Strategic Management: Competitiveness & Globalization - Assignment Example

Operations Management xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecturer xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Date QUESTION 1 Operation management is described as the way different organizations produces their goods and services. The operations concept is one which is highly concern with organizing the various processes involved in getting things done in the correct way. To understand more on the concept, it is essential to first understand what an operation is. Concept of operation is usually defined in terms of technology which employs, mission that is known to serve an organization and managerial and human processes it involves. An operation is considered to be that process that converts a set of resources or inputs into goods and services which are known to be the outputs. Importance of operational concept is that it involves the great responsibility of ensuring that all business operations are efficient whereby little resources is used in meeting all consumer requirements. The relevance of operations concept is that it increases an organizational performance by managing all processes involved in inputs into outputs. Within any given organization, operation can be categorized into both service and manufacturing operation (Meredith 2009). Evidently, there are various important areas of knowledge about the concept. Here, the two important areas that will be discussed about the knowledge of concept are customer service and utilization of resources widely putting focus on objective of operation management. It is observable that customer service is an important area of knowledge within operation concept. Operation concept enables organizations to provide goods and services specification that will ensure that customers get satisfied both in terms of time and cost. This fundamental objective can only be achieved by way of providing the customer with the right item at a right price not forgetting at the required time. Based on resource utilization, it is evident that it creates an important area within operation concept. Customer service can only be effective if and only if there is proper use of resources, the concept indicate that inefficient use of organizational resources or improper customer service leads to failure within operational systems. The concept creates an essentiality in utilization of resources. Clearly, the extent to which utilization of resources potential should be expressed in term of proportional of time used. It is therefore important that all organizations must invest on their operation management whereby these two knowledgeable areas in operational concept should be put into action. Operational management managers should at all time is in a position to balance between these two knowledgeable areas of operational concept for success and positive position. It is quite observable that there are numerous business situations whereby the above described concept can be applied. In this case the business operation that can be concept can be applied is when a business planning, organizing, directing especially focusing on the management team. A business that lacks good measures in its planning, directing and organizing have lacking in their customer service and proper utilization of resources. Evidently, most businesses are not able to have proper and full utilization of their resources thus customers are not able to obtain goods according to their specification. Operation concept is very important when focusing on such situation since it assists a business in reorganizing its ideas through proper directing, planning and organizing especially on the management part (Hill 2005). Within the above analyzed real business situation, there are several important management tasks that can be used to manage the situation. Evidently, business management is a very essential task in the whole operating system. Management is highly responsible for success of any business or organization. For such a situation an operation manager need to have obtained a solid knowledge of technology and human relations. The complexity within operation management should be distributed in all departments especially the management sectors. The effect created by this operation concept is that the management team is able to plan effectively. Planning ensures that determines the future course of action within a business situation. Further, the concept creates an effect whereby management is able to organize and establish organizational standards. This enables an organization to set design and goals, set various schedules for project and widely determining a means for accomplishing such standards. Effect of operational concept also ensures that proper staffing methods are put in place. Management should carry out training and selection of personnel so as to ensure that a business is able establishes the required skilled level of personnel (Hill 2005). QUESTION 2(B) Hayes and Wheelwright (1985) clearly state that with the current increasing competition in the global market the management of any given organization has to consider redesigning and restructuring its operation in order to obtain a competitive advantage over its competitors. In order to carry out business effectively, a company has to divide its operations into two distinct activities which are economic and technological activities. These are known as value activities and they are determined by the extent to which buyers are willing to spend their resources for the products and services offered by the company. An organization is considered to be profitable if the value acquired from sale of its products exceed that of the cost of operations involved in the production process. To obtain a competitive advantage over its competitors, a company must be able to operate both its internal and external activities at a reduced cost and in a way that differentiates them from its rivals and at a higher value. Evidently, many of the customers want to buy high quality products at reduced prices whereas the producers want to produce standard good at higher prices. In many cases this situation has proved to be a difficult challenge to operations managers who have to look for a point of compromise in order to ensure that the company is attaining its goals and also satisfying customers’ needs (Johnson et al 1997). There are several categories of company operations. The first category include primary activities which involves actual production process, marketing, delivery and after sale services. The second category comprise of supporting activities which are defined as those activities which enable the smooth running of primary activities. Every activity carried out during the process of production demands the input of human resources, financial resources and technological knowhow. Examples