Rationalisation

• What is rationalisation in the context of business?

  Reorganisation to increase efficiency
• What is the typical outcome of rationalisation on a business's size?

  A reduction in size
• According to the text, what are two possible effects of rationalisation?

  Change of policy or altered strategy
• What type of business activity did Barclays Bank undertake when it closed rural branches?

  Rationalisation
• What rationalisation strategy did Ford implement by ceasing Fiesta production in the UK?

  Transferring of production
• Why might a growing business choose to trim its product ranges?

  To focus on maximizing sales
• What initiative aimed at increasing NHS efficiency is described as rationalisation?

  Computerising all patient records
• Although rationalisation aims to increase efficiency, what negative consequence can occur?

  Loss of jobs
• What can result from uncertainty caused by rationalisation?

  Resistance from staff
• What can staff resistance to rationalisation lead to?

  Industrial action
• Why must rationalisation schemes be carefully planned?

  To avoid negative consequences
• What two things must be clear in rationalisation schemes?

  Objectives and means of achieving them
• What are the advantages of outsourcing?

  • Significantly reduced staffing costs.
  • Well trained staff, reducing HRM costs.
  • Existing workload and stress levels are reduced.
  • Less investment risk.
  • Capital needs are reduced.
  • Lower costs increase profits, speeding development.
• How does outsourcing potentially reduce HRM costs?

  By providing well-trained staff
• Why is reduced workload important for businesses operating at full capacity?

  It alleviates stress levels
• How does outsourcing reduce investment risk for a business?

  The outside supplier takes the risk
• What financial benefit can arise from the lower costs associated with outsourcing?

  More capital for R&D
• What are the disadvantages of outsourcing?

  • Potential of poor customer service.
  • Existing employees may feel demotivated.
  • Quality of production cannot be guaranteed.
  • More difficult to implement JIT systems.
  • Breakdown of communication.
  • Loss of security of data.
  • Lost tax revenues when offshoring is used.
• What is a potential customer service issue associated with outsourcing?

  Communication difficulties due to cultural differences
• How might outsourcing affect existing employees?

  They may feel demotivated
• What can be a challenging aspect of maintaining product quality through outsourcing?

  Keeping up with improvements in quality
• Why is it more difficult to implement JIT systems with outsourcing?

  Because of longer supply chains
• How can outsourcing affect communication within a company?

  It can cause a breakdown of communication
• What security risk is associated with outsourcing?

  Loss of security of data
• When offshoring is used, what revenue is lost to the home government?

  Tax revenues
• What is outsourcing?

  Using outside suppliers for internal activities
• Are outsourced suppliers directly employed by the business?

  No, they are not directly employed
• What happens to jobs within the business when outsourcing occurs?

  Jobs move outside the business
• What is it called when outsourcing is used to replace domestic jobs with overseas employment?

  Offshoring
• What are the main potential benefits of outsourcing?

  Increased efficiency and lowered costs
• What is the primary goal of rationalisation?

  Increase business efficiency