Studied by 0 people
Operations Management
concerned with providing the right products in the right quantities and quality level in a cost-effective and timely manner
Ways of managing operations
Method of production
Size, scope and timing of production
Quality control
Research and development innovation
Marketing Implications
Operations method used to provide a good/service will affect both the quality and the individuality of the product
exclusive product can be marketed at a premium price
Promotional strategies executed by high sales volume (ex. supermarkets) rely on aggressive tactics to gain market share and profit
Human Resource Management Implications
Production methods can determine workforce size
Ex. dependence on automated machines → less workers
Finance Implication
Capital intensity and lean production require heavy investment in machinery and equipment
Factors of Production
The resources needed to produce a good or service, namely land, labour, capital, and enterprise
Production Process
The method of turning inputs into outputs by adding value in a cost-effective way
Value Added
Occurs during the production process when the value of output is greater than the costs of production. Firms earn profit if value added exists in the production process.
Job Production
Customizing an individual product from start to finish, tailor made
Benefits: Quality, Flexible, Unique, Motivates, Choice
Drawbacks: Labour Intensive, Time consuming, Expensive, few economies of scale, order irregularity
Batch Production
Producing a set of identical products. For businesses that make a range of products and when demand is estimated
Benefits: Economies of scale, specialization, variety
Drawbacks: High amount of inventory, inflexible, repetitive and boring
Mass Production
Large-scale manufacturing of a standardized product
Flow Production
Form of mass production that uses continuous and progressive processes, carried out in sequence.
Mass/Flow Benefits/Drawbacks
Benefits: large value of output, cost effective, low defect rate, low labour cost
Drawbacks: monotonous, limited choice, expensive, inflexible
Factors to determine operations method
Size - larger markets tend to use capital intensive technology
Cost of labour and capital
Aims and objectives of business - for profit, economies of scale
Quantitative Reasons for a specific location of production
Availability, suitability and cost of land
HIGH demand but LIMITED supply =HIGH cost
Availability, quality and cost of labour
Proximity of the market (customers)
Bulk-increasing
Proximity and access to raw materials
Bulk-reducing
Government incentives and regulations
E-Commerce
Qualitative Reasons for a specific location of production
management preferences
local knowledge
Potential competitive advantage
Infrastructure
Political Stability
No corruption, Stable exchange rate
Government restrictions and regulations
economic freedom, anti-corruption measures, tax rates
Ethical issues
Comparative shopping (clustering)
Ways of Reorganizing Production
Outsourcing
Offshoring
Inshoring
Reshoring
Outsourcing
Hiring a third-party contractor to carry out specific work.(recruitment, office cleaning)
Benefits: efficient, cost control, reduce labour costs as outsourced workers are not employees of organization
Drawbacks: Subcontractors may not align with business aim, Quality management must be monitored, unethical practices
Offshoring
Getting business activities or functions done in a different country
Benefits: avoid import tax or trade restrictions, Cheaper labour, Abundance of natural resources, job creation
Drawbacks: Unethical to exploit cheap labour , Vulnerable to economic instabilities (exchange rate fluctuations), Political unrest
Inshoring
Use of an organization’s own people and resources to accomplish a certain function
Benefits: Greater control over business functions, cheaper overall, increased productivity
Drawbacks: training, Employees feel overworked, Less focus on core activities
Reshoring
Transfer of business operations to country of origin
Because: Product recalls, unethical practices, Improving/monitoring quality, consistent output
