Chapter 1 © 2011 Don Sykes & Kim Crawford - www.redpeg.com.

au

Role of Operations
Management
 Role of Operations Management
© 2011 Don Sykes & Kim Crawford - www.redpeg.com.au

Operations management is the core of a business and it is this aspect that makes it such an
exciting subject to study. Operations management is concerned with those business activities
that plan, schedule and control the business inputs that are transformed into finished goods and
services. Operations management is all about managing customer satisfaction. It is the aspect of
the business concerned with meeting customer needs.

KNOWING WHAT CUSTOMERS WANT

C mpeting business 1

C mpeting business 2
3
Price

flexibilit
y
hat
cust mers
C mpeting business 4
an
Quality
t

spee
The Winner? – The business that
C mpeting business 3
is able to consistently provide the
product in terms of:
• price,
• quality,
• speed,
• flexibility
Role of Operations Management
© 2011 Don Sykes & Kim Crawford - www.redpeg.com.au

Literacy evel pment

‘Operations’ comes from the Latin word ‘operari’ and means work. The
word operations has a number of meanings apart from this very specific
business meaning. Find another meaning and illustrate it in a sketch or a
sentence.

Typically the strategy

follows the steps
outlined below: Strategic role of
1 Correct the worst
operations management
problems 2 Be as good as The strategic role of operations management is to allocate resources in such a way that it helps
competitors 3 Be the best to achieve the business’s goals in a dynamic and often turbulent environment. The key aspect of
strategy is that the managers of a business are trying to achieve business goals in an
in the industry
environment where competitors are trying to beat them and the managers of the business have
4 Redefine the no control over the actions of competitors and other factors in the external environment.
industry’s
expectations

Case Stu y
Using an Australian business to explain the strategic role of operations
management: Kmart

When Guy Russo was appointed CEO of Kmart, his first challenge was to correct
the worst problems the ailing retailer was experiencing. The most immediate
challenge was to refurbish the stores so that they were clean and tidy, the décor
was attractive and appropriate, the stock on the shelves was in good condition,
and employees were always courteous, friendly and helpful. Big W had already
achieved these things and this was the main reason customers were attracted to
Big W. Russo quickly corrected the worst problems and set about being as good
as Kmart’s competitors.

Being as good as Kmart’s competitors involved a range of challenges. The first

was the introduction of new goods for sale and ensuring that a wide range of
goods were stocked on the shelves. Russo reduced the number of goods, such
as hardware and electronics, and improved the range of apparel. He also
improved employee training to ensure staff were competent in all aspects of
the store’s operation and could quickly move from task to task. This enabled
the store manager to match the number of customers at the checkouts at any
particular time with checkout operators and minimise queuing time by
customers.

The next step in Russo’s strategy is for Kmart to be the best in the industry.
 The focus of this strategy is staff training to ensure all employees deliver the
highest

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possible levels of customer service. The training videos encourage staff to go

beyond ‘courteous, friendly, and helpful’ and actively deliver customer service.
This requires staff doing tasks such as shelf filling and organisation, for
example, to stop what they are doing when they see a customer who appears
to need help; they are to approach the customer and offer to help. The
employee will then take the customer to the area they are looking for and help
them choose the good that would best meet their need by pointing out some of
the key benefits of a particular product.

Another key strategy in being best in the industry is to improve the

predictability of opening hours. If you go past a Big W store just before
opening hours, you will often see a significant number of customers waiting
while the employees prepare the store for opening. Many Big W customers
wait for up to half an hour in the entrance. Kmart is now open 24 hours a day.
This aspect of operations management enables customers to minimise the
time for the total transaction of
parking, entering the store, making their purchase and returning to the car.
Kmart is rapidly emerging as an industry leader.

The fourth step in the typical operations management strategy is to redefine the 5
industry’s expectations. This means that customers receive customer service
levels, value for money goods, availability and range of goods and an overall
shopping experience that is well beyond what they expected. Kmart are striving
for the sort of thing Walmart provides in the areas of costs and prices and range
of products – no competitor can match them.

THINK, INK, PAIR , SHARE

What are some specific examples of resources you think Russo might have
allocated to correct the worst problems when he took over the management of
the business? What sort of things needs to be done to ensure Kmart will be the
best in the industry? Jot down your ideas and discuss them with your learning
partner.

