Lecture 10 - Operations management

Question 1

Operations of business

Answer 1

• Business operations refer to activities businesses engage in daily to increase value of enterprise and earn profit
• The activities can be optimised to generate sufficient revenues
• Revenue (also referred to as Sales or Income) to cover expenses and earn a profit for owners of business
• Everything that happens within a company to keep it running and earning money, its referred to collectively as business operations
• Business plans often include a section dedicated to operations so that company founders understand systems, equipment, people, and processes need to make organisation function

Question 2

What do business operations include

Answer 2

• The resources: inputs needed (raw materials, labour, and capital)
• The processes:to transform inputs into outputs (goods or services).
• The Technologyinvolved
• The Location

Question 3

When is SWOT used

Answer 3

When a company is looking to launch a new product or upgrade an existing product it will undertake an analysis of the Business Environment to gauge if the environment is right for the new product (the product life cycle analysis)
Will help business make long term decisions on how to expand and diversify to take advantage of strengths and market opportunities but also where to possibly cut back on certain operations to meet weaknesses and threats.

Question 4

What does SWOT analyse

Answer 4

• Strengthsof existing products / markets.
• Weaknessesof existing products / markets.
• Opportunitiesof new products / markets.
• Threatsof new products / markets.

Question 5

What is the product life cycle

Answer 5

• A product life cycle is amount of time a product goes from being introduced into market until it’s taken off shelves.
• There are four stages in a product’s life cycle—Introduction, Growth, Maturity, and Decline.
• Newer, more successful products push older ones out of market

Question 6

Operations of business - continuous improvement

Answer 6

• Another important part of Business Operations is concept of Continuous Improvement.
• Continuous improvement, is ongoing improvement of products, services or processes through incremental and breakthrough improvements.
• Monthly Training Programs. Cross-training employees to work in a range of positions creates a continuous workplace improvement as it allows a more smoothly run operation.
• Having trained staff members to step in when someone calls out sick or takes a leave of absence prevents a production slowdown.

Question 7

Ways continuous improvement is implemented

Answer 7

• LEAN Technology:
  Created by Toyota to optimise its production cycle, LEAN improvement is customer-focused. Defines what customers value from the process most to determine what can be eliminated from the production of a product to decrease waste and cut costs.
• Six Sigma:
  Six Sigma is a method that focuses on improving quality of business processes. Aimed at limiting variation in processes to ensure consistency and increase performance. Uses statistics to measure deviations from a defined centre line on a control chart.
• Total Quality Management:
  With some similarity to Six Sigma, Total Quality Management (TCM) holds all involved parties responsible for producing quality outputs. It looks to standardise processes to reduce errors

Question 8

Examples of barriers to entry

Answer 8

Economies of scale
- These are declines in the unit costs of a product as the absolute volume per period increases.
- These force the entrant to either come in at a large scale (risking strong reaction from incumbents) or a small scale (forcing a cost disadvantage).

Product differentiation
- Existing companies have brand identification and customer loyalties. This forces entrants to spend heavily to overcome these loyalties.
- New entrants may bring a different product to market, but its benefits must be clearly communicated to the target customer.
- Start-ups must find an effective
positioning
, which often requires marketing resources beyond their means.

Capital requirements
- These are the financial resources required for infrastructure, machinery, R&D and advertising.
- May get around capital requirements by outsourcing parts of the operation to companies that can leverage existing investments.

Question 9

Examples of commercial opportunity’s

Answer 9

Switching costs
- These are one-time costs the buyer faces when switching an existing supplier’s product to a new entrant (for example, employee retraining, new equipment, technical support).

Access to distribution channels
- This can be a barrier if logical distribution channels have been locked up by incumbents.

Cost disadvantages independent of scale
- Existing companies may have cost advantages that cannot be replicated by a potential entrant. Factors include the learning or experience curve, proprietary product technology, access to raw materials, favourable locations and government subsidies.

Government policy
- Governments can limit or prevent entry to industries with various controls (for example, licensing requirements, limits to access to raw materials).
- Companies in highly regulated industries will find that existing business have fine- tuned their business according to regulation.

Market Resistance
- There may be strong retaliation to new entrants
- Established firms with substantial resources to retaliate (for example, excess cash,distributionchannel leverage, excess productive capacity)