Business Studies Notes

Role of operations management
Effective operations management adds value to a business by:
• Increasing productivity
• Reducing costs
• Improving quality
- This achieves a strategic competitive advantage through lower costs and/or differentiated goods.
- Role of the operations manager will require skills such as communication, decision-making, delegating and complex problem solving.

Strategic role of operations management
- A strategic decision affects the business in the long-term
- Strategic goals improve productivity, efficiency and quality of outputs
- Long-term decisions will cover three broad areas:
• Planning production and delivery
• Controls to manage quality
• Improving operations

o Cost leadership
- Business aims to be the lowest cost manufacturer within its industry
- Products are basic, fewer features, lower quality and low cost packaging
- Small profit-margin, high volume of sales
- Low costs can be achieved through:
• Outsourcing
• Economies of scale in production and distribution
• Access to cheaper raw materials
• Inventing an innovative method of production
- Achieving cost leadership would allow the business to be an above average performer with healthy sales and profits
- Benefits of cost leadership can be maintained through effective marketing, finance and human resources strategies
- Disadvantages:
• Competitors can use the same strategy
• Consumer preferences change and the market for a ‘low-cost, low quality’ product shrinks
• Consumers may think they are not environmentally sustainable

o Good/Service Differentiation
- Sustainable advantage
- A product may achieve a grater market share because it is uniquely different to its competitors
- Differentiation can be achieved through:
• Better quality
• Faster delivery
• Custom-designed products
- E.g. of differentiation: touch