Using each letter in the grid once per word, find as many words of at least four letters as you
can, always using the central letter. (No proper nouns.)
Score: 30 Good; 42 Very good; 54 or more ETR
Excellent O A P
O N I

The nine letter word is:

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The strategic role of operations management is firstly to implement the business strategy.
The operations function has the task of manufacturing the good or delivering the service. It
is also important for the operations manager to fully understand the strategic business plan
(what the business is trying to achieve in a dynamic, competitive environment), support the
business strategy and contribute to the decision-making process. This may seem obvious
but often the operations function is simply given the task of implementing the strategy with
little consultation.

Michael Porter (born How do you do this? There are two key strategies concerned with improving the competitive
1947) is a professor position of the business. The strategies are cost leadership and good/service differentiation. The
at Harvard Business concepts were developed in the 1980s by Michael Porter and were described in his landmark
School in Boston. book, Competitive Strategy: Techniques for Analysing Industries and Competitors.
Originally graduating with
a degree in Aerospace Cost leadership
and Mechanical Cost leadership is a strategy that aims to create a competitive advantage by having the lowest cost
Engineering in 1969, he is of manufacturing the good or delivering the service in the industry. A competitive advantage
a leading authority on is the ability to do something the customer regards as important, better than your competitors.
company strategy and The goal of a cost-leadership strategy is to be the best business in the industry by having the
competition
between lowest cost of operations in the industry.
businesses6
and geographic regions/
nations. More recently he
has applied his research
to understanding and
addressing the problems Case Stu y
of delivering health care
in the USA and the Using a global business to illustrate cost leadership in a tertiary
renewal of depressed business: Walmart
urban communities.
Porter is the author of
Walmart is the largest retailer in the world. In the year ended January 2010
eighteen books and his
Walmart sold goods and services to customers to a value of US$408 billion.
ideas are taught in
The business made a net profit of US$14.3 billion. All this from a small
virtually every university
discount store Sam Walton started on July 2, 1962.
business course in the
Sam Walton decided it would be better to make a $2 profit on each of a specific
world.
good where 100 were sold each day, rather than a higher $5 profit on sales of
only 10 of the particular good in a day. In the first instance he made a total profit
on that good of $200. In the second instance the higher profit would have
yielded a total of only $50.

Sam was the first to use a phrase widely copied today. The phrase was ‘every
day low prices’. Sam offered Walmart customers a wide variety of high quality,
branded and unbranded goods at the lowest possible prices.

Walmart’s advertising described ‘every day low prices’ in these terms:

‘Because you work hard for every dollar, you deserve the lowest price we can offer
every time you make a purchase. You deserve our Every Day Low Prices.’
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n

Role of Operations Management

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me

nage
a
M
ns
o
it
ar
e
p
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Image 1.1
Walmart in Wanda
Sam Walton also realised that, if he could get goods from the manufacturers at Shopping District
the lowest possible prices and cut the operating expenses in his stores, he Nanning, China
could make life very difficult for his competitors - Sears Roebuck and
Company, Woolco and Kmart.

Unlike his competitors, Sam Walton always shared the lower prices he With vendor-managed
received from his suppliers with his customers. Walmart’s products were inventory the inventory
usually 20% cheaper than his competitors. on Walmart shelves is
managed by the supplier,
Sam Walton understood the importance of volume in generating profits and who automatically replaces
lowering costs. ‘By cutting your price, you can boost your sales to a point where items sold
you earn far more at the cheaper retail price than you would have by selling the
item at the higher price. In retailer language, you can lower your mark-up but
earn more because of the increased volume,’ Sam explained.

In the years that followed, Walmart relentlessly pursued a policy of reducing

costs and offering prices to their customers lower than Walmart’s competitors.
In the 1980s Walmart grew rapidly by using information technology innovations
such

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as bar coding, radio frequency identification and vendor-managed inventory to

automate the supply chain. Walmart and their main suppliers have
interconnected accounting systems. Ordering, purchasing and payment all
happen automatically. Increasingly this is also happening with smaller
suppliers.

Radio frequency identification involves a radio frequency transponder

on all pallets of goods suppliers send to a Walmart store. It tracks the
pallet,
advises Walmart staff of the shelves where the inventory will be displayed
and automatically pays the supplier.

