Question

As you continued your discussion with Maia and Bram, you explain that even small, start-up companies should operate both efficiently and effectively. Although these terms sound similar, each has a different and precise meaning. You walk through a few examples with Maia and Bram to ensure that they have a solid understanding of the concepts. For the following examples, select the word or phrase that best completes the sentence.

Example : You deliver pizzas for a local restaurant. At least once or twice per evening, the person taking phone orders writes down the delivery address incorrectly. Frequently, you are sent to make just one delivery, even on busy days. Last night, after arriving more than an hour late, a customer told you to "take the pizza back" because it was no longer hot. The pizza restaurant is:

Answer 1

Gasoline price drops increase the efficiency and effectiveness of a messenger company by decreasing operating costs and allowing the expansion of service areas. Contrastingly, a pizza restaurant displaying inaccuracies in order delivery and poor management fails at being efficient or effective. Efficiency involves optimizing resource use, while effectiveness is about achieving business goals.

Step-by-step explanation:

When discussing efficiency and effectiveness within the context of a small, start-up company, we are examining how a business can maximize its outputs with its available inputs, and how effectively it reaches its goals. Using a messenger company as an example, we see that this company could operate more efficiently following a drop in gasoline prices.

This is because their main cost, which is gasoline, becomes cheaper, allowing them to deliver messages at a lower cost and potentially increase profits. They may also expand their service area and increase their supply, showing effectiveness in reaching the goal of business growth.

In contrast, the pizza restaurant mentioned in the scenario is neither efficient nor effective, as incorrect addresses and late deliveries impair both cost management and customer satisfaction.

Labor, representing human effort in production, and capital, meaning the physical assets used to produce a product, are two key components of a business's operations. For the pizza company, labor involves tasks such as rolling out dough and baking pizza, while capital includes items like the oven and the building itself.

Yet, if labor is mismanaged (incorrect order information) and capital is not used effectively (delivering one pizza at a time), neither efficiency nor effectiveness can be achieved.