Chapter 1 - operations management Flashcards
What are the 2 strategic roles of operations management?
Cost leadership and good/service differentiation
Define cost leadership
Cost leadership involves aiming to have the lowest costs or to be the most price-competitive in the market
Define economies of scale (which is an aspect of cost leadership)
Economies of scale are the costs advantages that result from an increase in the scale of business operations
Define standardisation
Standardisation is the making of products that are homogeneous
Define product differentiation
Product differentiation means distinguishing products in some way from those of competitors
Name the 4 ways to differentiate goods
Colour variation
Varying the actual product features
Varying the augmented features
Varying product quality
Name the 4 ways to differentiate services
Varying the amount of time spent on the service
Varying the amount of expertise brought to the service
Varying the qualifications of the service provider
Varying the quality of the materials/technology used in the service delivery
Define standardised goods
Standardised goods are those that are mass-produced, usually on an assembly line. Standardised goods are uniform in quality and meet a predetermined level of quality. These are produced with a production focus
Define customised goods
Customised goods are those that are varied according to the needs of customers. These are produced with a market focus rather than a production focus
How does standardised products help achieve cost leadership
When a product is standardised, the costs associated with production can be minimised. For goods, when goods are mass-produced for a lower price, economies of scale are achieved.
Define self-service
Self-service means encouraging customers to take the initiative to help themselves
Define drip pricing
Drip pricing means that a business advertises one price but in the process of purchasing the service, numerous additional costs are added.
Explain the interdependence between operations and marketing
Marketing and operations are interdependent as marketing involves the design and sales of products to meet customers needs, whilst operations involve the acquisition of products for sales or to source production. The product design (a marketing requirement) directly affects the operations function.
Explain the interdependence between operations and finance
If the cost of production can be minimised, then profit margins increase. If the quality of production increases, the cost of the product also increases. This demonstrates the direct relationship between the two.
Explain the interdependence between operations and HR
Because the operations function is innovating through technology, HR is impacted as the nature of work changes. This requires a change in the skills and qualities required from employees.