Walmart is very effectively using a cost-leadership strategy to sustain its strong

growth. Walmart offers its customers relatively standardised products with the
minimum level of differentiation at the lowest competitive price. When
businesses like Walmart successfully implement cost-leadership strategies, the
customers receive ‘value for money’. Walmart is redefining the retail industry’s
expectations.

THINK, INK, PAIR , SHARE

Which Australian retailers use the phrases ‘value for money’ and ‘every day low
prices’ in their store advertising? Do you think there are dangers in a business
such as Walmart being so efficient that no other business can compete with it?
Try and put Sam Walton’s basic philosophy into your own words. Do you think
the manager’s of Kmart Australia are trying to implement a cost-leadership
strategy? Discuss all these ideas with your learning partner.

H METHINK
Research the dynamic history and operations of Walmart. Construct a 6-
point timeline of the most significant changes in Walmart’s development.
Remember Kmart USA
and Kmart Australia have
no connection except the A business may choose a cost-leadership strategy when it offers its customers a relatively
name standardised product and the features or
characteristics of the goods being sold are acceptable
to their customers. You go to Kmart to buy goods such
as a handbag, or perhaps a dress or shirt, because the
good represents value for money. You are expecting
the minimum level of differentiation. Indeed if you
A handbag from the well want differentiation, you will buy the Louis Vuitton
known luxury French handbag at $1500 rather than paying the $40 cost at
fashion house Louis Kmart.
Vuitton.
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Again, it is important to understand that several businesses are competing to sell you the
standardised product. In our previous example it is not just Kmart, but also Big W, Target and
indeed businesses like Myer, all competing to sell you the handbag. If Kmart is going to be
successful in implementing a cost-leadership strategy, the managers will have to build a highly
efficient, large-scale supply chain. Remember it is this aspect that Walmart was able to do so
well
– sell a lot at small profits with very low costs.

However, there are other key requirements in implementing a successful cost-leadership

strategy. It is crucial that management has very tight control over manufacturing, supply and
overheads costs. Overhead costs are the expenses that are necessary to the on-going
functioning of the business. They include costs such as rent, advertising, wages, research and
development, and so on. In other words, successfully implementing the cost-leadership strategy
requires the costs of making the sales to be minimised.

Case Stu y
Using an Australian business to illustrate the concept of cost
9
leadership: Kmart

The remarkable turn around in Kmart’s performance since the appointment

of Guy Russo as CEO is due to the successful implementation of a cost-
leadership strategy. In the year ending June 2009 Kmart’s profitability
There is an ambiguity or
increased by 105% and was followed by a further improvement of 93% in
double meaning in the
2010.
slogan: ‘Change you can see’.
The strategy is based on pricing goods to generate sales. The reason for this is The word ‘change’ can refer
to lower costs by taking advantage of economies of scale. Economies of scale to the physical appearance
are cost savings that result from size. Kmart receives better prices from their of the stores or it can refer
suppliers because they are buying so much. Kmart is using national advertising to the money you receive
to drive the increase in sales based on ‘value for money’, with the advertising back when you pay.
slogans: ‘Look what you can get for $10’ and ‘Change you can see’!

The next important aspect of the cost-leadership strategy is based on

lowering the costs of inbound logistics. Inbound logistics refers to the
receiving, warehousing and distribution of goods, mostly sourced from
suppliers in China, to the individual Kmart stores. Containing the costs
associated with inbound logistics involves:
• carefully monitoring and evaluating the performance of suppliers
• creating a balance between maximising the size of the order to take
advantage of economies of scale and the increased cost of warehousing
• constantly monitoring the costs of transport and working to lower the costs
of both inbound and outbound transport costs
• flattening the management levels and by having relatively few
management layers reducing overhead costs.
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Kmart management has also reduced overhead costs by implementing

effective training programs to improve employee efficiency and effectiveness.
The core of each Kmart store is a small, but highly trained, sales staff who
have the goal of the highest levels of customer service. Casual employees
provide the flexibility needed to adapt to the business cycle and the yearly
fluctuations in retail spending. Kmart has developed consistent policies to
reduce the turnover costs associated with highly trained employees leaving
and, consequently, the need to train new people. Training sales staff is
expensive.

The KMart cost-leadership strategy is based on the following:

• increasing the volume of sales by generating more sales to take
advantage of economies of scale
• reducing costs in inbound logistics which is a major source of costs
• reducing overhead costs.

