Exercise 5.5.

5
1. Labour productivity is the total output in a given time period divided by the total
workers employed.
3000 3960 6600
2. Rapid Pizza: =200 Pizza to go: =220 Pizza4U: =264
15 18 25
3. Pizza4U is the most efficient
4. Rapid Pizza and Pizza to go probably haven’t invested much in the motivation and the
skills of the employees, since even though the number of them is not that much lower
from Pizza4U, they seem to be less productive by a great difference. In addition, Pizza4U
may have more technologically advanced production systems that allow the company
for greater production.
5. Labor productivity plays a major role in most of the industries as it measures the
efficiency of the employees. All firms strive for a high productivity, since it will lead to a
reduction in the unit costs of production, which is a great advantage, especially in a
competitive market.
The long-term performance of the firms in the pizza industry, is also greatly influenced by the
labor productivity of each one. Given that the business is competitive, a company that has high
productivity and low unit costs will be able to offer lower prices, draw in more customers, and
compete successfully with its competitors. Additionally, when more customers are attracted,
sales are likely to rise. If unit costs decrease more than selling prices, strong profit margins and,
thus, high profitability, will be reached.
To obtain high labor productivity, though, high expenses are inevitable. The businesses will
need to invest in either hiring qualified, skilled workers or in their training. Companies should
also make an effort to provide the appropriate circumstances to keep employees motivated,
such as a high income, favorable working conditions, and non-financial aspects like expressing
appreciation and acceptance and enabling the fulfillment of one's full potential. In such
industry, investing in more technologically advanced equipment is another essential way to
increase labor productivity, but doing so again comes at a considerable expense to the
companies.
To conclude, even though to achieve high labor productivity, a firm has to invest a lot of money,
the investment is worthwhile and will make the business far more successful than if it had not
been made.

Exercise 5.5.6
1. Labour productivity:
2012: 2500
2013: 2292
2014: 2000
Capital productivity:
2012: 5000
2013: 4583
2014: 4000
2. By observing the trend in labor and capital productivity, it is evident that both had been
falling significantly.
3. In labor productivity this could be due to the fact that none worker has been offered a
higher salary in three years, which leads to the demotivation of them. In addition, it is
mentioned that the new employees are not skilled, and the company provided little
training. Moreover, productivity is decreasing, due to the fact that the additional
machines being purchased were second-hand and were believed to be inefficient and
unreliable.
4. The company's capital productivity declines as a result of charging greater prices and
being less competitive in the market.
5. Westlife could increase its labour productivity by improving the worker’s skill level as
well as using financial and non-financial factors to motivating them. Lastly, Westlife
could purchase more advanced, reliable technological machinery.