Operational Strategies: Understanding Operational Objectives

Section 3.4

Chapter 11

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Understanding operational objectives

Operational objectives: targets set in relation to the production process or provision of a service within a given financial year
As with any objective, they always link back to the corporate objectives; operational objectives will normally look to improve performance with a view to improving competitiveness

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Types of operational targets

The key criteria within the operational objectives are quality, cost and volume Quality, cost and volume targets: operational objectives which set a minimum acceptable standard of provision measured by cost, quality or volume

Quality targets: Can be referred to as 'fit for purpose' or 'meeting expectations'
Important to recognise:

  • Performance core function of the product or service
  • Advanced performance actual functionality of product or service, aesthetics and serviceability
  • Predicted life how long it will continue to function or at what point it will become obsolete
  • Conformance with standards and spec requirements
  • Percieved quality often a USP achieved through reputation and brand loyalty
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Cost targets: Focus on keeping costs to a minimum in order to allow for competitive pricing without having a resulting bad effect on quality or volume targets

  • Will have an effect on selling price, added value and profit
  • Can also include the costs involved in manufacture of or provision of the product or service
  • Involved in keeping the product/service running and the management of it

Cost targets are often achieved through reduction of waste, which is done through lean production techniques

Volume targets: relating not only to the number of units a firm can process, but its flexibilty (ability to respond to varying demand)

  • If volume targets are high, will help a business achieve cost targets through economies of scale
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Innovation: the launch of a new product or process, an inventionm onto the market for commercial gain, putting a new idea or approach into action

  • Firms can achieve a competitive advantage by having new innovative products or services
  • It may include a more efficient method of production which may reduce costs in the long run and increase the volume and quality of outputs

Efficiency and environmental targets: operational objectives which set a minimum acceptable standard of provision in relation to efficiency or the environment

  • Large businesses will measure their efficiency by the added value gap between the input, process and output, an efficient firm will be able to maximise its output whilst minimising costs
  • Many businesses set environmental targets to reduce their negative impact on the environment, which focus on carbon footprint, pollution, sustainability of resources and food miles
  • Setting these can give them competitive advantage and a positive reputation
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Benchmarking: a management toll which aims to increase performance by identifying, investigating and adopting aspects of best practice from other firms

It may involve looking at a business who's performance outshines its own in the area and work alongside that business to identify its strengths and internal processes. Once areas of potential change have been identified, then they can look at how this can be applied to its own activities.

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Influences on operational strategies

Operational strategies cannot be set in isolation of other functional objectives or without regard to the corporate objectives.
Internal influences:

  • Corporate objectives any operations objective should not conlfict with these
  • Finance decisions often involve significant investment and cost, the financial position directly affects the choices that are available
  • HR the quality and capacity of the workforce affects operations
  • Marketing issues nature of the product determines the operational setup, regular changes to the marketing mix may put strains on operations, especially if inflexible

External influences:

  • Economic environment sudden changes in demand impace on capacity utilisation
  • Competitors efficiency better/quicker competitors will place pressure to deliver same performance
  • Technological change
  • Legal + environmental change regulation and legislation changes
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