MASTER OF BUSINESS ADMINISTRATION

DRIVE-SPRING 2015
PROGRAM: MBA/ MBADS/ MBAFLEX/ MBAHCSN3/ PGDBAN2
SUBECT CODE & NAME: MB 0044 - PRODUCTION AND OPERATION
MANAGEMENT

(Credits 4)
(Book ID: B1627)

Q. No. 1
)

making

Write short notes on:

Environmental scanning as a basis for strategic decision

Tools for implementation of operations

Differentiation strategies as a basis of decision making

Core competencies as a basis of decision making

Ans. Environmental scanning as a basis for strategic decision making:

Environmental scanning is the acquisition and use of information about events,

trends, and relationships in an organization's external environment, the
knowledge of which would assist management in planning the organization's
future course of action. Depending on the organization's beliefs about
environmental analyzability and the extent that it intrudes into the environment
to understand it, four modes of scanning may be differentiated: undirected
viewing, conditioned viewing, enacting, and searching.
Rational decision making requires information gathering and information
processing beyond the capabilities of any organization. In practice,
organizational decision making departs from the rational ideal in important
ways depending on: (1) the ambiguity or conflict of goals in the decision

situation (goal ambiguity or conflict), and (2) the uncertainty about the methods
and processes by which the goals are to be attained (technical or procedural
uncertainty). Thus, decision makers 'simplify' their representation of the problem
situation; 'satisfice' rather than maximize their searches; and follow 'action
programmes' or routinized procedures. When strategic goals are clear but the
methods to attain them are not, decision making becomes a process that is
highly dynamic, with many internal and external factors interrupting and
changing the tempo and direction of the decision process. Decisions and actions
are then the results of the bargaining among players pursuing their own
interests and manipulating their available instruments of influence.

Tools for implementation of operations

Implementation of Operations Implementation is the process of executing the

planned operations. Estimating, routing and loading are the planning processes
and dispatching and progressing are processes which are conducted while the
manufacturing is going on. We call the former planning and the latter controlling
function. Put together they are considered implementation. Estimating gives the
quantities to be made at each workstation depending on the sales forecast,
provision for buffer stock, quantities bought out, or services outsourced, likely
shortfalls etc. It is done on the basis of capacity. The next step, routing,
determines the sequence of operations and the machines that do them so that
work flow as determined by the processes is smooth resulting in minimum
inventory. Scheduling is mainly concerned with allocating time slots for different
jobs. It specifies as to when jobs start and end at particular workstations. The
purpose is to prevent imbalances among work centers and utilize labour hours in
such a way that established lead times are maintained. Dispatching is concerned
with actually moving the materials with tools, jigs and fixtures to specific
machines along with drawings and ensuring inspections at specific nodes, so that
the materials move in the supply chain, Expediting is mainly to ensure that all
the above are being done properly. Reports are generated and any bottleneck
that gets created is removed.

Differentiation strategies as a basis of decision making

Differentiation is a process by which a company distinguishes itself from its

competitors and their offerings. The process includes adding a set of

differentiators, which are meaningful, and adds value for the customer. The
customer should perceive the differences as important, distinctive, superior and
affordable. Nonetheless, they have to make the companys offerings i.e. the
products and services profitable. To derive competitive advantage the study of
the processes to adapt innovations, which should be of such nature as being preemptive, is important. Here, we are not considering the situation of an entirely
new product but those, which are already contributing to the company revenues,
and the threat of competitors has to be met. According to Miland Lele (Miland
M.Lele, Creating Strategic Leverage: New York, John Wiley 1992) companies
have different potential in terms of maneuverability along with target market,
place (channels), promotion and price. These are affected by the companys
position in the market, the industry structure. BCG has classified (Philip Kotler)
four types of industries and the approaches available, depending on the cell the
particular industry fits into.

Core competencies as a basis of decision making

Shared decision making is now making inroads in health care professionals

continuing education curriculum, but there is no consensus on what core
competencies are required by clinicians for effectively involving patients in
health-related decisions. Ready-made programs for training clinicians in shared
decision making are in high demand, but existing programs vary widely in their
theoretical foundations, length, and content. An international, interdisciplinary
group of 25 individuals met in 2012 to discuss theoretical approaches to making
health-related decisions, compare notes on existing programs, take stock of
stakeholders concerns, and deliberate on core competencies.
In response to rapid changes in society, shared decision making is now making
inroads in health care professionals continuing education curriculums. In the
United States, initiatives such as the patient-centered medical home reinforce
the importance of shared decision making with an emphasis on placing the
patient at the center of the care process. As defined by the authors of the most
cited model, shared decision making between a patient and one or more health
care professionals is an exchange in which information giving and deliberation is
interactional, the parties work together towards reaching an agreement on the
treatment, and all parties have an investment in the decision made. However,
research shows that shared decision making is not routinely used in clinical
practice.

Q. No. 2

Answer the following questions:

a.
b.
c.
d.

What is forecasting?
What are the benefits of forecasting?
What are the cost implications of forecasting?
List the different types of forecasting methods.

