Role of Operations Management

Question 1

Cost Leadership

Answer 1

A cost leadership strategy is where a business aims to be the lowest cost manufacturer within its industry.
The products arebasic with fewer features, perhaps lower quality and using low-cost packaging.

Question 2

Low costs can be achieved through:

Answer 2

Economiesof scale – The larger the business the more “purchasing power” it has

Standardisation- The more uniform the product, the lower the production costs are.

Global Sourcing - Accessto cheaper raw materials and labour

Technology - Inventing aninnovative method of productionreducing labour costs

Waste Minimisation – this can be excess production or under utilisation of labouror equipment.

Question 3

CASE STUDY
IKEA is the world’s most successful furniture retailer. Innovations in operations reducing its costs has given IKEA a competitive advantage over their rivals. These cost leadership innovations include:

Answer 3

Long term relationships with suppliers
High volume of ordering
Pieces are designed to include minimal parts
Flat packaging allows lower shipping costs
New materials are created like their particle board which weighs less reducing transport costs
All furniture carries a ticket and customers are asked to pick up their furniture from the warehouse
Customers do their own delivery and assembly

Question 4

CASE STUDY

The main costs for Qantas are:

Answer 4

Staff (24%)
Aircraft operation and maintenance (19%), Fuel (27%)
Depreciation (9%)
Marketing (4%), Property (3%), IT (3%)
Qantas has gained cost leadership through:
Economies of Scale: New strategic alliances new minimise unnecessary flights (Emirates)
Standardisation: Cut services to unpopular destinations
Technology: Results in lower labour costs
Waste Minimisation: Energy and water saving devices, more efficient designs

Question 5

Disadvantages of cost-leadership are:

Answer 5

Competitors can use the same strategy and achieve even lower prices
Perception of product may be poor
Changing technology
Consumer preferences change
Strong competitor joins the market with aggressive marketing

Question 6

Good/Service Differentiation

Answer 6

Higher quality/better performance
Added value/more customer support
Convenience
Trust/respected image/conscience
Faster Delivery
Custom-designed products
More features and application
Incorporation of new technology

Question 7

Goods and/or services in different industries

Answer 7

Goods may be standardised (mass produced or an assembly line) or customised (varied according to the needs of the customers).
Goods may also be perishable or non-perishable.
Intermediate goods have gone through one set of operational processes then become inputs into further processing, for example, a microchip.
Value of goods can be easily calculated but for services it can be highly subjective.

Question 8

Interdependence with other key business functions

Answer 8

Because of its central role, operations must be performed in coordination with other business activities.
Finance – Budgets make funds available to purchase inputs, equipment, and conduct repairs and maintenance.
Marketing - Involvesconductingresearch to determine what a customer wants operations to deliver.
Human Resources -Ensures there are enough skilled employees available for operations requirements.

Question 9

Define differentiation

Answer 9

the action or process of differentiating or distinguishing between two or more things or people.