Strategies Flashcards

1
Q

Customisation

A

- Refers to the development of individual products to meet the specific needs of customers

  • Elements of customisation could include variations in colour, size and quality
  • Mass customisation where businesses modify their operational and transformation process to allow mass-produced (i.e. standardised) goods to be modified to meet specific customer needs
  1. Modifying goods/services to meet specific customer needs and desiresMaximising customer satisfaction/repeat sales
  2. Increased market share
  3. Long-term sustainable competitive advantage

HOWEVER

  1. Result in increased complexity to operational and transformation processes
  2. Business’s might not have the knowledge, machinery, systems, processes available to engage in customisation (or a high degree of customisation)
  3. Customisation will generally increase lead times (negative impact on customer satisfaction)
  4. Despite the benefits of customisation, standardisation remains the predominant strategy employed by businesses, largely due to simplification and it’s cost effective nature
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2
Q

Performance objectives - dep

A

- Refers to the consistency, reliability, and durability of a product

  • Goods: dependability can be measured through number of customer complaints, defects, warranty claims (interdependence with marketing)
  • Services: dependability can be measured through the number of customer complaints
  1. Dependable products will result in enhanced brand image / reputation, increased customer satisfaction and achieving a long-term sustainable competitive advantage

HOWEVER

  1. Inconsistent and unreliable products will result in tarnished brand image / reputation, decreased customer satisfaction and loss of competitive advantage
  2. Improving consistency and reliability will require greater levels of quality control (negatively impacting costs)
  3. Using durable materials will increase costs adversely impacting the profitability objective
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3
Q

Flexibility

A

- Flexibility refers to how quickly operational processes can adjust to changes in the market

Manufacturing based businesses

  • Utilisation of (more flexible) technology to increase / decrease production as required
  • Altering product design
  • Methods of increasing flexibility (service based businesses)
  • Increasing the use of technology
  1. Shifting/changing consumer needs and wants can be fulfilled (fail to respond will result in lost sales)
  2. Avoids underproduction (lost sales) / overproduction (may not be able to sell products)
  3. Enhance flexibility will result in increased efficiency, customer satisfaction, sales and achievement of a long-term sustainable competitive advantage

HOWEVER

  1. Improving flexibility may necessitate the need to purchase new technology/machinery, this could require a significant outlay of capital – adversely impacting the cost objective
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4
Q

Cost

A

- Cost refers to minimising operational expenses

Operational costs that can be minimised

  • Input costs
  • Logistics costs
  • Inventory costs

Cost minimisation strategies include

  • Waste minimisation
  • Application of technology
  • More efficient use of inputs
  • Efficient logistics procedures
  1. Utilising cost minimisation strategies will result in lower operational costs, reduced COGS and expenses, high gross and net profit results – thus helping to achieve profit maximisation
  2. Cost minimisation strategies will assist a business cost leadership
  3. Lower production costs could enable a business to charge lower prices to customer – assist inducing increased sales and market share

HOWEVER

  1. Businesses must find a balance between cost and quality – if quality is compromised to save costs, it can lead to many negative ramifications – increased warranty claims and damaged brand image/reputation
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5
Q

Speed

A

- Refers to the time it takes for operational processes to respond to changes in demand and adjust output volumes

Speed goals include: Reduce wait times, Shorter lead times and Faster processing time

Eliminating bottlenecks in the production process

  1. Reduce wait times and shorter lead times – increased customer satisfaction – Repeat sales and competitive advantage

HOWEVER

  1. IF Operational processes are rushed to achieve speed objective, quality objective could be compromised
  2. It is critical that a business has efficient and reliable suppliers who have the capacity to respond to increases in demand for the inputs the business may require
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6
Q

Quality

A

- Refers to the ability of a business to satisfy or surpass the standards and expectations of consumers

Quality of conformance Refers to whether a good or service meets (conforms) to the desired specifications a consumer would expect

