Operational Strategies; Unit 3 - Notes

Notes made from a combination of resources including the Malcolm Surridge text book and Philip Allan revision guide.

Covers the operations quarter of the course; Operational Objectives, Scale and Resource Mix, Innovation, Location and Lean Production

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Understanding Operational Objectives
Operations Management:
The planning organising and coordination of activities involved in the production of a firms product or
Management of the whole process that transforms inputs into outputs and adds value
Operational decisions:
Where to produce?
What scale facilities are needed?
What production methods should be adopted?
How much of the transformation process to undertake and how much to outsource to other
Where to purchase supplies from?
Types of Operation Systems:
Differences in operations systems can be categorised using Slacks 4 V's model that highlights the
wide variations in operations management:
V Volume
V Variety
V Variation (in demand)
V Visibility
Operational Objectives:
A target related to the delivery of the product or service:
Effectiveness of operations management can be measured using indictors:
Unit cost
Number of defects
Speed of product
Flexibility of production
Amount of waste generated
Amount of energy used
Changing Operational Needs:

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Page 2

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Aims to deliver appropriate quantities of what customers need at suitable levels of quality and
suitable cost
Need to consider:
Who they are working with and the relationship
What resources they use and how they use them
Impact of their activities on various groups
Customer demands
Demand for many products is low and therefore the customer has a stronger bargaining power and
can demand better products and deals
Achieving different operational objectives simultaneously and may be difficult
Managers must decide on the key aspects of…read more

Page 3

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Corporate objective
Financial restraints
Marketing strategy
Nature of the product
Customer expectations
Increasing Efficiency:
Productive efficient involves:
Employee productivity
Nature of the production process
Degree of innovation
Scale of production
Capacity utilisation
Measure of success with which a firm turns input into output
Efficiency is measured by cost per unit ­ by improving efficient a firm can reduce its costs per unit
Too increase efficiency:
Labour productivity
Nature of the production process
Capacity utilisation
Scale of production…read more

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Capacity depends on:
o Capital available
o Existing level of technology
o Number and skills of employees
An increase in capacity will increase the scale of production
Getting the `right scale' depends on:
Expected level of sales
Costs involved in growing
Resources available
A firm can increase scale by:
Investing in new capital
Investing in labour
Takeover / Merging
Economies of Scale:
The unit cost falls as the firm increases its scale of production
Technical Economies of Scale:
As a firm expands, it may be…read more

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Cost of producing a unit can have significant implication from a firm's competiveness:
Higher revenue
Tactical pricing
Lower costs
Maybe able to price competitors out of the market
Diseconomies of Scale:
A firm expends its capacity and the unit cost increases
Communication Problems:
With more people involved in the firm, it can be difficult to ensure that the message gets to the right
people at the right time
Coordination and Control Problems:
As the firm expands and sets up new parts of the firm, it…read more

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Agree to produce products for other firms
Close part of its production process and reduce capacity (Rationalisation)
Choosing the Right Resource Mix:
Deciding the best way of producing
Deciding the best resources to use and the combination of resources required
Deciding on where to get resources from
Deciding where to get resources from
Deciding how many resources to hold in stock
When deciding how to produce a product or service, operations mangers will consider the mix of
Firms will have differing views on what…read more

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Increasing Productivity:
Increase number of hours worked
Invest in equipment and technology
Changing the way the work is done
Motivating employees
Employee Resistance:
Don't want to work longer and harder
Don't want to learn new skills
Fear higher productivity may lead to job losses
Feel its unfair produce more unless they high awards
The scientific investigation leading to new products and the development of those ideas into
saleable products
The process of turning an idea into a saleable product or service
Allows firms…read more

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A failure to innovate may lead to a loss in market share
Aims of innovation:
Develop products that have a USP
Develop better quality products
Develop more efficient wants of producing
Develop better ways of doing things
Helps firms compete by creating more value
Research and Development:
The generation and application of scientific knowledge to create a product or develop a new
production process
Development can take many years and be expensive
Risk that the firm may never end up with a viable idea
Protecting…read more

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A firm will want a culture that encourages people to try out ideas, doesn't punish failure and that
rewards those who do come up with new approaches (entrepreneurial culture)
If innovation really is a priority the senior managers need to promote it by doing things like makings
funds available to those who need them to experience and try out ideas
Culture of a firm is important because it supports all other actions and highlights the firm's priorities
Requires sharing ideas and approaches
Communication and innovation…read more

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Implications for Other Functions:
Finance: Initial outlay of capital will be ne returned for a long time
Marketing: Research will be needed to find out whether the innovation project is likely to appeal
HR: Additional recruitment and training may be needed
Location decisions have a direct effect on an operations costs as well as it s ability to serve customers
and is costly to undo
Choosing a Location:
The right location may affect:
Costs of production and running the firm
Tax rates paid
Availability…read more



This 19 page document seems to summarise the entire unit 3 AQA operations management syllabus. Mainly in bullet point form it can form the basis for revision. Highly recommended.

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