Ans. Forecasting:
Forecasts are vital to every business organization and for every significant
management decision. While a forecast is never perfect due to the dynamic
nature of the external business environment, it is beneficial for all levels of
functional planning, strategic planning, and budgetary planning. Decision-makers
use forecasts to make many important decisions regarding the future direction of
the organization.
Demand management exists to coordinate and control all sources of demand so
the productive system can be used efficiently and the product delivered on time.
Demand can be either dependent on the demand for other products or services,
or independent because it cannot be derived directly from that of other products.
Benefits of Forecasting:
Good forecast of material, labor and other resources for operation are essentially
needed by the managers. If good projection of future demand is available, the
management may take suitable action regarding inventory. Similarly, if
production activities are accurately forecasted, then balanced work-load may be
planned. Good labor relations may be maintained, as there would be lesser
hiring and firing activities by the management with better manpower planning.
Therefore, forecasting is useful due to following benefits:
E 1. Effective handling of uncertainty
E 2. Better labor relations
E 3. Balanced work-load
E 4. Minimization in the fluctuations of production
E 5. Better use of production facilities
E 6. Better material management
E 7. Better customer service
E 8. Better utilization of capital and resources
E 9. Better design of facilities and production system.
Cost Implications of Forecasting:

Forecasting requires special efforts and involves inputs from experts, which cost
a lot to the companies. Well-trained experts and associations substantially invest
in human resources and hence charge their clients for the service rendered.
Thus, forecasting done in-house or carried out externally requires significant
investments. Thus, it can be said that more the efforts put for forecasting; more
will be the cost of forecasting. Because of improved accuracy and better
judgment, the losses that would occur because of poor forecasting would
decrease as more efforts are put in for forecasting. Hence, higher the efforts,
lower will be the losses. Because effort is a direct function of forecasting, this
cost goes up with increase in the forecasting efforts.
Different types of Forecasting Methods:

The different methods of forecasting can be classified as follows:

Market surveys

Conducting surveys among the prospective buyers or users is a very old

method of forecasting. Here, a questionnaire is prepared and circulated
among the people and their responses are obtained. The responses are
collated and analyzed to reveal possible clues towards acceptance or
otherwise about a new product or service. Based on the overall decision,
the forecasting is done.
Nominal group testing
In the nominal group testing method, the product or service may be given
a trial use to a specified group like students, employees, neighbors, etc.
and their responses are collected and analyzed.

Historical analysis

The historical analysis method is based on the fact that the past is an
indicator of the future. People try to associate the events that happened
earlier with the events that are likely to happen in the future.

Jury of executive opinion

In the jury of executive opinion method, the opinion of a group of experts

is collected and used as an estimate to obtain the forecast.

Life cycle analysis

In the life cycle analysis method, an assessment of the life cycle stage in
which the product lies is made first and an opinion is formed.

Delphi method

In the Delphi method, the experts give their opinions, which are collected
by the coordinator, and several rounds of discussion may be held before a
consensus is reached. This forms the basis for forecasting.
Q. No. 3

Describe the process of value analysis.

Ans.

Step 1: Data gathering

All relevant information concerned with the product and the parts that go
to make it are collected. The concerns at this stage are the raw materials
used, its dimensions, characteristics, availability, lead time, price, mode of
transport, storage, and the rate of consumption. All questions regarding
each of them are asked. The available information is recorded and when
information is not available, tags can be attached for information
gathering at a later date. No information should be considered
unimportant or irrelevant. It will be advantageous to record the source of
information.
Step 2: Analysis and valuation of functions
The function of each part is listed. They are categorized as basic functions
and secondary functions. The description should be cryptic two or three
words. If there are many functions that any part has to perform
weightage may be given to each of them. Considered with the cost of the
part and the weight, each function gets a value attached to it.
Step 3: Idea Generation and Evaluation of Substitutes
Having collected the data and analysed them and knowing the relative
importance of the functions, the next step is to identify the material or process
that is amenable to the application of value engineering. Since there are a
number of factors to be considered and to break away from the conventional
thinking, brain storming is preferred. Ideas are allowed to be submitted to the
group for discussion. A few of them will turn out to be worth more detailed
evaluation. Debates about suitability or disadvantage of any particular change
envisaged are conducted. Facts are analysed and consensus arrived as to what
can be attempted. Many times, the existing material or process will be ideal and
nothing needs to be done. But a discussion and decision about this confirms that
the maximum value is being derived.

Step 4: Implementation and Regularisation

The decision taken after evaluation is conveyed to the top management and
clearances are obtained for implementation. Teams are formed for each
implementation and concerned persons are involved and educated about the
impending change. Their cooperation is necessary for the change to be effective.
If any small changes are necessary when a few trials are taken, they should be
considered. After successful implementation, the change material change or
the process change becomes the new norm or standard for further operations.
The methodology adopted is on the lines of continuous improvement.
Q. No. 4 What do you understand by line balancing? What happens if line
balance does not exist?
Ans.