Quality of service Refers to Is the service reliable, customisable and delivered in a time manner

Quality can be enhanced through commitment to the principle of: quality of design

  1. Less defects
  2. Less warranty claims
  3. Reduced waste
  4. Improve reliability and dependability of product (key performance of objective)
  5. Improve customer satisfaction
  6. Lead to a long-term sustainable competitive advantage

HOWEVER

  1. Increased defects
  2. Increased warranty claims
  3. Increased waste
  4. Reduced reliability and dependability of product
  5. Decreased customer satisfaction
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7
Q

New product or service design and development

A

- The design, development, launch and sale of new products enables a business to grow and attain a competitive advantage.

Changes in innovation and technology

Enables new, appealing products to be made because they sue advanced technologies, which give products great functionality.

  1. Addresses the issues with products being obselete
  2. Entice existing customers to repurchase
  3. Satisfy cosnumer needs and wants
  4. increases products range

HOWEVER

  1. May make existing products obselete
  2. Cost of R&D
  3. modifications to process layout and task design can be time consuming and expensive.

Consumer approach

The preferences and desires of consumers, identified by market research, determine which products are deisgned and developed.

  1. Satisfy cosnumer needs and wants
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8
Q

New product or service design and development CASESTUDY

A
  • One main reason for apples contunous success is beacuse they understand the power of product deisgn and devlopment.
  • Apple has established a reputation as a comopany that prodcues extraordinary products that grab the attention, and loyalty, of customers.
  • Exmaples for upcoming designs and development with apple are;
  1. 5th Gen Ipad air
  2. Mac mini
  3. iphone 14
  • 2021 apple annunal R&D expenditure - $22B , 17% increase from 2020.
  • Apples key strategy has been well desighned products - quality leading to customer expectation.
  • NEW SERVICES that apple have designed include Apple pay,apple fitness. this ultemetly leads to greater usage of the iphone in everyday activity. to buidl brandloyalty and increase sales.
  • 2021 revenue from services $68M, an increase of 27% from 2020.
  • NEW PRODUCTS that apple reases are the apple iphone, each september.
  • R&D for the iphone 12 focused on areas such as oLED display, ceramic glass, facial recognition and tri-camera.
  • Resulted in apple selling over $1M iphones per day within the first quater of ist release.
  • R&D was was also spent on the development of new products, such as apple car - still underway.
  • Apple are focusing and investing more on AI as it attempts to catch up to rivals like amazon and google.
  • Ensures that apple maintains a competitive advantage in a highly competitive and changing technological environment.
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9
Q

Supply chain managment

A

- Refers integrating and managing the flow of supplies throughout the inputs, transformation processes and outputs in oder to meet the need of customers.

Involves both sourcing (Supply side) as well as logistics and distribution (What is sold)

  • LEG
  1. Logistics
  2. E-Commerse
  3. Sourcing (Including Global)
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10
Q

Logistics

A

- Refers to the transport of physical raw materials and inputs with the distribution of finished goods to markets.

Considerations a business may consider are warehosuing, and distribution centres.

Warehousing and distribution centres

  1. Useful for short term or long term storage
  2. Perserve the products
  3. Ensures a business has stock on hand to meet customer orders

HOWEVER

  1. Costs such as insurance, stacking and moving, damage costs
  2. Technologies within the distribution centres

Automated warehouse trucks

  1. Reduces the need for warehouse staff - Higher efficiency.
  2. Achieve economies of scale by rationalising number of distribution centres or outsourcing -

HOWEVER

  1. High inital outlay for automated vechicles.
  2. Increased use of automation impact on existing labour - Lack of dexterity

AI is also being applied to improve supply planning - Assessing the volume needed.

