T3 Business Studies HSC

Operations

The business processes that involves transformation (Transforming input into output) Adding value so output its more value than all inputs combined

Strategic role of operations

 Operations assist business in achieving its overall goal of profit maximilisation

• Cost Leadership (Keeping costs low) 

• Differentiation (Increasing revenue) 

Cost leadership:

Aim to have the lowest cost or to be the most price competitive in the market
- Profit centres directly generate income. Cost centres incur costs. Key strategic aspect of Operation is cost management

Cost Leadership Strategy and how

Keep costs as low as possible

• Larger profit

• Drop prices create competitive advantage

How

• Invest in technology, research and development

• Lower production costs

• Economies of scale : Advantages when business increase scale of operations

Relationship between cost and quality

• Standard of material, labor and other inputs must align with precision of speed and facilities

• Low input cost = Price will reflect quality.

• Management of operation must determine quality and costs levels

Good/Service differentiation:

Aim Distinguishing products from competitors based on factors other than price

• Enhanced or additional features, unique products achieve brand loyalty

Goods Differentiation

• Features

• Quality (Affordability)

• Augmented features (Additional benefits associated)

Service Differentiation

• Time taken to deliver service 

• Experience and qualification

• Quality of materials and technology

Cross Branding:

Two business forms strategic alliances offering customer added benefits from cross branding agreements.

• E.g Uber and spotify (Listen to favourite music during ride)

Standardised Goods:

 Mass produced, meet quality expectations, assembly line and are uniform in quality. E.g Clothing, books, toys

Customised Goods:

Varying according to the needs of customers, market focused instead of product focused. E.g Hearing aids, glasses

Classifications of goods

Perishable - Short lifespan, consumed quickly e.g milk

Non perishable - Durable, last longer e.g Phones, Furniture

Marketing Interdependence

 Communicate to determine product design , subsequent sale to meet consumer needs

• E.g Product marketed to be sold at a certain date operations must make it happen

Finance Interdependence

Profitability, provides funds that determines what strategies operations can undertake and what inputs are to be used.

• Quality (Higher quality=Higher prices), Costs (Cost leadership), investment (New facilities and tech boost efficiency) 

Human Resources: Interdependence

Acquiring, training, separating, developing, staff. 

• Skill and expertise of employees and also impact the efficiency 

• Technology affects efficiency of work, speed and quality.  

Globalisation

Removal of trade barriers between nations enables greater exchange of capital, labour, knowledge, financial resources, and tech increased global interaction and integration.

Opportunities

• New markets

• Supply Chain management

• Production

New Markets, Supply Chain Management, Production

Potential customers/sales 

• Productions levels increase to meet growing demands

• Opportunities for economies of scale and cost savings

Relationship between business and supplier

• More sources of raw material and factories (Global sourcing)

• Locating closer facilities to suppliers lower transport cost

Manufacturing

• Outsourcing overseas 

• Flexibility of location 

Threats

Global business

• Increased competition in new markets

• Operation manager work harder to stand out from competition

Domestic business

• New global competitors with better cost cutting strategies can overtake

• Operation managers reduce cost to stay competitive 

Technology

Use/application of innovative devices, system and machinery in process

Administrative technology:

 Organising, planning and decision making controlling all operations processes

• Sequencing and scheduling tools

• Office technologies

• Software (Word processing, graphic and publishing programs)

Process technology:

Carry out functions like manufacturing, logistics and quality management

• Machines

• Robotic (Highly complex) 

• Computer technology 

Quality Expectation

How well designed, made and functional goods are. Overall degree of competence of which services are organised and delivered.

QE Goods 

• Quality of design: How well product ideas are developed and executed. How innovative and quality of materials

• Fitness for purpose: Does intended job

• Durability: How long goods last easy to repair or maintain

QE Service

• Professionalism: Manner that staff engages with customers and environment

• Reliability: Competence and efficiency of service provider

• Level of customisation: How well tailored to meet customer needs

Cost-based competition

Determining break-even point and then applying strategies to reduce cost. 

• Aim to achieve cost leadership by reducing fixed and variable costs. 

• Reduce costs rather than increase revenue to improve profit. 

Sourcing Supplies (Cost-based Competition)

• From lower quality inputs

• Lower cost nations

• Bulk buying

Production (Cost-based Competition)

• Economies of scale: Better use of machinery and efficiency

• Standardised products: Less inputs simpler and faster production

• Automated Production: Streamlined process speeds up production

• Lean production: Minimise waste and costs

Output (Cost Based competition)

EOS high volume of output reduces production cost

• Spreads fixed cost across large number of outputs 

Environmental sustainability

Operations shaped around practises that consume resources without compromising access to future resources.

• Sustainable use of renewable resources

• Reduction in non-renewable assets

• Application of the precautionary principle 

Corporate Social Responsibility CSR

Refers to open and accountable business actions based on respect of people, society and environment.

Triple bottom line:

Complying with laws and regulations, demonstrates that business values more than financial gain and profits, and considers community concerns and societal expectations.  

Difference between legal compliance and ethical responsibility:

Difference between legal compliance and ethical responsibility: Legal compliance is required business to follow the law and ethical responsibility is describing meeting obligations in good spirit.

In a CSR-oriented business

• Employees' increased motivation, productivity and engagement 

• Allows businesses to define partnership and pathways aligning with community values and drives a positive impact. 

• Following guidelines like the International Labour Organisation, businesses can promote rights at work, social protection and working conditions

Inputs

Resources used in transformation (Production process)

Transformed resources

are those inputs changed or converted in the operations process

Materials

 Basic elements in the production process

• Raw goods: Essential substances in their uncompressed stages

• Intermediate goods: manufactured and used further in manufacturing

Information

Knowledge gained from research, investigation, and instruction which result in an increase in understanding. Used to inform how inputs are used, where sourced, which suppliers are available. Come from externals sources or internal (KPI)

Customer (Transformed resources)

 Transformed resources when their choice shapes inputs used. Acts as input and desires act as the transformed resource. Critical to be custom orientation at the beginning of the production process to fulfil needs and interest.