of support activities include functions such as legal framework, general management and accounting systems of the company. Operations within an organization are closely related and are interlinked in such a way that the performance of one will directly affect the effectiveness and cost of other activities. Therefore, it is pivotal to manage and coordinate operations appropriately in order to gain a competitive advantage (Chong and Rundusv 2004). Operations managers have to ensure that products are highly competitive by having all the necessary qualifying factors needed by the consumers. Cost leadership and product differentiation are the two main ways that can be used to achieve this goal and they have critical implication to company operations. It is possible for a company to produce the same goods and services produced by another company at a reduced price. This is achieved by perhaps improving its process, having efficient operations, simplifying designs, locating plant near customers, reducing wastage, using advanced technology and having a efficient supply chain. In product differentiation, the company avails products that customers cannot find anywhere else. Product differentiation on can be based on many factors including quality, cost, reliability, customization, availability, technology, innovation, location and reputation of the company. An obvious challenge faced by many operation managers is that demand keeps changing and fashions and trends are very dynamic. In this case, it is fundamental for the company to understand its product cycle very well in order to ensure that products are readily available to customers at right quality and quantity. This can be attained by conducting intensive research to find out preferences and tastes of the consumers, best marketing strategies for the products and the simplest and less expensive means of producing them. Product quality is a major concern for the producers of the products and the buyers as well. Making products that are of high quality and meets with the customers’ expectations is the only way that a company can remain competitive over its rivals (Hitt et al 2011). Automation of the company processes also resort to a competitive advantage for the company since higher levels of automation imply higher output. Besides high volumes and masses of output, automation also ensures that the process of production is continuous, precise and of high quality. Utilization of information technology will enhance a company’s competitive power by altering the five competitive forces which include power of suppliers, power of buyers, threat of substitute products and threats of new entrants. Computer-aided manufacturing process and product design will ensure that production is easier, faster and cheaper and will also enable incorporation of competitive features into the products. Customers will tend to be attracted to a company where they can make online orders and billing. Computerized systems enable quick identification of errors and faults within the systems hence management is able to take action in timely manner to avoid further losses and ensure a continuous flow of the production process. Hitt et al (2011) argue that a company which aims to acquire a competitive advantage over its rivals has to consider its operations layout in terms of its plants, offices, warehouses and retail shops. Facilities that are well laid out enable easy, smooth and efficient flow of products during the production process while those that are poorly laid out tend to reduce efficiency and disrupt the process. Choice of layout depends on the objective of the company which might be to maximize output, minimize costs or to increase customer’s accessibility. A process layout is the most appropriate lay out whereby facilities and equipment are grouped together. In this case, offices are arranged in such a way that purchases people, accountants, sales persons and so on are in separate areas which simplifies the work of consumers and suppliers hence making improving dependability of the company. QUESTION 3(C) Economic order quantity (EOQ) is the most economical quantity to order which minimizes the balance of costs between inventory holding costs and reorder costs. That is, at the EOQ the holding cost and ordering cost are minimized and they are equal (Donald 2010). Both ordering costs and holding costs are $2,509.94. Total cost is the sum of ordering costs and holding costs, which is equals to $5,019.87. EOQ = $2,478,948. This is the amount that Christie should borrow from the bank at any time she takes a loan to purchase inventory. Any other amount will not minimize the balance of costs between inventory holding costs and reorder costs. Increased costs arise from the extra holding costs caused by the average loan level being higher due to the larger order quantity (Amenc and Le Sourd 2003). Any amount less than the EOQ will cause the ordering costs to be high. The total number of loans the company should obtain during the year is 2, and each time the company should borrow $2,478,948. Reorder level is the level of cash on hand at which a further replenishment order for a bank loan should be placed (Thomas 2006). The reorder level is dependent upon the lead-time (15 days) and the demand during the lead-time ($17,000 per day). Given that it takes 15 days for a loan to be processed by the bank, then the level of cash at which the company should apply for a new loan is $255,000 (17000*15). Ec is the total cost at the EOQ. Notice that any other amount less than or greater than the EOQ will lead to a higher total cost. If the bank lowers the origination fee from 2.25% to 2.00%, the optimal amount of loan the company should borrow from the bank should be $2,629,321.84. Lowering origination fee has the effect of lowering the holding cost hence a lower total cost. References Amenc, N. and Le Sourd, V., 2003. Portfolio theory and performance analysis. New Jersey: John Wiley and Sons. Chong, V. and Rundusv, M., 2004, Total quality management, market competition and organizational performance, The British Accountant Review, Volume 36, Issue 2, pg. 155-172. Donald, E., 2010, Intermediate Accounting. New Jersey: John Wiley and Sons. Hayes, R. and Wheelwright, S., 1985, Restoring Our Competitive Edge, New York: Wiley. Hill, T, 2005, Operations Management, Basingstoke: Palgrave Macmillan. Hitt, M., Ireland, R. and Hoskisson, R, 2011, Strategic management: competitiveness & globalization. Concepts, Mason, OH: South-Western Cengage Learning Johnson R., Chambers S., Harland C., Harrison A. and Slack N, 1997, Cases in Operations Management, London: Pitman. Meredith, J., 2009, “The Evolution of the Intellectual Structure of Operations Management: A Citation/Co-Citation Analysis,” Journal of Operations Management, Vol. 27, No. 3, pp.185-202. Thomas, A., 2006, Managerial Accounting, Albany: Thomsons. Read More