  1. Ai can assist with continous volume within producution - minimsed shortages - production efficieny
  2. Improve reliability/dependability

HOWEVER

  1. Increased use of automation impact on existing labour - Lack of dexterity
  2. Significant cost/infrastructure required e.g purchasing of drones for small deliveries, autonomous mobile robots, supply chain software,
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11
Q

Logistics CASE STUDY

A
  • Apple primarily outsources its logistics as it lowers operating costs and helps achieve the speed objective.
  • Apple purchases raw materials from various sources then get them shipped to an assembling plant in China.
  • From there, the assembler will ship products directly to consumers via FedEx, for those who buy from the Apple’s Online Store.
  • For other distribution channels such as retail stores, direct sales and other distributors, Apple Inc will keep products in Elk Grove, California and supply products form there.
  • At the end of a product’s life, customers can send products back to the nearest Apple Stores or dedicated recycling facilities.
  • UPS and Fedex will freight the iPhones using Boeing 747’s which can carry 150,000 iPhones (SPEED AND COST)
  • Logistics hub located Louisville Kentucky, Elk Grove California
  • It takes three days to transport the iPhones from China to a store in the US (SPEED OBJECTIVE)
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12
Q

E - Commerce

A

E - Commerce involves the buying and selling of goods and services via the internet.

E-procurement, B2B process.

  • The use of online systems to manage supply.
  • Allows suppliers direct access to the business’s level of supplies.
  • Stock falls to a pre-determined point, the supplier will re-supply
  1. Allows business to source efficiently
  2. Ensures that sufficient inventory is ordered

HOWEVER

  1. Innefficiency in production implementing procurement systems
  2. High intial outlay - S.T increased costs.

Opting to sell directly to consumers - B2C process.

  1. Improve speed
  2. Receive customer’s orders electronically

HOWEVER

  1. More difficult in certain industries ( Highly customised goods )
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13
Q

E-commerse CASE STUDY

A
  • Apple utilises an e-procurement strategy as a result of the increasingly complex B2B transactions it engages in, whereby, when stock/inventory in its distribution facility at Elk Grove, California falls below a certain point, more stock is automatically ordered.
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14
Q

Global sourcing

A

- Refers to businesses purchasing supplies or services without being constrained by location.

Involves a business creating a global web of suppliers for materials.

  1. Access to greater volume of inputs → Economies of scale
  2. Access to higher quality inputs → QUALITY
  3. Access to unique inputs → G/S Diff → Comp Ad.

HOWEVER

  1. Unfavourable exchange rate movements → hinder cost saving → Use of derivatives.
  2. Quality concerns → Poor QM → Quality
  3. Transportation delays with inputs → SPEED (Covid)

Advantages having multiple suppliers:
• Mitigate supply chain disruptions and delays, allowing a business to maintain gross-margins.
• Can quickly increase production capacity to respond to changes in consumer demand
• Encourage lower supply costs as multiple suppliers compete for its business
• Prevent competitors from utilising the same production capacity through
exclusive relationships with suppliers

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15
Q

Global sourcing CASE STUDY

A
  1. While many components are bought from multiple sources, Apple is reliant on some suppliers as a single source of their component part These sources are located in U.S, Asia and Europe Component from more than 200 suppliers go into each iPhone

• Apple orders many of the components from global suppliers and then sells them to Foxconn or Pegatron to build the product

  • This can be an issue if there is an industry wide shortage issue or significant price changes of the component parts
  • As Apple also uses some custom components – New products launched use these custom components and these may only be available from a single supplier
  • There are advantages of this strategy however, disadvantages include significant supply and pricing risks due to its reliance on one or limited suppliers
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16
Q

Outsourcing - Advants, Disads

A

- Outsourcing involves external (outside) providers to perform business activities. Such as extenal manufactuers for goods.

More effective production.

