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Operational Objectives

  • High efficiency 
  • High capacity utilisation 
  • Low unit costs
  • High quality

Economies of Scale 

Unit costs fall as the business expands. Example include:

  • Bulk buying 
  • Technological 
  • Managerial 
  • Marketing

Diseconomies of Scale

Unit costs rise as the business becomes too big. Examples include:

  • Communication problems 
  • Poor co-ordination
  • Low morale due to employees becoming alienated


The successful commercialisation of new ideas. Can be either new products or manufacturing processes.

Benefits include:

  • First mover advantage 
  • Improved reputation 
  • Improved quality and efficiency

Problems include:

  • High risk of failure 
  • High cost 
  • Danger of competitors stealing your ideas

Implications for a strategy of innovation:

  • Financial- sufficient funds available
  • HR- do employees have the necessary skills and experience
  • Operations- required machinery and capacity
  • Marketing- market research required to identify new opportunities
  • Attitude of senior managers- prepared to take the risks required?


Factors influencing location decisions include: 

  • Technology 
  • Cost of land and labour 
  • Infrastructure 
  • Need to be close to resources or market 
  • Qualitiative 
  • Availability of goverment grants 

Issues relating to international location include: 

  • Relative costs of land and labour
  • Quality of the overseas workforce 
  • Communication and co-ordination 

Lean Production 

  • This consists of:
  • Critical path analysis 
  • Just in time
  • Time-based management
  • Reduced lead times 
  • Shorter product development times 
  • TQM ''total quality management''- ensures that the quality of the product meets the requirements of customer.

Benefits of Lean Production

  • More effective use of time e.g. quicker new product development, faster production 
  • Less waste 
  • Better quality 
  • Improved efficiency
  • Higher staff morale

Issues with Lean Production:

  • Need for extra training 
  • Need for reliable suppliers for JIT
  • CPA is dependent upon accurate data


HR Objectives

  • Labour productivity 
  • Labour turnover 
  • Absenteeism
  • Employer/ employee relations

'Hard' HR

  • Views the workforce that needs to be fully utilised


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