Setting Operational Objectives

Setting Operational Objectives

The four main functions, or departments, of businesses are marketing, operations, human resources and finance.

Operational objectives

• To support the business’s overall objectives, each of these functions or departments will have its own objectives which contribute to the wider objectives set for the business.

• It is important that the objectives of each department are aligned to the business’s overall objectives, as if they are not, individual departments may not be contributing to the success of the overall business.

Cost objectives

• Operations objectives can be focussed on reducing or maintaining costs, for example fixed and variable costs.

  • For example, a value retailer such as Poundland may try to reduce the variable costs of its products by reducing the amount of packaging used. This objective is likely to be important to all businesses which compete on price.

Quality objectives

• Operations objectives can be focussed on improving or maintaining quality.

  • For example, Rolex prides itself on the quality of its products.

Dependability objectives

• Operations objectives can be focussed on dependability. If a business is dependable, customers trust the business as they value reliability and this allows the business to attract customers and increase its selling prices.

  • For example, if a retailer is running low on stock, they may pay a manufacturer to distribute a product directly to the customer so that their supply remains stable and customer needs are met.

Environmental objectives

• Operations objectives can be focussed on the environment.

  • For example, Amazon has created a piece of software which determines the most appropriate size box for packaging to reduce waste and their impact on the environment.

Adding value

• Operations objectives can be focussed on added value. Added value occurs when businesses convert raw materials into a finished product and in doing so create a product which can be sold at a greater price than the cost of the individual components or materials used to make the product.

  • For example, the actual components and materials used to create an Apple iPhone are worth much less than the purchase price of the product, as value is added because of Apple’s reputation as a manufacturer of smart phones.

External and Internal Influences on Operational Objectives and Decisions

Influences affecting a business’s choice of operational objectives can be internal or external.

The influence of other business functions

• The objectives of the three other business functions will influence the choice of operational objectives.

  • For example, if the operational objectives are focussed on flexibility and require the recruitment of additional temporary staff for the festive period, the human resources department will need to support this through their responsibility for overseeing recruitment.

How products influence objectives

• The type of product or service produced will influence the choice of operational objectives.

  • For example, if the product or service produced is sold competitively on the basis of price, objectives to reduce costs may be appropriate.

Availability of internal resources

• The availability of internal resources such as capital and labour can influence the choice of operational objectives.

  • For example, if there is a shortage of employees, it would be difficult to increase the speed of response and the business’ ability to increase its production levels.

Technological advancements

• Technological advancements influence the choice of operational objectives.

  • For example, developments in artificial intelligence may allow businesses to improve their production processes.

Changing tastes

• Changing customer tastes, needs and preferences influence the choice of operational objectives.

  • For example, when customers demanded healthier meals, McDonalds introduced a range of healthier menu alternatives.

Globalisation

• Globalisation and competition influence the choice of operational objectives.

  • For example, customers’ ability to purchase products directly from China places pressure on UK manufacturers to remain competitive.