  • Manufacturing, design, sourcing, logistics
  1. Simplification - reducing the number of activities a business has to perform
  2. Access to skills/resources lacking within the business
  3. Increased process capability (Mass-production facilities and robotic process automation)

HOWEVER

  1. Cost of outsourcing
  2. Communication and language – Outsourcers are often using English as their second language;
  3. Loss of control standards
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17
Q

Outsourcing - Advants, Disads CASESTUDY

A

Apple’s outsourcing of production to Foxconn and Pegatron has been highly effective in upholding the operations performance objectives for Apple.
• 94 production lines at each Foxconn manufacturing facility - 400 steps to assemble the iPhone, polishing, soldering, drilling and fitting screws.
• The facility can produce 500,000 iPhones a day, or roughly 350 a minute
• Apple saves US$300 per iPhone unit through the outsourcing of production, additionally, through the outsourcing of logistics to FedEx and UPS
• Apple has been able to freight iPhones at $0.50 per unit
• Dual supplier engagement of both Foxconn and Pegatron - leverage more competitive prices
• Quality & Dependability - Foxconn’s 96% manufacturing accuracy rate significantly assists with achieving these objectives

Disadvantages
•Apple requires its suppliers to adhere to their Suppliers Code of Conduct
•However Apple notes that material violations of the code could occur and can be a problem
•Apple has clear contractual arrangements (SLAs) in place regarding the required quality, delivery schedules and cost

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18
Q

Technology

A

- The application of science and knowledge that enables people to do new things or perform established tasks in new and better ways

A business may use established technology such as robotics & automated vehicles to undertake the transformation process

Established Technologies (CAD, Robotics)

  1. CAD Increases the accuracy and precision of production methods – Increasing qaulity – reduced wastage – COST & QUALITY.
  2. Robotics leads to a reduction of labour costs due to Capital Labor substitution – long term cost efficiencies – COST.

HOWEVER

  1. CAD requries High initial outlay → Negatively impacting S.T costs – COSTS
  2. Redundancy costs associated with employees who are replaced by Robotics → Impact staff morale and productivity

Administrative technology (Computers and software)

  1. Computers may Improve efficiency & productivity in the transformation process – improved lead times – SPEED
  2. Software Reduces defects – Warranty claims – Improved COSTs.

HOWEVER

  1. Time and cost of training or retraining employees – decreased productivity – SPEED & COSTS.
  2. Installation and set-up of new technology – Decreased efficiency – decreased lead times – SPEED.
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19
Q

Technology CASESTUDY

A

Foxconn ‘lights out’ factory in shenzhen is highly-automated with robots (Foxbots). deployed across the production line, reducing its reliance on\ human workers → Upfront initial costs, however → Long term cost efficient.
Foxconn reduced the staff in a single department by 60,000
due to the introduction of ‘FoxBots’ evidencing the potentially negative implication of technology on a business’ workforce

  • However, at apple Robotics and engineering replace repetitive tasks previously done by employees, and through training, enable our employees to focus on higher value-added elements in the manufacturing process, such as R&D and Quality control
  • 10.5 Billion on new tech such as, laser sutters, robotics and testing equipment at foxconn
  • Apple uses, liam and daisy to recycle products → reducing wastage → COST
20
Q

Inventory managemnt

A

- Refers to the storing of transformed resources waiting to be processed

  • Raw materials
  • Semifinshed and finished

HOLDING STOCK

  1. Adequate supply for production/sale
  2. Reduces lead times between order and delivery
  3. Ability to store stock - Benefit from volume aggregation
  4. If a particular product runs out, an alternative can be offered

HOWEVER

  1. ​COSTS - Storage, Insurance, Secruity, Theft, Spoilage.
  2. Risk and costs of obsolescence - if stock remians unsold
  3. funds tied up
21
Q

LIFO

A

The last goods purchased are also the first goods sold and therefore the cost of each unit sold is the last cost recorded

  • Product is NOT perishable or has a use-by-date.
  1. If price of inventory has increased → COGS overstated → profits understated → Pay less tax.
  2. An advantage of this method is that the GP measurement reflects recent costs.