Q. No. 5

Write short notes on the following:

A. Divestment strategy
B. Liquidation strategy

Ans. Both are explained below:

A. Divestment strategy:
Divestment, also called divestiture, means selling a part of a company- a major
division or an SBU. Divestment is usually a part of corporate restructuring or
rehabilitation program as indicated above. Divestment can be part of an overall
downsizing or retrenchment strategy of an organisation to get rid of businesses
which are unprofitable or which require too much capital or which do not fit well
with the companys other existing businesses or activities.
Divestment is many a time used to raise capital for new acquisitions or
investment. Sometimes divestment becomes a forced option when an attempt
has been made to turnaround the business, but, has not been successful.
Divestment can be done in two ways:
Selling a business outright or spinning it off as an independent company.
Selling a business outright is the most commonly used form of
divestment.

Retaining partial control is generally recommended if the business to be divested

has good profit prospects. Spinning off a business, with or without partial
ownership, may be done either by selling shares to the public through an initial
public offering or by distributing shares of the new company to the existing
shareholders of the corporate parent.
Divestments are common in corporate functioning of multi business
organisations including multinational companies. From time to time, large
companies sell or spin off businesses and add or acquire new businesses in
conformity with environmental changes and organisational objectives or goals.
The underlying driving force is competitiveness.
B. Liquidation strategy:
Liquidation means closing down a company and selling its assets. Liquidation can
also be defined as selling off a companys assets, in parts, for their tangible
worth. This should be the strategy of last resort when no other alternatives like
turnaround, restructuring or divestment are applicable or workable. Liquidation
is actually recognition of defeat. But, at some stage of the organisational lifecycle, it is advisable to cease operating then continue to operate and accumulate
losses. Liquidation should be planned. Liquidation may be the toughest decision
for a company, but, if it is unavoidable/ inevitable, it should be done at the right
time and, in a panned manner. Planned Liquidation involves a systematic process
for maximum benefits for the company and its shareholders. If Liquidation is
unplanned or haphazard, the company may incur avoidable or unnecessary
losses.
In the Companies Act, Liquidation is officially termed as winding. The Act
defines winding up of a company as the process whereby its life is ended and its
property administered for the benefit of its creditors and members. The Act
stipulates appointment of a liquidator who handles the liquidation process. The
liquidator takes control of the company, collects its hazards, pays its debts and,
finally, distributes its surplus among the members according to their rights.
According to the act, Liquidation or winding up may be done in three ways:

Voluntary winding up
Voluntary winding up under supervision of the court
Compulsory winding up under an order of the court.

The Act also provides for dissolution of a company in which case it ceases to
exist as a corporate entity for all practical purposes and, all its operations remain
suspended for a period of two years.
Q. No. 6

Describe the different approaches to business ethics.

Ans. According to Rossouw and Vuuren (2003), there are four approaches to
business ethics. They are discussed below in an increasing order of ethical
concern:

Unconcerned or ethical non-issue approach

Ethical damage control approach

Ethics compliance approach

Ethical culture approach

1. Unconcerned or ethical non-issue approach: This approach is adopted

by companies whose managers are either immoral or amoral. Such
companies believes that organisational objectives and business targets are
foremost. Business must grow profit should be generated and maximize.
These companies plan and adopt strategies which may follow general legal
and business principles, but may be ethically unsound. They are not really
concerned with the ethical issues in the conventional sense.

2. Ethical damage control approach: In companies in this category,

managers are generally amoral, but, they fear adverse publicity or
scandal. The objective in this approach is to protect the company from
adverse publicity which may be made by unhappy stakeholders, external
investigation agencies, threats of litigation, punitive government actions,
etc. To avoid such a contingent situation, there is a need for rejecting
unethical behavior and introducing corporate governance safeguards
through window-dressing ethics. A company may generally ignore a
condone questionable methods or actions which may help to achieve
business targets or improve its market position so long as it does not
publicly tarnish the image of the company.

3. Ethics compliance approach: In this approach, companies are

conscious that they should comply with ethical standards and
requirements. The managers are either moral and view strong compliance
to prescribed norms or methods as the best way to enforce ethical
practices or, are unintentionally amoral but are highly concerned about
their ethical reputation. Companies which adopt a compliance approach
adhere to certain practices to demonstrate their commitment to ethical
conduct make the code of ethics visible and a regular part of

communication with employees, form ethics committees to give guidance

on ethical matters, introduce ethics, training programs, lay down formal
procedures for investigating alleged ethical volations, conduct ethics audit
to measure and monitor compliance and institute ethics awards for
employees for outstanding efforts for creating an ethical environment and
improving ethical performance.

4. Ethical culture approach: In companies with this approach, ethical

business practices are rooted in the organisational culture itself. The top
management/CEO believes that high ethical principles embedded in the
corporate culture should guide the managers and staffs. The ethical
principles contain in the companys code of ethics and/or corporate values
are seen as integral to the companys identity and image. The prevalence
and success of the ethical culture approach depends heavily on the
personal integrity of the individuals manner approach depends heavily on
the personal integrity of the individual managers who create and nurture
the culture. It is clearly understood in such companies that corporate
strategy should be ethical in all respects and ethical behavior should also
be reflected in strategy implementation.