Future Business Leaders of America (FBLA) Agribusiness Practice Test

Which term is most closely associated with operational effectiveness in a business?

1. Working capital

2. Economies of scale

3. Market segmentation

4. Competitive advantage

The correct answer is: Economies of scale

Operational effectiveness refers to how well a company utilizes its resources to produce goods or services efficiently. This concept is closely linked to economies of scale, where a company can lower its per-unit costs by increasing production. As a business scales up its operations, it often spreads fixed costs over a larger number of goods, leading to better margins and enhanced efficiency. This reduction in costs directly contributes to a company's operational effectiveness, allowing it to maintain competitiveness in the market. While working capital is crucial for the day-to-day operations of a business, it focuses more on liquidity and financial stability rather than the overall effectiveness of operations. Market segmentation deals with dividing a market into smaller segments to target specific customer needs, which is more about strategy than operational effectiveness. Competitive advantage involves strategies that a business employs to outperform its rivals, encapsulating a broader concept that can encompass operational effectiveness but is not exclusively synonymous with it.