HOWEVER

  1. In times of falling prices, LIFO overstates profits and maximises taxes.
22
Q

FIFO

A

Assumes that the first goods purchased are also the first goods sold and therefore the cost of each unit is sold in the first recorded.

  • Usually goods are perishable - Ensuring those goods sold are the oldest
    1. FIFO is more appealing to investors as net profit is usually higher, thus more dividends

HOWEVER

  1. If the price of inventory has increased - COGS would be understated - profits overstated - Paying more tax
23
Q

JIT

A

The exact amount of material inputs will arrive only as they are needed in the operation process.

More commonly used for perishable goods as products are made on demand

  1. Reduced operating costs as there are no expensive storing costs
  2. Wastage costs along with losses due to obsolescence are minimised
  3. Business able to store a wider range of goods as they store less of each product.

HOWEVER

  1. Supply chain disruptions may affect short term supply (Covid-19 shut down of manufacturing in China)
  2. Demand forecasts may be inaccurate → SPEED
24
Q

Inventory managment CASESTUDY

A

Apple effectively manages its inventory extremely well using FIFO (valuation of iinventory), FIFO for stock rotation (non-perishable) and JIT (managing stock).

Apple’s goal is to have a low inventory-on-hand ratio

Apple’s strategy has been to get products from the pallet to the shelf as fast as possible

Apple averages just 5.3 days worth of inventory on hand at any given time.

Approximately $6.6 billion stock on hand in 2021(Balance Sheet - CA)

Benchmark against Dell’s stock turnover = 10.2 days

Benchmark against Samsung stock turnovers every 21 days

What this means is that every 5.3 days, Apple need to replenish its inventory to prevent stockouts.

Apple is able to pull this off because it has invested so heavily in its supply chains and inventory management.

Challenges of Apple’s inventory management

Need to manage inventory for many iPhone models 11, SE, 12, 13, 13 Pro, 14, 14 Pro along with varying
models of iPad, AirPod, AirTag, Apple Watch, MacBook

Ensure it has sufficient stock for upcoming launches

Holding too much stock can be costly as it may become outdated in the rapidly changing market for
smartphones

25
Q

Quality management

A

Refers to those processes that a business undertakes to ensure consistency, reliability, safety, and fitness of the purpose of product.

  • Quality control
  • Quality assurance
  • Quality improvement
26
Q

Quality Control

A

- The use of inspections at various points in the production process
to check for problems and defects

Hiring supervisors to conduct inspections

  1. Ensure that customers purchase defect free product with minimal variance in final output → Customer satisfaction → QUALITY
  2. Ensures that products are fit for purpose and conform to high level of QUALITY

HOWEVER

  1. Cost of conducting inspections (e.g. purchasing equipment and/or increase in human labour)
  2. May increase lead times and bottlenecks

Use of Technology (X-rays/photographs)

  1. X-rays and infrared technology can be beneficial in detecting defects → reduce warranty claims and repair/replace/refund COST
  2. More efficiency shown compared to employees → SPEED

HOWEVER

  1. Cost of production may increase → marketing may increase the price of their product (price method: cost-based)
  2. Maintenace May slow the production process - SPEED
27
Q

Quality control CASE STUDY

A

Since the incident of the scratched iPhone 5s, which cost Apple $1.8
billion, Apple has invested significantly into quality control methods to ensure their manufacturer, Foxconn, complies with quality control standards.

  • QC is conducted at various stages of the component production, including before shipment.

• Foxconn has invested into automated X-Ray machines into its assembly
lines to carry out quality inspections and reduce defects.

  • Not only does Apple monitor Foxconn and Pegatron, it monitors their suppliers, stipulating what materials to use.

• In some cases Apple will install its own machine which the component supplier is obliged to use to ensure quality standards are met.

  • Even though this has increased the cost of production for Apple and Foxconn, it has ultimately reduced the number of warranty claims and amount of negative publicity, ultimately assisting Apple with achieving high sales volumes (approx. 242 million iPhones were sold in 2021).

