A-Level Business Unit 4.1 (Year 1/AS AQA Slides)

Learning Outcomes

- What you need to know:

  • why businesses set operational objectives - what is the value of setting them?
  • the external influences on setting operational objectives
  • the internal influences on setting operational objectives
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Overview of Key Concepts

- What is meant by the term 'operational objectives'

- Identifying the main operational objectives - quality, reducing costs, speed of response, depandability, environmental and adding value

- The internal and external influences on the operational objectives

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Objectives

- A definition of objectives is:

  • 'a quantifiable target which helps to co-ordinate activites'

- Objectives should be SMART, or:

  • Specific - easily defined
  • Measurable - quantifiable
  • Agreed/Achieveable - stakeholders involved in setting them
  • Realistic - not in conflict with other objectives
  • Timely/Time Bound - based on a timescale
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Diagram

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Why Set Objectives

- Having a mission will help to guide employees and motivate them in the direction the organisation wants to go

- Having corporate objectives gives a more detailed sense of direction

- Having functional objectives allows for greater co-ordination of resources to ensure corporate objectives are met

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Operational Objectives

- Operational objectives are:

  • broad - they encompass anything to do with the operational side of the business
  • general goal - these ensure that departments can understand what they need to do to achieve the operational objectives
  • long and medium term - plans and strategies are devised to ensure that the long and medium term objectives are met

- Short term measures and called operational tactics

- Operational objectives include:

  • costs
  • quality
  • depandablilty
  • added value speed of response 
  • envirnmental objectives
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Remember

- Sales Revenue - Total Costs = Profits

- Therefore, to improve profit, you can:

  • increase sale, or
  • reduce costs

- Reducing costs is frequently part of the operational management objectives

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Reducing Costs

- Reducing unit cost: a low unit cost enables a business either to keep low for customers or to enjoy higher profit margins

- Reducing fixed cost: this is a common aim when businesses have merged because they may have duplication of fixed costs, i.e. two premises on the high street

- Reducing variable costs per unit: this could include finding cheaper suppliers or cheaper manufacturing

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Quality

- Qualitty is defined as:

  • ' those features of a product or service that allow it to satisfy customer'

- There is no set measure of quality because it depends on people's opinion, but it can be measured using various methods:

  • customer satisfaction - can gather satisfaction n both qualitative or quantitative form
  • customer complaints - this is a good measure to show whether a business has problems it needs to address. good and bad customer thoughts will be told
  • scrap rate - manufacturers track the rejects through the manufacturing process
  • punctuality - measure how promptly a business delivers its goods and is expressed as a percentage:

Punctuality (%) = Deliveries on time     x 100

                               Total Deliveries

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Dependability

- Some businesses do not want to let customers down and so focus on ensuring that they meet promises - or are dependable.

- Examples:

  • Amazon state delivery dates for their products and keep customers informed if that date changes, using emails - this ensures that their reputation is maintained with customers
  • Dyson do extensive product testing the ensure that their vacuums deliver their promises
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Environmental Objectives

- For many businesses, ensuring that their operational side does not harm the environment is important - especially for their corporate social responsiblity reports

- Environmental objectives would include:

  • reducing waste
  • reducing carbon footprint
  • minimising waste products or materials
  • increase recycling
  • achieving self-sufficiency in energy use

- M&S has a 'Plan A' to help them achieve environmental objective. This includes having delivery HGV's that have a slopped roof to reduce fuel consumption and reducing the use of plastic bags at the counter.

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Added Value

- Adding value is an operational bjective because it allows the business to develop a unique selling point (USP) for its product

- Adding value objectives would include:

  • increased spending on R&D - Land Rover, for example, are one of the world's biggest spender on R&D
  • achieving a certain number of patents - Dyson currently hold 1,200 patents, sending roughly one a day
  • developing a particular innovation - Google glasses add value to their brand
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External Influences on Operational Objectives

- External influences are those outside the business. This is covered more in a later topic, but briefly:

  • Market factors
  • Competitors' actions and performance
  • Economic factors
  • Political factors
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Internal Influences on Operational Objectives

- Internal influences are those from within the business. E.g:

  • Corporate pobjectives
  • Finance
  • Human Resources
  • The nature of the product or service
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Summary

- Operational objectives allow a business to concerntrate on what they consider to be important to make a=them as effiecient as possible or to give them a competitive advantage

- They can be influenced by the finance, HR and marketing of the goods or services

- External influences like cmpetitors and the economy can affect what objectives the business wants to achieve and how quickly they can achieve them

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