Sunday, July 26, 2009

Which of the following is an example of a firm focusing more on efficiency than effectiveness? ...

Of the options that you give us in this question, the second option is the best example of a company that focuses on efficiency and not on effectiveness.  To see why this is so, let us look at how these two concepts differ.


Efficiency deals with how few resources a company can use to make a given product.  When a company is being efficient, it makes the most possible products using the fewest possible resources (both in terms of material resources and in terms of labor). Effectiveness deals with whether a company is turning out high-quality goods and services.  A company that keeps its customers happy is being effective. In general, efficiency and effectiveness are opposite concepts.  When you increase the quality of your work, you generally use more resources. When you use fewer resources (greater efficiency), the quality of your work generally goes down (lower effectiveness).


With this in mind, we can see that the second option is an example of a company that is pursuing efficiency over effectiveness. If the company combines shipments, it uses fewer resources.  It pays for less fuel per unit of freight moved. It does not have to pay a driver to drive with a truck that is not full.  This is efficient.  However, it is not effective.  It forces its customers to wait for their shipment, something that most customers are not happy to do.  This is an example in which the company has decided it wants to pursue efficiency even if that lowers the quality of its product.

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