• There’s never one component manufacturer – Apple makes sure it can switch to alternatives as a bargaining point for quality and price.

28
Q

Quality Assurance

A

- Involves the use of a system to ensure that set standards are achieved in production.

Becoming International Standards Organisation (ISO) certified

  1. The businesses which comply with these requirements to enhance their domestic and international competitiveness (Comp awareness)
  2. Provides customers with a level of assurance that the business engages in ‘quality of design’ principles → increased customer satisfaction

HOWEVER

  1. When applying for ISO accreditation, the business may have to upgrade existing technologies → COST
  2. ISO certifications are not an indication of the quality of the business or product, they certify a businesses processes within operations meet a certain standard.

Put systems in place to ensure errors do not occur

  1. Reduced levels of variance in the final output → increased customer satisfaction
  2. Decreases defects → Warranty claims →COST/QUALITY

HOWEVER

  1. Production may need to stop to enable the installation of the new technology or to rearrange the process layout - SPEED
  2. If an employee is not expirienced enough, quality will be hindered.
29
Q

Quality Assurance CASE STUDY

A
  • Apple only use suppliers that have ISO compliance in their production process
    • Ensures there is a greater focus on quality management to assure consumers of Apple’s quality outputs.
    • Reduction in wastage from poor quality inputs
    • Assisted Apple with the sale of approx. 242 million iPhones in 2021
30
Q

Quality Improvement

A

- Refers to the ongoing commitment by the business to implement processes that ensure consistency, reliability, safety and fit for purpose.

  • Continuous improvement - Ongoing commitment to improving a business’ goods/service Known as Kaizen. Six Sigma - Seeks to identify and remove cause of problems in the operations process, such as….

Monthly training programs focused on improvment

  1. Improved quality in design
  2. Decreased levels of defects

HOWEVER

  1. Time involved with improving the operations processes
  2. Cost involved with training

Analysing and benchmarking performance study

  1. Decreased wastage and improved dependability - COST
  2. Employee involvement will be beneficial towards new ideas

HOWEVER

1.

31
Q

Quality Improvement CASESTUDY

A
  • Apple has invested heavily into training employees to improve the customer service provided, leading to continuous improvement in the consumer’s experience with Apple – Genius Training Student Workbook
  • Evident in 92% of Apple employees being trained in “Retail Fundamentals” → ensure customer satisfaction is maintained
  • Focus on continuous improvement in employee skills
  • Assisted Apple in creating brand loyalty → thus, a competitive advantage

• Also evident at Foxconn - $20 million investment into workforce training funds in 2017 → improve the skills of employees focusing on long-term development and reduced wastage/defects

  • In 2019, Foxconn invested $5.5m setting up two training centres in India to train approx. 100,000 employees over 3 years.

• Enabled Foxconn to reduce overall costs (wastage/defects; warranty claims)

32
Q

Overcoming R to C - Purchasing new equipment

A

- Purchasing new equipment

  • Machinery, robotics, assembly lines
  • Purchase of equipment is known as capital costs

Why would the business change?

  • Improved processing flexibility
  • Improved processing speeds and shorter lead times
  • Higher quality
  • Reduced wastage.

IMPLICATIONS

  • Leasing of equipment is an option to reduce upfront costs.
33
Q

Overcoming R to C - Redundancy payments

A

Refers to a loss of work due to job skills that are no longer required or relevant to the workplace.

Redundancy payments can be quite high due to:

  • Length of employment
  • Level of pay
  • Amount of unused leave
  • Any outstanding wages
34
Q

Overcoming R to C - Retraining

A

- Refers to teaching an employee new skills to enable them to do a different job.