So far Guy Russo has been remarkably successful, but there is little doubt
his competitors are also striving to be the winner.
10

THINK, INK, PAIR , SHARE

Who are Kmart’s competitors? What have been your experiences of
shopping at these competing stores? How are they similar or different? Jot
down your ideas and discuss them with your learning partner.

Businesses that succeed with a cost-leadership strategy must have access to a great deal of
capital. This is because highly efficient manufacturing facilities with high levels of the latest
technology can provide an effective barrier to entry to competitors. Capital can also be used
to create very efficient distribution channels that make it difficult for competitors to match
prices. Woolworths, for example, used this strategy during the 1990s. Woolworths’ managers
spent more than a billion dollars restructuring their warehouses and distribution systems with
the very latest in logistics technology and were consequently able to put enormous pressure on
Coles. From 1995 to 2007 Coles lost market share to Woolworths.

Good/service differentiation
A good/service differentiation strategy is a very different way of developing a competitive
advantage. A good/service differentiation strategy is concerned with developing products
that are different from their competitors because they have benefits or attributes a customer
values. The customer is then prepared to pay more for the differentiated product.

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A typical example of the good/service differentiation strategy is the Apple iPod. At the time
of the iPod’s introduction, most competitors were pursuing a cost-leadership strategy and the
prices of mp4 players were falling rapidly as manufacturers incorporated a raft of cost-saving
strategies. Apple incorporated attributes such as a cool design and intuitive technology. The
strategy was responsible for
Apple’s spectacular growth during
the early 2000s.

Apple’s success demonstrates the

importance of highly skilled and
creative product development teams in
pursuing a good/service differentiation
strategy.
Jonathan Ive, the head designer for
all Apple products, understands ‘cool’
and has been able to give the ‘cool’
attribute to the iPods, iPhones and
iPads that are the reason for Apple’s
rapid growth.
Customers are prepared to pay for ‘cool’
and many are fiercely loyal to
Apple. 11
The customer loyalty that typically
follows a successful good/service
differentiation strategy is an important
barrier to entry.
It is difficult for competitors to copy because the customer loyalty is typically to the brand rather
than the product. Most mp4 players now have the attributes that first attracted customers to the
iPod, but customers still purchase the iPod. It is the brand loyalty that makes it difficult for rival
firms to attract customers.

Another important aspect of the good/service differentiation relates to cost increases from
suppliers or component part manufacturers. Cost increases from suppliers can be of great
concern where a business is pursuing a cost-leadership strategy, but when the product has been
successfully differentiated the business is more likely to be able to pass the cost increase on to
customers. The business is also able to resist the demands from large buyers to lower prices
because that buyer has no real alternative. Have you noticed that, when electrical goods retailers
have sales with greatly discounted products, the sale rarely includes Apple products?

THINK, INK, PAIR , SHARE

Make a list of three products you consider have the attribute of ‘cool’. What is
roughly the price difference between these products and the standard
competing product? How important is brand when you buy clothes? List three
products where price is the main consideration in your purchase. Jot down your
responses and discuss them with your learning partner.
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Literacy evel pment

Obviously ‘differentiation’ comes from the word different. Brainstorm
examples with your family of how differentiation impacts on your daily life,
such as fruit, vehicles, and television channels.

Goods and/or services in

different industries
Because operations management is all about manufacturing goods and delivering services, it can
be helpful at the outset to broaden our understanding of the nature of goods and services.

Is this pineapple a good or a service?

12

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Of course most of you would immediately answer that it is a good. But did you know that when
pineapples were first introduced into Europe in the seventeenth century, they were such a status
symbol that poorer middle-class families would hire a pineapple to impress visitors when they
entertained? The pineapple was returned to its owner when the visitors left. In this case is the
pineapple a good or a service?

THINK, INK, PAIR , SHARE

Work with your learning partner to decide if each of the following scenarios
is about making a good or delivering a service:
1. The employee is attaching a wheel to a new Toyota Prius at the
Toyota assembly plant in Japan.

2. The employee is attaching a wheel to a new Toyota Prius at the 20

000 kilometre assistance to customer at the distributers’ outlet.

3. The parents of a new baby purchase Huggies disposable nappies from a

13
supermarket. Are the disposable nappies a good or a service?

4. The parents of a new baby pay a weekly charge to have cotton nappies
laundered. Are they buying a good or a service?

5. The manufacturers of a brand of motorcars purchase cans of paint to

paint the finished vehicle.

