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Detailed Operations Business Studies Notes for HSC
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OPERATIONS NOTESOperations involves the process of converting inputs into outputs
role of operations management
• strategic role of operations management – cost leadership, good/service differentiation
• goods and/or services in different industries
• interdependence with other key business functions
Strategic role of operations management
Involves the creation of value via value adding, being the intangible benefits of the product.
As operations is the cost centra, a strategic role of OM is to manage costs.
Strategies used to gain a competitive advantage include:
i. Cost leadership
Businesses aim to be the lowest cost-supplier in the industry. Lower cost can be obtained
from economies of scale in:
- Production and distribution
- Access to cheaper raw materials
- Using technology
Advantage: Businesses can price products below competitors, hence minimising profits.
Disadvantage: Could lead to lower positioning of products (perceived lower quality)
ii. Product differentiation
Businesses believe this will lead to a competitive advantage, by distinguishing themselves
from competitors.
This can be done via:
- Better quality
- Faster lead times
- Customisation
The main avenues for product differentiation are:
- Price
- Quality
Goods and/or services in different industries
i. Standardised goods- uniform, mass produced goods. They meet a predetermined quality
and are produced with a production focus.
ii. Customised goods- goods that can be varied according to the needs of consumers with a
market focus.
iii. Perishable goods- goods that require high quality standards, safety and cleanliness. They
also have shorter shelf-life.
iv. Non-perishable goods- goods that don’t have an expiry date and bring up issues of
inventory management.
v. Intermediate goods- Goods that are completed but can be furthered processed.
vi. Finished goods- Goods that have gone through a transformation process and are ready for
sale.
, OPERATIONS NOTES
Interdependence with other KBFs
Interdependence refers to the mutual reliance between two more KBFs.
Operations and marketing
Cause: Through market research, a strong demand for a product is found.
Effect: Operations provide cost of production for marketing to determine price.
Operations and finance
Cause: Finance will create budgets and make funds available to purchase capital and inputs.
Effect: Operations uses funds to buy capital and inputs in order to increase long-term
operational efficiency.
Operations and HR
Cause: HR will ensure skilled employees are employed and are available for operations to
run effectively.
Effect: Employees are properly trained to undertake their tasks in the production process.
Changes to operations
- Changes in cost production can lead to higher prices (marketing)
- Acquire, retrain or make redundant employees (HR)
- Purchase of new inputs and capital (finance)
, OPERATIONS NOTES
influences
• globalisation, technology, quality expectations, cost-based competition, government policies, legal
regulation, environmental sustainability
• corporate social responsibility
– the difference between legal compliance and ethical responsibility
– environmental sustainability and social responsibility
Globalisation
Globalisation refers to the process in which the world is becoming increasingly
interconnected as a result of increased trade and improvement of technology.
Businesses are influenced by location, allowing for a reduction in costs as businesses can
locate closer to suppliers where costs are lower.
As such, Australian businesses have had opportunities to expand into overseas markets.
The impact of globalisation is twofold:
- Opportunity to reduce costs by buying cheaper raw materials through the
establishment of a global supply chain
- There’s access to global markets to sell outputs of operations
A further influence is that funds can be borrowed from foreign markets, due to the lower
interest rates.
Another influence is the ease of access into a country if two countries have a bilateral trade
agreement.
Technology
Technology refers to the equipment and knowledge that are available to help a business
preform certain functions or make products.
Benefits of technology include; new developed methods for improved speed at low costs,
better quality outputs from reduced human error and saved time from reduced waste.
- These all lead to long-term operational efficiency
Three types of technology include:
- Robotics
- Computer Aided Design (CAD)
- Computer Aided Manufacturing (CAM)
i. Robotics
Programmable machines with sensors which can detect changes in the environment.
For manufacturing, robotics can increase operational efficiency by working without breaks
and performing tasks more effectively than humans.
However, the high implementation costs often limit its availability to large businesses.
ii. CAD
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