Retraining might be needed to acquire new skills if

  • Job roles change
  • Reorganisation of the business’s internal hierarchy
  • Acquisition of technology
35
Q

Overcoming R to C - Reorgansing Plant Layout

A

Reorganising plant layout refers to rearranging machines, processing equipment and service departments to achieve the greatest co-ordination and efficiency in a plant.

Significant costs associated with reorganising the plant

  • Transportation costs
  • Costs of bringing power to the new plant and equipment
  • Downtime (Maintanence) when moving from the old equipment to new equipment
  • Loss of productivity whilst staff get accustomed to the new layout
36
Q

Overcoming R to C - Inertia

A

- Inertia describes a psychological resistance to change.

  • A feeling of uncertainty or fear of the unknown, when change is imminent or pressing, can lead people to resist.
  • Occurs when people fear their job prospects are threatened or who find technology and equipment intimidating.

IMPLICATIONS

  • Hard to quantify (in terms of cost)
  • It can lead to slower change management which may impact the business → Competitive ad - SPEED
37
Q

Strats to overcome R to C

A

• Managers need to be proactive rather than reactive to change

For change to be successful, managers must consider:

  1. The pace of change
  2. The overall impact of change
  3. Encouraging a workplace culture of employee participation
  • Identify the source(s) of change and assess whether there is a need to accommodate change through adjustments to business processes.
  • Lower the resistance to change communicating with employees about the need for change
  • May need to use change agents (somebody who initiates change) or management consultants
  • May need to apply change models - Kurt Lewin’s unfreeze - change - refreeze model, John Kotter’s 8 Step model
38
Q

Overcoming R to C CASESTUDY

A
  • In the 1990s Apple found itself struggling in the high competitive technology market (external influence)

• Larger companies like Windows were dominating the market, leaving Apple with little market share.

  • In 1997, Apple had 40 “different” products (internal influence)

• Many product problems (internal influence)

  • Licensed the MAC OS to other computer companies who produced cheap MAC clones.
  • Apple market share fell from 10% to 3%.
  • Apple had a significantly compelling need to institute change, being only 90 days from bankruptcy in 1996
39
Q

Global factors

A

- Global factors are concerned with finding ways to improve the competitive position of the business in a global environment.

  • Global sourcing
  • Economies of scale
  • Research and development
  • Scanning and learning
40
Q

Global factors - Global Sourcing

A

- Refers to businesses purchasing supplies or services without being constrained by location.

Involves a business creating a global web of suppliers for materials.

Factors influencing choice involve, Determining volume required, Quality of inputs required, & the Cost of supplier/s.

  1. Access to greater volume of inputs → Economies of scale
  2. Access to higher quality inputs → QUALITY
  3. Access to unique inputs → G/S Diff → Comp Ad.

HOWEVER

  1. Unfavourable exchange rate movements → hinder cost saving → Use of derivatives.
  2. Quality concerns → Poor QM → Quality
  3. Transportation delays with inputs → SPEED (Covid)
41
Q

Global sourcing CASESTUDY

A

Used by Apple to reduce their expenses (Maintain a competitive advantage - link to cost leadership)

  • Approximately 200 suppliers for materials, manufacturing, and assembly of products

• Limited availability of certain raw materials such as tin has required global sourcing

  • Key component in the manufacturing of the iPhone and iPad (soldering circuit boards).

• Apple orders many of the components from global suppliers and then sells them to Foxconn or Pegatron to build the product

  • Vast majority of suppliers are located in Asia in close proximity to outsourcing companies → reduced transport time and costs (speed and cost objectives)

• While many components are bought from multiple sources, Apple is reliant on some suppliers as a single source of their component part

42
Q

Economies of Scale

A

- Refers to cost advantages that can be gained by producing on a larger scale.

