would not buy unless they were adequately convinced and motivated.
Firms started undertaking aggressive selling and promotional efforts to persuade customers to buy their products.
Promotional techniques like advertising, personal selling, and sales promotion were considered essential for selling products.
The focus shifted to pushing sales through aggressive selling techniques, overlooking customer satisfaction in the process.

The Marketing Concept

Marketing orientation implies that customer satisfaction is the key to an organization's success in the market.
An organization can achieve its objective of maximizing profit by identifying and satisfying the needs of its present and prospective buyers.
Customer satisfaction becomes the focal point of all decision-making in the organization.
Decisions on product features, pricing, and availability are made from the customer's point of view.
An organization produces products with features that meet customer needs, such as a refrigerator with a double door or a separate water cooler provision.

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Description

Understand the key differences between capital-intensive and labour-intensive organisations, including their investment requirements in plant, machinery, and manual labour.