6. The manufacturers of a brand of motorcars outsource the painting of

the motorcars to the paint manufacturer Dulux, to paint each car for a
fee.

Another way to look at the difference between a good and a service is by placing the
product on a scale that sees the difference as a continuum. Would you agree with the
placing of these products?

tooth extraction fast food computer mining coal

Service Good
air-line ticket newspaper television farming
Can you see why it is better to talk about products and services rather than goods and services?
The reason, of course, is that most products consist of good and service components
such as a warranty. The difference between goods and services is difficult to define and
it is not particularly useful to make the distinction. Indeed, it is not particularly useful to
make a
distinction between a product and service. In the past it was easy to define products as tangible
and services as intangible. But what about a computer program purchased as a disc and the
same program downloaded from the internet. One product is tangible and the other intangible.
It is the same product!
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THINK, INK, PAIR , SHARE

Discuss with your learning partner the placement of each of the products on
the continuum between a service and a good. Identify any products you
consider wrongly placed and explain why. Try and think up another couple of
products in the middle and test them out on your learning partner.

Different industries provide very different goods and services. Kmart, for example, is typical
of the retail industry. Kmart provides a service that could be called a ‘shopping experience’.
Customers have expectations about the service they are purchasing. They expect the products
they are purchasing to be in good condition, the surroundings to be clean and pleasant and
- most importantly - a high level of customer service. In addition, they expect goods to
be available when they want them and to have access to the shops when they want to
shop.

14
Railcorp also provides a service and is typical of an industry that involves the movement of
people. When customers purchase a ticket to
go from one destination to another, they also
have a set of expectations about the service
they are purchasing. They expect the trains to
be clean and a reasonable degree of customer
service but, most of all, they expect the trains
to be reliable and run to the timetable. They
also expect the timetable to make trains
available when they want to travel.

The Ford Motor Company provides a product. The Ford factory is typical of goods and services
produced in the manufacturing industry. There is a
good component, the car, and a service component,
the after sales aspects of maintenance and warranty.
When the business purchases products such as
engines or brakes from its suppliers, Ford expects
the parts to be manufactured to the specifications it
gave to the suppliers. This determines the reliability
its customers expect from Ford. Ford customers also
expect the car will be well designed and be
available
when they want it. Customers will also expect a degree
of customisation in terms of things like the colour of
the vehicle and accessories.
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THINK, INK, PAIR , SHARE

What goods or services are produced in the banking industry? What are
customer expectations for these goods or services? What other businesses
are typical of the goods or services provided by this industry? Jot down your
ideas and discuss them with your learning partner.

Interdependence with other

key business functions
Businesses create goods and services in a process called production. Operations management
refers to the activities that transform inputs (raw materials, component parts, labour and so on)
into outputs of goods and services. All businesses do this. Sometimes adding value to inputs to
create a service is not so obvious. The reason a business exists is to produce goods and services.
15
However, just creating the product or service is not enough. The product or service has to
be sold. The specialist activities that design the product to meet the needs of customers and
‘Interdependent’ means
generate the demand by pricing, promoting and distributing the product are just as important.
dependent on each other.
There is a clear interdependence between the operations function and the marketing function.

Finance is also important. Employees have to be paid. Raw materials and component parts
must be purchased. Bills for rent and electricity must be paid. The money from the sale of
products or services must be collected and records must be kept. This is the finance function.
There is a clear interdependence between the operations function, marketing function and
finance function.
These are the three basic functions in a business and as a general rule the success of the
business is determined by how well they work together.

Market research guides new product development. The marketing function will design a
product that is competitive in the market place because it meets the needs of customers better
than competing products. The operations function works with the marketing function during
the development stage to determine the most efficient and effective design from the operations
function. The finance function works with both to ensure the money needed to develop and
manufacture the product is available and the appropriate financial systems for the sale and
collection of the money are in place.

Imagine you were Guy Russo, CEO of Kmart. Your company (Wesfarmers) has just purchased
a business that is declining because it no longer effectively meets the needs of customers as
well as Big W. You need to do three things. The first is to design a product (a shopping
experience) that is better than Big W. You give this task to the marketing function. The
marketing function develops a product based on wider aisles, refurbished stores and new
merchandise with higher profit margins, lower costs and high levels of customer service.

