O PERATIONAL S TRATEGIES U NDERSTANDING O PERATIONAL O BJECTIVES “Sometimes you have to pay a high price for an opportunity.” Rupert Murdoch “Since the worker has been reduced to a machine, the machine can confront him as a competitor.” Karl Marx BUSS3.11 Understanding Operational Objectives

U NDERSTANDING O PERATIONAL O BJECTIVES I N THIS TOPIC YOU WILL LEARN ABOUT : Operational Objectives Assessing internal and external influences on operational objectives BUSS3.11 Understanding Operational Objectives

OPERATIONAL OBJECTIVES BUSS3.11 Understanding Operational Objectives Corporate Objectives Functional Objectives Operational Objectives The targets a business sets in order to produce goods/services in the most effective way

OPERATIONAL OBJECTIVES Operational Objectives looks at the aims of a business in producing goods and providing services. It will include the following areas: Meeting Quality Cost and volume targets Innovation Efficiency (including time) Environmental targets BUSS3.11 Understanding Operational Objectives

O PERATIONAL O BJECTIVES A N EXAMPLE : H EWETT P ACKARD To provide products, services and solutions of the highest quality and deliver more value to our customers that earns their respect and loyalty. Underlying beliefs supporting this objective: Our continued success is dependent on increasing the loyalty of our customers. Listening attentively to customers to truly understands their needs, then delivering solutions that translate into customer success is essential to earn customer loyalty. Competitive total cost of ownership, quality, inventiveness, and the way we do business drives customer loyalty. Source: BUSS3.11 Understanding Operational Objectives

Operational Objectives - Meeting Quality, Cost and Volume Targets BUSS3.11 Understanding Operational Objectives RECAP AS Quality can be defined as the ability of a product or service to meet customers’ expectations. This was looked at in depth in 2.9. The operational targets of quality, cost (unit cost) and volume (capacity utilisation) were looked at in 2.8. Operational targets relate to a number of measures of efficiency: Unit Cost The cost of each individual product or service supplied Quality Quality of raw materials, processes, output and customer service Capacity Utilisation The extent to which resources are being used (utilised) to their full potential Remember – quality is an important factor in meeting customer expectations

Operational Objectives - Innovation Innovation is the development of an idea into a new product or process. The entrepreneur invests time and money in order to make a profit. This could be through: Product innovation - changing a product that already exists or developing an invention into a brand new product Process innovation - changing a process of production that already exists or putting into practice a brand new production process Innovation is covered in depth in 3.13 BUSS3.11 Understanding Operational Objectives

Operational Objectives - Efficiency and Environmental Targets Large businesses set targets in order to be more efficient by reducing inputs to the production process whilst attempting to maximise output. Lean production techniques will be used in order to meet these targets. See Large firms are also more aware of their obligations to the environment – whether for legal reasons or other factors. Environmental targets can be used to improve the image of the firm and to reduce costs. This will be covered in more depth in BUSS4. The hotel industry faces demanding standards in order to meet the legal requirements of its operations! BUSS3.11 Understanding Operational Objectives

Assessing internal and external influences on operational objectives – Competitors’ Performance BUSS3.11Understanding Operational Objectives A firm will have to take into account the performance of its competitors. This may take different forms: Benchmarking - identifying best practice from other firms and adopting elements of this in the firm’s performance Environment targets - setting targets to improve performance e.g. wastage Innovation - in order to differentiate from the competition You will need access to the internet to watch this clip

Assessing internal and external influences on operational objectives – Resources Available BUSS3.11Understanding Operational Objectives A firm will have to take into account the resources that it has available. This may take different forms: Finance - Budgeting will be particularly important in a competitive environment People - the skills of the workforce and how they are applied are fundamental to a firm Effective marketing – important in the service sector where customers are persuaded to buy Capital – a capital intensive approach will improve speed and quality but will mean high initial costs

Assessing internal and external influences on operational objectives – Nature of the Product BUSS3.11Understanding Operational Objectives A firm will have to take into account the nature of the product: Target market – niche might require specialist operations management such as expertise in that field; mass might lead to highly automated, capital intensive operations Regulatory environment – legal requirements will heavily impact on operations e.g. waste Geographical – location of industry and the closeness of the available factors of production e.g. Sheffield Steel or financial expertise in the City of London Certain products can even obtain Government grants!

Assessing internal and external influences on operational objectives – Demand BUSS3.11Understanding Operational Objectives A firm will have to take into account demand: Price elasticity of demand – elasticity will affect the revenue and a firm can take this into account when setting an operations budget for the product – the more inelastic the product the higher the budget is likely to be Income elasticity of demand – if the product is a luxury good it will be income elastic and affected by the position of the economy in the business cycle. Necessities will be income inelastic and the operations budget is less likely to be cut in recession (or raised in a boom).

A CTIVITY - O PERATIONAL O BJECTIVES AND OTHER F UNCTIONAL A REAS Operational Objectives Scale and resource mix InnovationLocationLean Production Financial Objectives HR Objectives Marketing Objectives BUSS3.11 Understanding Financial Objectives Print this slide onto A4 and complete to explain the possible links between each operational objective and other functional objectives.