Recap Chapter 1 & 2

CHAPTER 1

The 3 Basic Functions of Business Organizations Operations Finance Marketing Organization

Operations Function Inputs Land Labor Capital Materials Information Inputs Land Labor Capital Materials Information Outputs Goods Services Outputs Goods Services Transformation/ Conversion Process Transformation/ Conversion Process Control Measurement and Feedback Measurement and Feedback Measurement and Feedback Value-Added Feedback = measurements taken at various points in the transformation process Control = The comparison of feedback against previously established standards to determine if corrective action is needed.

Supply and Demand Supply Demand > > Supply Demand < < Supply Demand = = Wasteful Costly Wasteful Costly Opportunity Loss Customer Dissatisfaction Opportunity Loss Customer Dissatisfaction Ideal Operations & Supply Chains Operations & Supply Chains Sales & Marketing

Role of the Operations Manager Recap: – Operations: The part of a business organization that is responsible for producing goods or services – Operations management: The management of systems or processes that create goods and/or provide services A primary function of the operations manager is to guide the system by decision making. – System Design Decisions – System Operation Decisions

Key Issues For Today’s Business Operations Economic conditions Management of technology (Innovating) – The Internet, e-commerce, e-business Competing in a global economy – Globalization, outsourcing Quality Problems Risk Management

CHAPTER 2

Competitiveness Product and service design Cost Location Quality Quick response Flexibility Inventory management Supply chain management Service Managers and workers

Hierarchical Planning and Decision Making Mission Goals Organizational Strategies Functional Goals Finance Strategies Marketing Strategies Operations Strategies Tactics Operating procedures

Porter’s Five Forces Model SUPPLIER POWER Supplier concentration Importance of volume to supplier Differentiation of inputs Impact of inputs on cost or differentiation Switching costs of firms in the industry Presence of substitute inputs Threat of forward integration Cost relative to total purchases in industry THREAT OF NEW ENTRANTS Barriers to Entry Absolute cost advantages Proprietary learning curve Access to inputs Government policy Economies of scale Capital requirements Brand identity Switching costs Access to distribution DEGREE OF RIVALRY Exit barriers Industry concentration Fixed costs/Value added Industry growth Intermittent overcapacity Product differences Switching costs Brand identity Diversity of rivals Corporate stakes THREAT OF SUBSTITUTES Switching costs Buyer inclination to substitute Price-performance trade-off of substitutes BUYER POWER Bargaining leverage Buyer volume Buyer information Brand identity Price sensitivity Product differentiation Substitutes available Buyers' incentives

SWOT Environmental scanning (SWOT) – Internal Factors Strengths and Weaknesses – External Factors Opportunities and Threats

Measure of Productivity

Warm-up Microsoft Cuts 18,000 Cuts: What Nadella's Thinking Microsoft Cuts 18,000 Cuts: What Nadella's Thinking