HSC Business Studies Notes PDF

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CHRISTOPHER KENDIRJIAN

HSC BUSINESS STUDIES NOTES: TOPIC 1: Operations Role of Operations:  Strategic role of operations- Cost Leadership, Good/service differentiation  The strategic role affects all key business functions and is aimed at two aspects: minimising costs through cost leadership and differentiating products from competitors  Cost leadership is aimed at having the lowest costs and to be the most price-competitive in the market business should still be profitable and overall product quality should not be compromised as this can increase costs in the long term (customer complaints, warranty issues, wastage through damaged products)  A business can be a cost leader by taking advantage of economies of scale- these are cost advantages that can be created because of an increase in scale of business operations, meaning the business can purchase lower cost per unit of input. Efficiencies will be created from improved use of technology  Good/service differentiation develops product characteristics that are distinguishable from competitors as to achieve a larger market share. Goods can be differentiated by varying product features, quality and augmented features. Services are differentiated through varying time spent, level of expertise, qualifications and experiences, quality of materials/technology used  Cross branding can be used as a means of differentiation as it adds value to products by offering customers added benefits e.g. Woolworths-Caltex alliance Case studies  QANTAS: cost leadership- standardisation minimises costs, using technology eliminates the need for staff to interface with customers  Differentiation- Includes comfort based features such as sky beds, special menus, lounges, online check  CRUMPLER: differentiates its products through better design, quality, variety and incorporation of new technology  Goods/services in different industries:  Standardised goods are mass produced usually on an assembly line. They are uniform in quality and meet a predetermined level of quality production focused  Customised goods are those that vary according to the needs and wants of the customers market focused  The choice to customise or standardise is strategic as it requires cross-functional interactions with marketing, finance and HR

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Characteristics Tangibility and perishability Customisation Ownership

Time between production and consumption Determination of value

Goods Tangible and some can be perishable e.g. fruit Tend to be standardised but can be customised Can be owned and this ownership is transferrable through sale of ownership Can have long time

Can be determined through costing all inputs and adding a margin. Inputs can be easily determined

Services Intangible and only exist when being performed Generally customised Cannot be owned

Production and consumption of service is simultaneous Value is subjective and depends on market. Value increases when provider gives high levels of skill, longer time, high levels of education and experience and high levels of expertise

 Interdependence with other key business functions:  Operations is interdependent with marketing as marketing is concerned with product design, sales and meeting needs of consumers. Operations needs the market research and designs from marketing in order to translate this into products that meet customers’ needs and wants  Finance provides operations with funds to produce products while operations must ensure quality of output is high in order to generate sales and so the funds can be put back into the finance department  Because of the changing nature of work in modern society, skills and qualities sought from employees also change. Operations rely on employees to effectively interact with customers to generate sales and to also gain info on the market. HR relies on the quality of output produced by OP in order to effectively sell products also rely on OP for the provision of jobs Case studies  QANTAS: operations relies on HR to effectively communicate with customers in order to establish positive relationships with customers to ensure repeat sales and customer loyalty whilst HR require the jobs to be performed from OP e.g. plane servicing technicians

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Influences on Operations: 

Globalisation, technology, quality expectations, cost-based competition, government policies, legal regulation, environmental sustainability

Globalisation:  removal of trade barriers between nations  high degree of transfer of capital, labour, resources and technology between nations  global customers want standardised products, therefore OP must be structured around this large businesses orient what they produce and how they produce it towards meeting the needs of global consumers  businesses should increase the rate of global outsourcing in order to create cost advantages over competitors  the development of factories in low-wage countries means businesses are increasing their outsourcing rate  logistics and inventory management processes must be oriented towards global markets  the use of manufacturing plants for the production of goods means that businesses can achieve economies of scale advantages  supply chain: the range of suppliers a business has for global businesses, the range of suppliers creates a network called the global web Technology:  technology is the design, construction and/or application of innovative devices, methods and machinery upon operations processes  technology influences operations as it allows efficiencies to be created in the operations processes by increasing the speed of production, improving product quality and reducing costs due to wastage  Businesses are influenced to adopt modern technologies in order to attain a competitive advantage over competitors Quality Expectations:  How well designed, made and functional goods are influences OP as it shapes the way inputs are used to transform them into outputs through value adding  Customers’ expectations of quality will shape the way operations are undergone as OP managers must ensure these expectations are met in the final product quality expectations determine the design, creation and deliverance of products to customers  OP must follow specific standards or minimum levels of excellence Cost-based competition:  Businesses determine their break-even point and then apply strategies to create cost advantages over competitors  Competing with competitors in relation to price will influence operations as OP managers would then have to ensure a cost leadership approach is applied so that fixed and variable costs are minimised and the business becomes price competitive

