Influences on Operations Management Flashcards
Operations influences acronym
- Only Operations
- In Influences
- Greenland Globalisation
- They Technology
- Quietly Quality expectations
- Chew Cost-based competition
- Gum Government policies
- Leaves Legal regulation
- Every Environmental sustainability
- Christmas Corporate social responsibility
What is globalisation
Refers to the removal of barriers of trade between nations
How might globalisation act as a threat
Other global businesses might more effectively apply cost leadership and might undercut domestic businesses and dominate.
What are the two main drivers of globalisation
- The removal of trade barriers
- Improvements in communication and technology
What has globalistaion allowed businesses to do
- Sell their goods globally
- Purchasing supplies globally
How has globalisation resulted in massive economies of scale advantages for businesses
Through allowing businesses to sell their products all over the world, increasing market and produce massive production runs ,thereby enjoying low per unit costs
Why might businesses choose to outource globally
- They can’t acquire goods domestically
- Price of purchasing inputs is less
- Quality of inputs is higher
What is a strategy for outsourcing globally
Global web strategy
What is a global web strategy
meaning having different parts of production process in different geographical areas
What are advantages of a global web strategy
- Abundance of raw materials
- Favourable movements in exchange rate
- Lower labour cost
How has globalisation impacted Apple
- Globalisation allows Apple to outsource production of the iPhone to other businesses overseas –> mainly Foxconn in China
- Outsourcing to large production companies allows Apple to reduce production costs
- Also lose control over quality of production and business practice e.g. Apple attracted negative publicity for string of suicides at Foxconn Shenzhen facility
What is technology
Technology may be defined as the design, construction and/or application of innovative devices, methods and machinery.
What aspects of business can technology improve
- Quality
- Speed
- Dependability
- Flexibility
- Customisation
- Cost
How does technology impact Apple
- Global smartphone market is innovative and subject to rapid change
- Apple must invest heavily in R&D to compete in market
- If Apple fails to innovate their competitors may surpass them
What is quality in business
Quality refers to how well designed, made and functional goods are and the overall degree of competence with which services are organised and delivered
What are the main quality expectations associated with goods
- Quality of design
- Fitness for purpose
- Durability
What are the main quality expectations associated with services
- Professionalism of the service provider
- Reliability of the service provider
- Level of customisation
Can high quality be a point of product differentiation
Yes
How has Apple been impacted by quality expectations
- iPhone designed and marketed as a premium product
- 2013 choice to replace iPhone 5 with 5c essentially the same phone with a plastic back were not received well as it did not meet customer’s quality expectations
- iPhone 5s was far more successful
What does cost-based-competition involve
Determining breakeven point (the level where costs equals revenues) and then applying strategies to create cost advantages over competitors.
When does cost-based-competiton occur
When a business competes with its rivals by establishing prices for its output based on costs of production
What are fixed costs
Costs that do not change regardless of production level e.g. rent or buildings
What are variable costs
Costs that vary according to business activity e.g. electricity and materials
What approach must operations managers take to engage in cost-based-competiton
Cost-leaderhsip approach
What must oeprations managers do to engage in cost-leaderhsip
- Developing efficient scale of operations to generate economies of scale
- Using up-to-date technology in production
- Controlling production costs
- Controlling costs of R&D and selling costs
How does McDonald’s engage in cost-based-competition
McDonald’s must engage in cost-based-competition with competitors such as KFC in order to maintain customer demand and market share seen through the McDonald’s value menu
What are the three levels of govt that influence business
- Local
- State
- Federal
What are the different types of government policy
- Monetary policy (interest rate decisions of the Reserve Bank)
- Fiscal policy – also known as budgetary policy (government expenditure and taxation decisions)
- Employment relations policy
- Environmental policy
- Trade and industry policy
What is the main business policy set by local government
Zoning regulations
What is main state government policy
Workplace Health and Safety Act 2011
What is main Federal Govt policy relating to business
- Taxation
- Fairwork Act 2009 (Cth)
- Competition and Consumer Act 2010 (Cth)
What are the main forms of govt policy
- Monetary policy (interest rate decisions of the Reserve Bank)
- Fiscal policy – also known as budgetary policy (government expenditure and taxation decisions)
- Employment relations policy
- Environmental policy
- Trade and industry policy
How does McDonald’s comply with govt policy
- McDonald’s restaurants must comply with zoning regulations set by local council’s about where commercial property can be located
- McDonald’s must adhere to Workplace Health and Safety Act 2011 which mandates all work places provide a safe environment for workers
- Must comply with federal regulations on enterprise agreements and corporate tax
How is Apple influenced by govt policy
- During 2019 US threats to impose tariffs on Chinese imports and China’s retaliation of tariffs on the US impacted Apple’s operations were negatively affected with stock dropping 4 % when tariffs where announced due to their production processes which occur in China
What are compliance costs
Compliance costs are the costs associated with meeting the requirements of legal regulations
What does the operations function involve
Transforming inputs into outputs (goods or services).
