Fluctuations in currency market and prices of raw markets are ignored.

1. Changes in break-even is disregarded sometimes because it is static. Computer programs are used to make it more dynamic and mangers can help to make predictions. Another drawback is that it has to make a lot of assumptions causing the garbage in garbage out problem. These can include: • Breakeven is linear which is not realistic because a rise in production will lead to economies of scale kicking in and lowering production costs. A raise in rent will raise fixed costs • Sales revenue can be hard to determine as well because the more a customer buys the more discount they may demand. • Because of demand rules a business may need to reduce their price in order to increase demand. • Breakeven can really only work well if a business only has one product. • Unsold stock does not equal stock and that is not added into the pricing scheme of BEQ

2. Fluctuations in currency market and prices of raw markets are ignored. • Can cause unneeded stress to the employees of a firm to make sales and production deadlines. • Competitors will react to different pricing schemes that the business will try • Allocation of fixed costs is also a concern

3. Break even can be used to figure out the total number of sales made to equal some predetermined profit goal. • Profit = TR-TC • TFC 2000 • AVC 22 • AUP 35 • BEQ? • What would the number of sales have to be for a business to make 13000 profit?

4. Factors that affect profit that a BEQ cannot predict • Gaining market share may mean short term of lowering price in order to attract customers and raise prices later • All the elasticity factors can affect demand • High risk profits projects will have higher breakeven but they also have a much higher rate of return if successful • New innovative ideas are hard to predicate demand. Things like the iPod are very hard to figure out the predicted demand. • Luck is a factor that can never be counted on

5. Quality assurance higher level • Kaizen is a Japanese word for continuous improvement • The most important aspect of this approach is that the business keeps moving forward in continual progression • The idea comes from having Kaizen groups whose job it is to make small improvements over the course of time. Because people fear and resist change this approach is seen as the most effective. Cost cutting is not the primary reason for Kaizen groups but it usually results in some. • Businesses that use Kaizen groups will try to implement total quality management tactics to increase productivity and quality. • Kaizen groups do not usually have power (unlike qualitycircles) to make things happen but their purpose is to take ideas from several different people especially bottom rung workers because they have the best chance to see effective changes. • Motivation of staff should increase because of Kaizen and quality circles

6. Quality circles are made up of different small groups within an organization that usually work in a circle or all channel style communication network. They are to implement change that will solve any quality problems. • They are very important to total quality management and have the power to implement change (unlike Kaizen groups) • The staff need to understand that they need to care about the company as a whole not their own interests for this to work properly. • If the quality circles are effective then a business will continue to improve and ultimately become more efficient in all departments • However some workers are not motivated by empowerment, teamworking and responsibility

7. Benchmarking/ Best practice benchmarking • This refers to following the operational procedures of what is considered the best practices in an industry. (usually led by market leaders) Stages in bench marking practice • Identify the area of rival to be benchmarked • Set a criteria based on the rival to see how your business performs • See how improvements can be made • Implement changes • Evaluate effectiveness of changes

8. Types of benchmarking The main split is historical or internal for the same department or the business as a whole or inter-firm benchmarking between organizations • Strategic benchmarking – looking at overall performance of another organization • Performance benchmarking – look at products and services offered by the other company • Process benchmarking – look at the production or operations department of another business • Internal benchmarking – looking at different productivity levels of other departments within an organization • International benchmarking - looking at businesses in other countries

9. Benefits of benchmarking If benchmarking is successful then a business can close the gap with a market leader Looking at production standards of another firm can help deal with quality issues It looks at problems from a customer point of view (the important one) Lower production costs and make a business more competitive Limitations of benchmarking Getting real information about other firms can be time consuming It can discourage new ideas because always coping other businesses ideas. (me too products) Time and money is spent on benchmarking that could otherwise be used (opportunity cost) Commitment of employees is very important for this to work properly. Also needs continues work

10. National and international quality standards • When a business meets a certain national or international quality standard then they are allowed to advertise the reward they have earned. • This helps to let people know that the product is of a high quality • Quality awards help to • Promote quality awareness • Improve the efficiency and motivation of the workforce • Attract the best employees to the company • Make a business more competitive

11. Most organizations that promote and reward quality will be independent of government. • Some include: • CE Marking is the EU award that a product is healthy and safe • ASQ Award is an American organization that a business has performed excellently in a given market • The BSI – is the British standards institution that guarantees quality of British products • The International Standards Organization is one of the most highly respected agency for quality in the world. They set the global standard for quality. They not only certify business that do products but also services. • ConformiteEuropeenne

12. The ISO 9000 award is given to business that have met the following standards • Proper recordkeeping • Proper monitoring of production to make sure proper products are produced. • Proper defectchecks are conducted • Making sure the business continues to check for ways to improve quality. • Products that are given awards go under very intense testing before any award is given. Once a business receives the award they will advertise the achievement to boost brand image.