Business studies Operations

• Operations

  A business process involved in the transformation process whereby inputs (materials) are transformed to higher-value outputs (products)
• Strategic role of operations

  • To effectively administer and coordinate with other key business functions to ensure a business runs as effectively and efficiently as possible to achieve the company's long term goal; specifically profit maximisation
• Cost leadership

  When a business has either the lowest priced products or is the most price competitive in its industry
• How to achieve cost leadership

  1. Evaluate profit centres (marketing, finance) and cost centres (operations, HR) to ensure they are running as effectively as possible

  2. Invest in R&D

  3. Utilise economies of scale to lower costs

  4. Advertise to a broader demographic
• Standardisation


  The process of created products that are identical and homogenous
• Differentiation


  The process of distinguishing a business's products from its competitors
• Cross-branding


  When 2 businesses form an alliance to differentiate their products by providing consumers with extra benefits
• Ways products can be differentiated

  • Standardised/customised goods
  • Perishable/nonperishable
  • Intermediate/final
• Standardised goods

  Mass produced on assembly lines, uniform in design and quality, cost leadership approach
• Customised goods


  Varied according to customer needs, market focused, differentiation approach
• Perishable goods

  High standards for cleanliness/safety/quality, short lead times (production times), suitable/robust packaging and storage
• Non-perishable goods


  Requires good inventory management to ensure there is no waste + accumulated unsold goods, quality management in storage
• Intermediate goods


  Will become processed again to become another higher value output
• Final goods

  The end product that will not be processed further
• Standardised services

  Performed the same to all customers
• Customised services


  Tailored to a client's needs/preferences
• Self-service


  Services performed by the customer themselves
• Interdependence


  The mutual dependancy key business functions have with one another
• Synergy


  The sum of the whole is greater than the sum of individual parts—> departments must coordinate effectively to ensure the overall success of the business
• Marketing identifies consumers needs and preferences


  Operations process must create these goods according to Marketing's promotional schedule and meet deadlines for distribution
• Finance sets budgets, determines risk and sets financial controls on the operations process

  Operations, to meet these financial controls, must minimise their warehouse costs by not producing surplus goods by forecasting demand + reduce costs in sourcing inputs via econcomies of scale or minimise wastage
• Human resources deals with the acquisition, training, development, and the separation of operations staff


  Human resources ensure workers in the operations process meet the performance objectives of speed, reliability and quality
• Quality expectations of goods


  Durability, Quality of design, Fitness for purpose
• Quality expectations of services


  Professionalism, Reliability, Level of customisation
• Quality control


  The implementation of various checks and inspections at different stages of the operations process against a a set of predetermined criteria to recognise any defects or issues in the operations process
• Quality management


  The use of a system carefully designed to minimise defects and create reliability
• Continuous improvement


  Aims to improve processes by continuous evaluation and increasingly high standards
• Total quality management


  An ongoing business wide commitment to every aspect of the business's operations to create a defect free production process
• If a business doesn't meet quality expectations

  Lack of customer loyalty due to low reliability, Decreased sales and declining revenue, Inability to meet operations goal of profit maximisation + business failure
• Compliance


  The process of ensuring a business and its employees comply with all relevant legislation in their operations
• Compliance costs

  The costs associated with achieving compliance
• Compliance departments


  Responsible for identifying compliance risks and creating business wide guidelines
• Work, Health and Safety Act (2011)- works to ensure the health and wellbeing of employees (mandates standards of employee training, protective equipment and safety procedures)
• Sex Discrimination Act (1984)- all operations employees must be treated fairly and not discriminated on the basis of gender
• If a business doesn't meet legal obligations

  May be sued, Damages public reputation, Increased costs + low liquidity, Decreased customer sales + profitability, May have licenses/permits seized or revoked, Lack of revenue while fixed costs may remains, Inability to meet debt + business failure
• Environmental sustainability


  The process of operating in a way that does not compromise future generations ability to access resources
• If a business isn't environmentally sustainable

  Responsibility for depletion of natural resources, environmental degradation as a result of fossil-fuel usage, Harmed reputation- customers purchase more sustainable brands
• Globalisation

  The elimination of trade barriers between countries leading to increased integration between national economies and the increasing sharing of capital, ideas, labour, financial resources and technology
• How globalisation effects operations

  Access to increased markets (especially for online businesses) and new customers who demand standardised products and global brands, Increased sales= ability to create manufacturing plans near suppliers, Ability to outsource/offshore operations processes to capitalise on labour laws and decrease costs, Access to the global web- can find suppliers with the lowest overall costs, lowest risks, greatest reliability and efficiency, Global web and production facilities create necessity for supply chain management (logistics, storage and transformation, proximity to markets, global sourcing)
• If a business doesn't utilise globalisation

  Missed opportunity to utilise new technology, decrease production costs and profit maximisation (by accessing worldwide customers), May be unable to sustain competitive advantage