What are the main laws that businesses must comply with
- Fair work laws (Fair Work Act 2009 (Cth))
- Anti-discrimination laws (Racial Discrimination Act 1975 (Cth) and Sex Discrimination Act 1987 (Cth)).
- Environmental protection laws (Environment Protection
- & Biodiversity Conservation Act 1999 (Cth)).
- Consumer protection laws (Competition and Consumer Act 2010)
- Workplace Health and Safety Laws (Workplace Health and Safety Act 2011)
How is Apple impacted by legal regulation
- Apple in ongoing legal battle with Samsung over intellectual property outcome will affect future business decisions and products
- 2015 Apple was ordered to pay $US 234 million to University of Wisconsin for infringement of intellectual property over micro processors
What does environemental sustainability mean
Environmental sustainability means that business operations should be shaped around practices that consume resources today without compromising access to those resources for future generations
How must operations comply with legal regulations
Operations must comply with these laws but at minimum cost to achieve cost leadership
What are the three aspects of environmental sustainability
- Sustainable use of renewable resources
- Reduction in the use of non-renewable resources (lean production!)
- The application of the precautionary principle which requires that, where environmental impacts are uncertain, a business undertakes actions that are most likely to cause least environmental impact.
How can environmental sustainability improve business reputaion and reduce costs
- Businesses incorporate environmental sustainability into business operations as point of differentiation and to demonstrate CSR
- Minimising waste and efficient production techniques also allows cost leadership to be achieved (Lean production)
How has environmental sustainability impacted Apple
- Wall Street Journal art 4 august 2014 à suppliers to Apple had been alleged to have pumped large amounts of toxic heavy metals into rivers in China, Shanghai region and had polluted the air and soil around the area
- Drew negative media attention for Apple
What is CSR
Corporate social responsibility refers to open and accountable business actions based on respect for people, community/society and the broader environment
What does CSR involve
CSR involves businesses doing more than just complying with the laws and regulations.
What is the triple bottom line
- Financial returns
- Social responsibility
- Environmental sustainability
What is legal compliance
Legal compliance is following the letter of the law
What does ethical behaviour involve
Ethical behaviour involves making decisions that are not only legally correct but morally correct
What do businesses that go above legal compliance demonstrate
Good CSR
What are the main areas of legal compliance
- Labour laws (e.g. minimum wages, working hours, breaks, holidays etc)
- Environmental laws (e.g. pollution, waste disposal etc).
- Business licensing rules (e.g. training or certification, zoning restrictions).
- Taxation (e.g. taxes on profits, superannuation contributions)
- Trade practices (e.g. misleading and unfair conduct, monopoly behaviour)
What does environmental sustainability mean in relation to CSR
Environmental sustainability means that business operations should be shaped around practices that consume resources today without compromising access to those resources for future generations
What is social responsibility concerned with
Social responsibility of a business is concerned with that business interacting in a positive way in terms of its operations with the local community and improving the quality life of community members
What are some areas that involve environmental sustainability
- Recycling
- Minimising environmental impacts
What are some areas that involve social responsibility
Social responsibility includes areas such as making a family friendly workplace and gender equality
What are ethical concerns surrounding Apple
- Ethical concerns surrounding Apple include use of child labour, pollution and poor working conditions
- 2014 BBC report found that child labour was used in mines where materials for Apple products were sourced
- `Workers in Foxconn factory was paid starting wage of $2 an hour
Outline Operations Influences section of syllabus
(acronym)
- Globalisation
- Technology
- Quality Expectations
- Cost-based Competition
- Government Policies
- Legal regulations
- Environmental sustainability
- Corporate social responsibility (differece between legal compliance and ethical responsibility, environmental sustainability and social responsibility)
