setting operational objectives(updated)

• Operational objectives


  • Describe what needs to happen to achieve a business goal
  • Objectives need to be specific and measurable
• Objectives and business planning


  • Objectives give clear indication of where the business is heading
  • Business plan is developed in a systematic way
• Management by objectives


  • A technique aimed at improving business performance by aligning objectives of everyone in the organisation
  • Operational objectives are often known as tactical objectives
  • Short-medium objectives that are aimed at a particular aspect of the business
• Financial performance of a business is often used to determine how a business is doing
• It's a mistake to concentrate solely on cost objectives as other areas of performance will have an impact on performance and profits
• Priority objectives


  • The objectives that have the most impact on their product or service offer
  • May focus on a single area or a few but some will have very low priority, this is known as a 'trade off'
• Low cost airlines like Ryanair

  • Try to win a competitive advantage by focusing on low cost objectives
  • Their target market is customers who want low fares above anything else
• British Airways


  • Define objectives around speed, dependability, quality and added value
  • Their check in desks have shorter queues
  • Target customers are those who want a comfortable flying experience
• Flexibility objectives


  • About being able to change the business in some way
  • Produce a wider range of products or services and develop new and innovative products
  • Reduce the time it takes to produce products and adjust production to meet changes in demand
  • Change delivery arrangements to get products and services to customer more efficiently
  • Respond to and take advantage of changes and developments in tech that improves operational processes
• Toyota


  • Has built flexibility into its car production processes
  • It can now build multiple brands of car in the same factory and on the same production lines
  • Gives company flexibility to swap production based on demand and produce smaller batches as well as reduce costs
• Cost objectives


  • All businesses need their outlay on costs to be less than their income or revenue, in order to make a profit
  • Better a business is at keeping costs down the greater its ability will be to sell to the consumer at a lower price and remain competitive
  • Costs can be reduced through increasing productivity, which involves getting more out of resources like people and machinery
  • If a business excels in other operational objectives this will help it to reduce costs
• Quality objectives


  • Setting good quality objectives is important for any business as it helps build reputation and brand loyalty
  • Specification; the way the product/service is described
  • Conformance; consumer experience of the product or service being the same every time
• Failure on a quality objective could result in legal action-getting sued for supplying defective equipment or sub standard goods
• Not meeting quality standards can damage the company name and brand image, causing a loss in market position
• Volkswagens rigging of emission tests


  • Severely damages its image and will cost the company billions
• Customers always have a choice to go elsewhere so they can demand a product that consistently meets their requirements
• Many businesses have quality assurance processes that manage all aspects of quality from testing the product or service to looking at how to improve its internal processes
• Aimed at preventing inferior products or services reaching the customer
• Survey in 2015 by BSI showed that 50.6% of companies with ISO 9001 certification attract new customers as a result of publicising their quality mark
• Speed objectives


  • Being first in the market with a new product gives it a competitive advantage and then it can often charge a premium price
  • Speed of internal operations can reduce costs and lead to increased efficiency and productivity
  • Speed is also important to consumers in terms of service, such as the time it takes to check out in a supermarket
  • Consumers expect fast and economical delivery of goods with options to pay extra for different levels of service such as next day delivery
• Many retail operations prioritise objectives in fast delivery

  • Argos offers same day delivery
• Customers also want the processes they come into contact with to be efficient e.g speed at which they can get through to call centre
• Courier UPS 2014 research on e commerce issues found: 1/3 of customers said delivery time was important, Delivery speed was 4th most important thing with buying online, 50% of people abandon shopping cart if shipping takes too long
• Dependability


  • Linked to speed as it means being on time and consistent
  • Dependability is about reliability and always doing what you say, its also about being consistent
• Business-business customers are interested in dependability objectives because the dependability of the purchasing business will be affected by the dependability of the business supplying it
• Many large businesses that want to ensure dependability buy up or take control of their supply chains so they aren't reliant on third parties
• Environmental objectives

  • Objectives set in this area will reflect what the business does and what laws it needs to comply with
  • Many investor prefer not to buy shares in companies that pollute or damage the environment
  • Although businesses may recognise the advantages of having environmental objectives in place, they also have to be aware that environmentally sustainable operations can affect profitability
  • Although many environmental objectives will help minimise costs e,g by reducing waste and energy consumption, some environmental measures may cost more
• A transport company


  • Might place objectives in its business plan that cover issues such as reducing emissions, miles travelled and purchasing energy-efficient vehicles
• An office-based business


  • Could set objectives around energy usage in choosing office equipment, using recycling schemes for paper and ink consumables or encouraging its staff to cycle to work
• Added value


  • Fundamental that has to be achieved for a business to survive
  • In accounting terms added value is gross profit
  • In case of manufacturing ,its turning raw materials like wood into furniture
  • In service sector, its taking flights, hotel rooms etc and turning it into a package holiday
  • Level of value added will be judged by consumer
• Influences on objectives


  • External influences: Market, Competition, Technology, Political and economic, Resources
  • Internal influences: Strategy, Budgets, HR, Personalities
• If a business is first to market with a new product its objective would be to gain as much market share as possible and try to hold on to it
• If the market is declining, objective may be to look for a new market
• Business objectives have to take into consideration what the competition is doing
• Increasing pressure on businesses in terms of costs, quality and price
• Greater awareness among consumers -increasing pressure
• Significant impact on the operations functions in terms of production and the way consumers purchase goods and services
• Introduction of CAD and CAM has resulted in speedier innovation and production, and quality
• Use of comparison and review sites means consumers are more aware and demanding in terms of price, quality and customer service
• Newspapers can be read online and films and music can be downloaded