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Government policies:  Policies such as taxation rates, required materials handling practices, WHS, training, public health, environmental etc. can influence OP primarily through the costs associated with following these policies  Government policies can also lead to new opportunities, therefore OP managers must be aware of current governmental policies Legal regulation:  Compliance costs are expenses associated with meeting the requirements of the law  Many laws influence operations particularly relating to labour and labour management, as well as environment and public health WHS, training and development, fair work and anti-discrimination laws, environmental protection and public health Environmental sustainability:  Business operations should be shaped around practices that consume resources today without compromising access to those resources for future generations  E.g. business operations must be structured around processes that minimise their carbon footprint  Rise in climate change influences businesses to reduce and minimise waste, recycle water, glass, paper and metals and reduce carbon footprint

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Corporate social responsibility: The difference between legal compliance and ethical responsibility Environmental sustainability and social responsibility CSR refers to the open and accountable business actions based on respect for people, community and the environment. It is more than just complying with the laws and regulations Legal compliance are the requirements that businesses follow the prescribed standards of the law whereas ethical responsibility sees businesses meeting legal obligations and taking it further by following the intentions and ‘spirit’ of the law Environmental sustainability is emphasised in current society and businesses are required to protect the environment through policies such as conservation, recycling and restoration Social responsibility refers to a business’s management of the social, environmental, political and human consequences of its actions. This influences operations because operations processes may cease if customers choose to stop buying its products due to the business exploiting employees, accepting bribes or polluting the environment Customers will reward socially responsible businesses by purchasing their products

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Case studies  QANTAS - Globalisation- developing new airlines overseas decreases costs and improves efficiency in production - Technology- new planes and new operational processes influences operations due to need for retraining= increased costs - Government- carbon tax caused an increase in costs for Qantas and a decrease in profit - Environmental- purchasing new, environmentally sensitive aircrafts - Social responsibility- health surveillance program- workplace conditions monitored   CRUMPLER: - Globalisation- Crumpler can outsource its manufacturing and now has a global supply chain. Operations costs have reduced as the other countries had lower costing inputs and labour. Globalisation has allowed Crumpler to sell to more countries such as New York and Singapore - Technology- CAD &CAM was introduced allowing efficiency to be increased. Headquarters started using email in its communication to allow faster transmission of messages within the company. Three dimensional designing software allowed them to create new products virtually and, it could be viewed from a few perspectives. - Quality expectations- Crumpler knew that consumers would use the bags to hold precious technology so, the highest quality was needed. Crumpler bags are water resistant due to the nylon shell and the inner padding. Customers expect quality from such a higher price. - Social responsibility and environmental sustainability: quality of bags are high so low level of repairs is seen meaning less resources are consumed by Crumpler. They sub-contract factories when labour standards are low they have an independent monitor to maintain and improve working conditions and be socially responsible

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Processes of Operations: Inputs- transformed (materials, information, customers) and transforming resources (HR, facilities)  Inputs are resources used in the transformation process 

TRANSFORMED RESOURCES: Materials: -

Basic elements used in production process- raw materials and intermediate goods Raw materials are essential substances in their unprocessed state- come from mines, forests, oceans or recycled waste Intermediate goods are manufactured and used in further manufacturing or processing e.g. steel doors used in assembly of cars in Toyota

Information: -

Knowledge gained from research, investigation and instruction increased understanding Info can be internal and external and acts as transformed resource when it is used to inform how inputs are used, where they are drawn from, which suppliers are available External info includes market reports, stats from industry observers and industry bodies, Gov. stats from ABS, media reports, comparative studies Internal info (within business) includes financial reports, quality reports, internal KPI’s such as lead times, inventory turnover rates and production data

Customers: -

Customers are transformed when their choices and preferences shape quality, design and construction of products Customer oriented businesses take the preferences and interests of consumers as the starting point to production processes

TRANSFORMING RESOURCES:

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Inputs that carry out the transformation process enable the change and value adding to occur

Human Resources: -

Staff are qualified, hardworking and disciplined and bring productivity and efficiency to operations Employees carry out work duties and responsibilities which adds value in transformation process Employees combine and coordinate other resources e.g. machinery and technology, raw materials and finance to produce goods and services

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Facilities: The plant (factory or office) and machinery used in OP processes which transform the inputs into outputs Modern technology, well-designed and labour friendly will be reflective of productive operations processes

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Case studies  QANTAS Transformed resources:

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Materials- fuel + paper

Information- statistics + transactions - Customers – customers are moved Transforming resources: - Human Resources- employees- cabin crew and flight attendants - Facilities- terminal buildings + holdings  CRUMPLER: Transformed resources: - Materials: The key material inputs are heavy-duty rip stop nylon and thread to construct the bags. Crumplers’ bags have a water-resistant 900 denier shell. - A nylon rip-stop nylon, which is super strong, lightweight, durable and resistant to fraying, tearing and ripping. - Information: Information from a parachute manufacturer enabled the business to start new stitching methods that added strength to the bags. Extensive data for the design specifications for every model of bag ever produced by Crumpler is kept in accessible files. This allows models to be edited and changed quickly without delay, saving time and mistakes. - Customers: Crumpler encourages feedback from its customers. They monitor blogs and message boards to see demands for new products and to improve existing ones.