Benefits: lower transportation cost, created jobs
Bulk-increasing/Weight-gain industries
Products that increase in weight during the production process, so need to be located near their customers in order to reduce costs
Bulk-reducing/Weight-loss industries
locate near the source of raw materials that are heavier and costlier to transport than the final product
Footloose Organization
Does not gain any cost-reducing advantages from locating in a particular location. Can locate anywhere
Industrial Inertia
Reluctance to relocate due to the inconvenience of moving even when the competitive advantages for the location no longer exists
Government Incentives
Financial enticements offered by the state to businesses to locate in a particular area or region, perhaps due to high unemployment
Subcontractors
Outsourced firms that undertake non-core activities for an organization due to their expertise and the cost advantages
Break Even Benefits
make realistic sales, costs,profit predictions
decision making, risk assesment in a simple and quick way
Works well for single product analysis, standardized product and operation in a single market
Predicting impacts of changing costs and prices
Break Even Drawbacks
Costs and revenue are not linear
unpredictability of economies of scale affecting fixed and variable costs
Businesses offer bulk discounts. Prices are not constant
Assumes business will sell all output
Obsolete or unrealistic data will affect the validity
Only useful to firms selling one product
Ignore dynamic changes. Like staffing, motivation and productivity
Human Resource Management
Deploying and developing people within an organization to meet its business objectives
Why is HR important
Adds value to its output by:
Increasing labour productivity
Improving product quality
Creating new ideas
Providing better customer service
HR Planning (Workforce Planning)
Management process of anticipating and meeting an organization’s current and future staffing needs
Looks at:
Historical Data/Trends
Sales and income levels
Labour turnover rates
Flexibility/workload of employees
Demographic changes
5 Problems of no HR (5R)
Recruitment, Resources, Reservations, Returns, Reputation
Factors that Affect HR Planning
Demographic Change, Changes in labour mobility, Immigration, Flexitime, Gig economy
Demographic Change
Caused by: net birth rate, migration rate, retirement age, females in the workforce
Ageing population effects: Increased dependent population, reduced labour mobility, changes in consumption patterns, change in employment patterns
Labour Mobility
The extent to which people can move to different locations and their flexibility in changing jobs
More mobile workers → higher the supply of labour
Depends on: age, mobility of the job, discrimination
Immigration
Contribues to production, consumption and payment of taxes.
Reasons for immigration: Pay, opportunities, seasonal factors, domestic instability, standard of living
Flexitime
Requires employees to work for a core period, but the rest of the time is flexible
Benefits: improves firm image, reduces overtime, freedom and balance
Teleworking or Homeworking
B/D of Homeworking/Teleworking
Benefits: Flexible hours, lower cost of technology, low absenteeism, reduced overheads
Drawbacks: Workers exceed work hours, social isolation, management is more difficult, technological breakdowns
Gig Economy
Workers are short-term, flexible, and temporary contracts. Includes freelance workers/independent contractors
Benefits: greater flexibility, lower cost, workers are more in control of work balance
Drawbacks: No job security or benefits, no regular income, higher burnout rate, risk
Portfolio Workers
People involved in a number of different jobs carried out simultaneously, often temporary
Resistance to change in the workplace
Self interest, low tolerance, misinformation, different assessments of the situation
Six change approach
education and communication
participation and involvement
facilitation and support
negotiation and agreement
manipulation and co-option
explicit and implicit coercion
Centralization
Decision-making power is kept in the hands of a few people or shared among the workforce.
