Chapter 59 - operations management objectives and external influences Flashcards
when setting operations management objectives it is important to note…
- The legal status and size of the business - the level of profit that is set for a public limited company may be substantially different from that of a sole trader.
- The other objectives of the business - whether it is a production target or a target to launch products; will all have a financial implication for the business. In almost all instances, a budget will have been set; one that ought to ‘fit’ with any financial objectives.
- The state of the economy - a growing economy will make it easier to achieve targets or objectives than if the economy is in recession.
- The level of competition within the market in which the business operates - a highly competitive market may mean that prices have to be lower in order to compete & consequently profit margins may be lower, which in turn will affect the ability of a business to to achieve its production target.
- The government - may be encouraging or discouraging business as part of its political agenda. the level of taxation imposed upon business will impinge upon the ability to achieve any operational target set, or even the size of the target in the first place.
- The work of Monetary Policy Committee - the MPC sets the level of interest rates that govern the economy. in turn this interest rate will affect a business in terms of borrowing money, and therefore its ability to purchase new capital goods needed to enhance productivity.
- Legislation - may also affect the production targets set or the ability of a business to meet its productive targets / objectives.
what does having operational management objectives allow a business to do?
overall, having operational management objectives allows a business to be able to manage its productive capacity and output in the context of the objectives of the business as a whole.
operations management strategy (notes)
- there may be a desire to reduce costs in order to be able to compete in a highly competitive market.
- the level of production and productivity will be essential in helping to reduce costs.
- if costs can be reduced then its is more likely sales will increase, therefore aiding in the achievement of the goals of the business.
- ensuring the quality of products is high is essential to the good reputation of the business, and thus helps the marketing and HRM departments.
- positive effect on finances as sales and reputation grow.
- the actual budget allocated will be a major constraint on how operations management set & implement strategy.
What are the EXTERNAL factors on operations management?
- social factors
- ethical factors
- environmental factors
- legal factors
- economic factors
- political factors
- technological factors
- international factors
> in order to evaluate the factors that affect operations management within the external environment, the nature of the business itself is critical. Not all of the factors will be relevant to every business
SOCIAL factors
> changing tastes that may affect the demand for certain goods and thus affect what the business is prepared to produce.
holidays aboard cruise liners have grown significantly as the illusion that cruise holidays were only for the over 60’s has been well and truly shattered.
religious changes: as the UK has moved into being seen as a multi-cultural society, there has been several changes in purchasing habits; e.g. what types of food and desired consumables are consumed. this has meat that businesses have responded in terms of what they produce and in some cases how food maybe prepared.
ETHICAL factors
> ethical issues are now a higher priority
how a product is produced may alter as sustainability becomes more important & may also be used in the marketing of a business.
the need to consider the level of waste I often viewed as an ethical issue, as the planets resources continue to diminish. consequently, more research is undertaken to consider if the production process can be altered to save energy, resources and time.
changing the resources used has become significant within the car manufacturing industry
labelling on packaging, although it may be governed by legislation, also has ethical influences as manufactures wish to be seen as operating in n ethical manner.
ENVIRONMENTAL factors
> a healthy regard for the planet and its resources has seen a growth in the level of concern ad awareness of environmental issues.
businesses are conscious of being able to promote environmental awareness of how products are produced.
the use of sustainable resources in the production process will enhance the credibility of the business, and may in many instances enhance its sales as discerning consumers often favour such products.
LEGAL factors
> the level and specific nature o legislation may well impinge upon the operations management of of a business.
complying with the law is essential, as not doing so may damage the reputation of the business and subsequently the goodwill of the business (non-tangible assets)
legislation can affect the productive process within a business, such as health and safety issues, which in turn may have a cost implication and impact how the productive process takes place.
ECONOMIC factors
> the state of the economy, in term of level of inflation, will affect the costs of production.
the level of unemployment will affect the availability of labour required in order to produce goods and services.
the cost of labour: when there is full employment, the wage level increases and therefore the cost of labour increases, which in turn may encourage businesses to seriously consider using machines instead of labour (capital substitution)
the level of growth within the economy: when the economy is growing business feel more confident to invest in both capital equipment and labour in order to meet the growing level of demand within the economy.
value of the £: a strobe pound will make it harder to sell abroad and therefore there may need to be a serious consideration as to how the business can lower its costs, orbit may have to settle for a lower profit margin.
if a business imports components with a strong pound these components will be cheaper and therefore the business can sell more, by passing on the reduction I costs through lowering its prices and thus increasing revenues.
alternatively, a business may decide to keep prices constant and thereby increase its profit margins.
POLITICAL factors
> the nature of the actual government in power will affect the operations management of many businesses.
the concern as to whether a particular political party would increase the minimum wage would affect businesses as they try to ensure they can budget for the coming year on an accurate manner and at the same time ensure that the additional cost can either be passed on to the consumer absorbed, often depending upon the price elasticity of the product.
there are also political factors to be aware of from within the EU.
TECHNOLOGICAL factors
> technology is ever changing and consequently the operations management area of a business must keep pace with such changes in order to remain competitive.
rapid technological advances within the mobile phone industry is a classic example of technology impinging upon the operations management of a business. more money is being spent on research on development in order to either remain competitive, or be viewed as the market leader in terms of new technology.
material technology has shown significant progress in recent years, allowing for the rise of battery operated cars, due to lighter batteries.
technological advances in solar energy have allowed businesses to cut their energy bills significantly, allowing operations managers to possibly spend the energy saving expenses on further technological advances.
INTERNATIONAL factors
> as the pace of globalisation increases, operations managers need to be aware that markets are growing, as is the degree of competition.
globalisation offers potential customers more choice and consequently these working in operations management need to be mindful of keeping up to date with the competition, or ensure there is a USP that will appeal to the wider market.
the wider market may give rise to the need to vary products according to specific international tastes, cultures or religious beliefs.