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Transformation processes: The influence of volume, variety, variation in demand and visibility (customer contact) Sequencing and scheduling- Gant charts, critical path analysis Technology, task design, process layout Monitoring, control and improvement Transformation is the conversion of inputs into outputs e.g. Sony takes plastic, metal, glass and electronic parts and transforms them through design, manufacturing and assembly into electronic products Volume refers to how much of a product is made. Businesses must quickly adjust the volume produced in relation to changes in demand. This responsiveness to changes in volume effectively manages lead times (the time taken for an order to be fulfilled) Influence of Variety refers to the range of products/services a business offers. Greater variety, the more OP processes needed to allow for variation. Mix flexibility is the product range or variety of choice Influence of Variation in demand: increase in demand requires more inputs from suppliers, increased HR, increased energy use and increased use of machinery and tech. However businesses may not be able to meet these required changes. Decrease in demand requires operational flexibility (staff working hours may need reducing, production may need to slow to avoid inventory build-up) Influence of Visibility (customer contact) refers to customer preferences shaping what a business makes. Higher customer contact influences greatly on OP because it means the business would need to integrate high levels of customisation. Direct contact= customer feedback through surveys, interviews, warranty claims. Indirect contact= review of sales data gives indication of customer preferences.

Sequencing and scheduling: 

Sequencing is the order in which activities in OP processes occur and Scheduling is the length of time activities take in the OP processes

Gant charts: -

Outlines activities to be performed, order in which to perform and how long each will take They allow manager to plan steps needed to complete a task and to specify time required for each task They make it easy to monitor actual progress against planned activities

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Critical Path analysis: -

Scheduling method showing what tasks needed to be done, how long they’ll take and the order necessary to complete them It shows the shortest length of time it takes to complete all tasks in operations processes Allows managers to see what needs to be done and how long it will take with this info a business can determine order to perform tasks and see which tasks can be done simultaneously

Overall, sequencing and scheduling gives direction and organisation to OP processes as well as providing a means of control in order to meet the objectives of the strategic plan Technology    

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Technology involves the use of machinery and systems that enable OP processes to be more efficient and effective In manufacturing sector, tech can be used to shorten processes and enable fuller utilisation of raw materials operations are more cost-effective In services sector, office and communications tech has enabled markets to open up Office technology includes computers, telephones, internet modems. These allow work to be performed quicker- greater range of tasks can be done- also allow workers to perform jobs at greater distances from workplace telecommunications through emails etc. Manufacturing technology include CAD and CAM and robotics. Robotics allows a degree of precision and accuracy that can’t be achieved through human labour. Robotics are very costly and can be unaffordable for some businesses CAD allows businesses to create product designs from a series of input parameters. Generates 3-Dimensional diagrams assisting both designer and managers to visualise what will be produced  costs can be quantified, high speed means easy to customise designs CAM allows manufacturing processes to be computer controlled increase precision and accuracy in production

Task design:  Task design involves classifying job activities in ways that make it easy for an employee to successfully perform and complete tasks  A skills audit is a formal process used to determine the required level of skills or skill shortfalls needed to perform transformation processes

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Process layout:  

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Process layout is the arrangement of equipment, machinery and staff within the facility so that equipment are grouped together by the function they perform Considering the process layout ensures enough physical space is available, production equipment are used effectively, appropriate tech is used, efficient flow of the good or service in transformation and safe work environment Fixed position layout: product is manufactured and remains in the same location due to its size and weight e.g. bridges employees and equipment come to the product Office layout: organised in workstations with each having access to computers, phone and close access to printers Product layout: equipment arranged relating to the sequence of tasks performed in manufacturing a product e.g. motor vehicle assembly

Monitoring, Control and improvement: Monitoring - Measuring actual performance against planned performance - Using KPI’s- predetermined variables that are measured so that appropriate controls to OP processes can be made - KPI’s allow for the assessing of performance against targets - KPI’s include: lead times, inventory turnover, defect rates, IT and maintenance costs

Control - KPI’s are assessed, judged against set targ...