Benefits: rapid decision making, better control, better sense of direction, efficiency
Drawbacks: added pressure/stress for senior staff, inflexibility, possible delays in decision making, demotivating
Decentralization
Decision making authority is shared with others
Benefits: input from workforce, faster decision making, improved morale, improved accountability, teamwork
Drawbacks: costly, inefficiencies, greater chance of mistakes, some loss of control, communication issues
Factors decision making depends on
Size of organization, importance of decision, level of risk, corporate culture, management attitudes
Delayering
Removing one or more structures in the hierarchy to flatten the organizational structure
Benefits: reduces cost, improves communication, encourages delegation
Drawbacks: creates anxiety, increased workload, slower decision making
Matrix Structure
Flexible method of organizing employees from different departments to temporarily work together
Benefits: improved communication, maximizes skill set, cost-effective
Drawbacks: added workload, difficult to coordinate, time consuming
Flat organizational chart
Exist in cultures that foster creativity and innovation
Benefits: more opportunities, better communication, cheaper, eliminates hierarchy
Tall organizational chart
Traditional approach
Benefits: quicker and more effective communication in small teams, easier to control, more productive, greater promotional opportunities
Drawback: bureaucratic
Types of leaders
Autocratic, Paternalistic, Democratic, Laissez-Faire, Situational
Autocratic leader
Makes all the decisions and prefers not to delgate responsibility
Benefits: quick decision making, workers opinions ignored
Paternalistic Leader
Guides employees through the consultation process and acts in the best way of their subordinates
Democratic Leader
Involves employees in the decision making process
Benefits: better morale and job satisfaction, improved decisions
Drawbacks: delays decision making, not suitable for large workforces
Laissez-Faire
Allow subordinates to make their own decisions and complete tasks their own ways
Benefits: higher motivation, promotes creativity
Drawbacks: delays decision making, relies heavily on teamwork and goodwill of employees, encourages slack
Situational leadership
Depends on: CLOTS
culture, leader, organizational structure, task, subordinates
Motivational Theorists
Taylor, Maslow, Herzberg
Taylor
Employees are motivated by money, productivity is improved by setting output and efficiency targets related to pay
Division of labour and differentiated piecework
Differentiated piecework: workers are paid a standard level of output and receive overtime
Drawbacks of Taylor
Drawbacks: ignores the non-physical contribution of workers, difficult to measure physical output (like teaching)
Maslow
Focused on the psychological needs of workers. People need to be satisfied with their lower level needs first.
Needs: psychological needs, safety, love/belonging, esteem needs, self-actualization
Drawbacks of Maslow
Level of needs are difficult to measure, assumes everyone is motivated in the chronological order
Herzberg
Focused on the sociological and psychological aspects of work
Hygiene factors (security, pay, conditions, relationships) and motivators (achievement, advancement, personal growth, recognition)
Limitations: does not apply to low-skilled/payed jobs, some employees do not want enriched jobs
Financial Rewards
Salary, wages, commission, performance related pay, profit-related pay, employee share ownership schemes, fringe payments
Non Financial rewards
Job enrichment, job rotation, job enlargement, empowerment, purpose, teamwork
Types of training
Induction, on the job, off the job
Market Orientation
Outward looking. Focuses on making products that they can sell, rather than selling products that they can make.
Benefits: meets wants and needs, greater flexibility, lower risk
Drawbacks: market research is expensive, future is uncertain
Product Orientation
Inward looking. Focus on selling products that they make, rather than making products that they can sell.
Benefits: quality is assured, more control over operations, USP
Drawbacks: market needs are ignored, high failure rate, high risk
Market Share formula
firms sales revenue/industrys sales revenue * 100
Market Growth
The rate which the size of a market is increasing.
(Current market size/original market size)/original market size * 100
Marketing Plan
A document outlining an organization's marketing objectives and the marketing strategies to be used to achieve these objectives.
Benefits: improves chances of success, identifies/deals with anticipated problems, better control of operations
Drawbacks: too expensive (money,time,resources) for small businesses, inflexible and outdated quickly
Marketing Audit
A review of the current position of an organization's marketing mix (SWOT)
Marketing Plan Includes
Marketing objectives, s/w of competitors, methods of market research to find target markets, outline of marketing mix, details of marketing budget, anticipated difficulties
Segmentation
A distinct group of customers with similar characteristics (such as age or gender) and similar wants or needs
Benefits: Better understanding of customers, higher sales revenue, growth opportunities, support for product differentiation strategies
Targeting
Each distinctive market segment having its own specific marketing mix.
Consumer Profiles
Demographic and psychographic characteristics of consumers in different markets, such as their age, gender, occupation, religion.