  • Becomes a global factor when selling to global markets and there is large scale production
  • Cost savings are derived from spreading fixed costs over increased output → Enables businesses to lower their per unit costs (links to cost and profitability)
  1. Buying in bulk globally → Reduce per unit costs → Spread fixed costs over a large amount of items → Comp Ad → Cost leadership

HOWEVER

  1. Diseconomies of scale can occur
43
Q

Economies of scale CASESTUDY

A

2021 iPhones sales = Approx. 242 million
• Large sales volume allows Apple to take advantage of economies of scale
• Created cost leadership for Apple → assisting with profitability
• Allowed Apple to use higher quality inputs due to the lower per unit cost → assisted with creating further competitive advantages over competitors such as Samsung.

44
Q

R&D

A

- Refers to the work directed towards the innovation, introduction and improvement of products and processes.

  • Links to New Product Design and Development - Consistant with innovative creation and distribtuion.
  1. Governments sometimes offer tax incentives and grants to encourage businesses to undertake R&D
  2. Creation and use of leading edge technologies → superior product design product and/or innovative new manufacturing processes → competitive advantage
  3. New product design and development → improve product quality → reduce defects and wastage → improve environmental sustainability → expand product range → increase variety → assist marketing with increasing sales

HOWEVER

  1. Costly and time consuming – requires significant and sustained investment
  2. Not all R&D can be commercialised
  3. Requires skilled, expert staff proactively working on new ideas, processes (higher costs as a result)
45
Q

R&D CASESTUDY

A

In 2021, Apple spent $22b on R&D, 6% of revenue.
• Increase from $11.5b in 2017
• → Improve product quality e.g. iPhone 13 has ceramic shield and improved camera
• → New services e.g. Apple TV+
• Contributes to Apple’s 2021 revenue of $366b
• R&D is a competitive advantage for Apple as it launches innovative consumer electronics products and a key component of their business strategy.
• Significant investment in R&D of AI, AR and self driving car technologies

Aluminium is a key material in many of Apple’s most popular products, and for more than 130 years, it’s been produced the same way.
• However, aluminium giants Alcoa Corporation and Rio Tinto Aluminium
announced a joint venture to commercialise patented technology that eliminates direct greenhouse gas emissions from the traditional smelting process, a key step in aluminium production. This is a revolutionary advancement in the manufacturing of one of the world’s most widely used metals.
• As part of Apple’s commitment to reducing the environmental impact of its products through innovation, the company helped accelerate the development of this technology.
• Apple has partnered with both aluminium companies, and the Governments
of Canada and Quebec, contributing $13m million to fund future R&D.
• Apple in conjunction with the JV partners …designed a completely new
process that replaces that carbon with an advanced conductive material, and
instead of carbon dioxide, it releases oxygen. The potential environmental impact
was significant.

46
Q

Scanning and Learning

A

- Refers to the use of observation strategies by a business to find and subsequently adopt best practice operations strategies.

  • Scan the global environment and learn from best practice of businesses around the world
  • Influenced by post-WWII industrial success of Japanese businesses which emphasized and quality and continue improvement in all areas of the business (Kaizen)
  • Can include analysis and benchmarking to leading businesses and competitors across the globe

Management journals, conferences.
• Staff members and managers

  1. Improve operations processes
  2. Adapt to change
  3. Identify trends
  4. Opportunities to learn different approaches
  5. Opportunities to improve performance objectives

HOWEVER

  1. Businesses may not want to share their approaches to operations
  2. Ability to scan and learn from other businesses may be limited in certain industries (i.e. number of competitors, type of good/service being produced, etc.)
  3. Certain strategies might not be appropriate for the business (i.e. due to size, industry, location, etc.)
47
Q

Scanning & Learning CASESTUDY

A
  • Apple regularly scans a range of different technology industries to learn the best practice for manufacturing technology based goods

• It regularly compares their performance against key competitors such as
Microsoft and Samsung to see if their operations process is ‘best
practice’.

• Apple regularly have issues with imitating products and the protection of
intellectual property in the smartphone market.

• Being aware and learning from/about competitors assists Apple with
maintaining a competitive advantage