Segmentation by demographic
Age, Gender, Language, Religion, Marital Status, Race, Income/Socio-economic class
Segmentation by geographic factors
climate, location
Segmentation by psychographic factors
values, religion, status, culture, hobbies and interests
Niche Market
Targets a specific and well-defined market segment.
Benefits: better focus, less competition, high specialization encourages customer loyalty
Drawbacks: small customer base, less economies of scale, entrance of new competition
Mass Marketing
A broad range of market segments are targeted collectively to maximize sales.
Benefits: Economies of scale, same marketing strategies (saves time and resources), large customer base
Drawbacks: Not suitable for all businesses, high competition, lack of focues
Unique Selling Point
Any aspect of a business, product or brand that makes it stand out from those offered by competitors
Differentiation
Distinguishing a business or its products from competitors in the market. Helps business thrive and compete effectively.
Business: Price advantage, brand recognition and loyalty, distribution advantage
Drawbacks: Expensive, economies of scale, choice is not always desirable
Market Research
Discover the opinions, beliefs and preferences of potential and existing customers.
Continuous or Ad hoc (only when necessary)
Reduces risk of failure
Primary Market Research
Gathering new and first-hand data for a specific purpose
Benefits: Relevant, up to date, confidential and unique
Drawbacks: Time consuming, costly, validity
Survey
PR. Avoids bias, avoids jargon, has open and close ended questions, is tried and tested, objective
Benefits: qualitative and quantitative, simple
Drawbacks: costly, time consuming, bias or dishonest answers
Focus Group
PR. Small discussion groups to gain insight into opinions, attitudes and behaviours.
Benefits: particular group
Drawbacks: uneven participation, peer pressure, expensive
Interviews
PR. 1-1 discussion to investigate personal circumstances and opinions.
Benefits: can be in-depth
Drawbacks: non-quantifiable info, difficult to analyze, time consuming, large scope of bias
Observation
PR. Watching how people behave and respond in situations.
Benefits: Record behaviour vs words
Drawbacks: Does not explain behaviour, bias in interpretation
Secondary Research
Second-hand data and information that already exists.
Benefits: Cheap and fast, provides insight in the industry, large range, large sample size, valid
Drawbacks: outdated, inappropriate format, provides partial info, available to competitors
Market Analysis
SR. Reveals the characteristics, trends and outlook for a particular product or industry, such as market size, market share and market growth rates.
Benefit: relevant, up-to-date, detailed
Drawback: expensive, outdated quickly
Academic Journals
SR. Periodical publications from educational and research institutions.
Benefits: up to date, reliable
Drawbacks: not always relevant, outdated quickly
Government Publication
SR. Population census, social trends, trade statistics, unemployment figures, inflation rates.
Benefits: comprehensive, reliable, up to date, large range of topics
Drawbacks: identifying and locating info, fee required for special data
Media Articles/ Google
Benefits: up to date, easily accessible, wide range of info, free
Drawback: bias from reporters, out of date quickly, paid subscription
Qualitative MR
Benefits: Explores driving/restraining forces, valuable (flexible), inexpensive, detailed less bias
Drawbacks: not representative of the whole, time consuming, cost of hiring skilled interviewers, interviewer bias
Sampling Methods
PR. A small group of the population from a particular market for research.
Quota Sampling
A certain number of people from different market segments are selected
Benefits: representative, quick, reliable
Drawbacks: not always representative, sampling errors
Random Sampling
Giving everyone in the population an equal chance of being selected
Benefits: easy, minimizes bias
Drawbacks: indiscriminate, time consuming, expensive
Convenience Sampling
uses research subjects that are easy (convenient) to reach
Benefits: easy and quick
Drawbacks: highly skewed, unrepresentative of the population,
The 7 P’s - Product
Tangible or intangible. Consumer or producer.
Product life cycle
Shows different stages that a product is likely to go through.
Allows managers to identify necessary changes to improve marketing strategy.
R&D, Launch, Growth, Maturity, Decline.
Note 
Flashcard (93)