You give the task of creating this product to the operations function. The operations function

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will transform the store with teams of carpenters, painters, shop-fitters and so on. The
operations will examine every aspect of the supply chain from the factory in China, the
container ships, warehousing to the final delivery to a Kmart store. The operations function will
also be responsible for effectively training the thousands of employees to deliver the highest
levels of customer service.

People are very important. A business gets so much of its competitive advantage from the
quality of its people. The business that effectively manages its human resources in terms of the
way it selects, trains and rewards employees usually provides better products and services in
the marketplace. It is the role of the human resource function to achieve these goals.

None of these things can happen without money. You give the task of working out how much
money will be needed and the most efficient way of providing the required money and the
payment of wages and so on to the finance function. The business functions of operations,
marketing and finance are interdependent.

16
Pr cessing the rk f r the unit n the
R le f perati ns management
At the outset, focus on your HSC. Carefully review the unit of work. Practise potential multiple
choice and short responses. Most importantly learn from business. Adopt the basic principles
the most successful businesses have adopted.

Russell and Taylor (2005) have set out the following principles for implementing a continuous
improvement effort:
1. Create a mind-set for improvement. Do not accept that the present way of doing things
is necessarily the best.
2. Try and try again. Don’t seek immediate perfection but move to your goal by
small improvements, checking for mistakes as you progress.
3. Think. Get to the real cause of the problem. Ask why - five times.
4. Work in teams. Use the ideas from a number of people to brainstorm new ways.
5. Recognise that improvement knows no limits. Get in the habit of always looking for
better ways of doing things.

Mem ry rk
Carefully review the work you have done in this section.

What is operations management?

Operations management is concerned with planning, scheduling and controlling the business
inputs that are transformed into finished goods and services. Operations management is all
about managing customer satisfaction. It is the aspect of the business concerned with meeting
customer needs.

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Outline the strategic role of operations management

* Allocate resources to help achieve the goals of the business and improve its
competitive position.
* This can be achieved by:

1. Cost leadership that aims to create a competitive advantage by producing the good
or service at the lowest cost

2. Good/service differentiation, which is concerned with developing products that are

different from those of competitors with benefits or attributes a customer values.

Explain the difference between goods and services in different industries

Traditionally, goods were defined as tangible or physical things while services were intangible
actions performed for the customer, such as legal advice from a lawyer. Today it is more
difficult to make this distinction. For example, a newspaper is tangible, but it also provides the
customer with a service. Kmart is a business typical of those in the retailing industry. This
business provides a service. So, too, does a bus company and a dentist. Ford Motor Company,
on the other hand, manufactures a product. Regardless of the industry, operations management
is
concerned with providing the good and/or service. 17
Demonstrate the interdependence of operations with the other key business functions
Operations management cannot exist in isolation from the other business functions of finance,
human resources and marketing. Obviously finance is required to pay employees and to ensure
inputs of raw materials and component parts are available when they are needed. Marketing is
the function of a business that works out what customers want and develops the goods/services
that will best meet customer needs in a competitive market place. For a business to operate
successfully, the best employees need to be selected, motivated and retained. None of these
functions can be sustained independently of the other functions.

T pic Test - chapter 1

The role of operations management

1. Which of the following best describes the strategic role of operations?

(a) Operations is concerned with correcting the worst problems
(b) Achieving business goals in a dynamic external environment
(c) Being as good as competitors
(d) Gaining control over a turbulent external environment.

2. Which of the following best describes the concept of cost leadership?

(a) Leading the industry in high costs
(b) Concerned with taking advantage of economies of scale
(c) Concerned with lowering the cost of inbound logistics
(d) Creating a competitive advantage by having the lowest cost of manufacturing in
the industry.

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3. Which of the following best describes the concept of good/service differentiation?

(a) Demonstrates the importance of a highly skilled and creative product development
team
(b) Is difficult for competitors to copy because customer loyalty is to the brand
(c) Developing products that are different from their competitors
(d) Is an important barrier to entry to the industry.

4. Which of the following best describes the role of operations management?

(a) Transforming inputs into finished goods
(b) Planning, scheduling and controlling business activities
(c) Managing customer satisfaction
(d) Transforming inputs into products that will effectively meet customer needs.

5. Which of the following best describes the strategic goal of operations management in
a business like Kmart?
(a) Redefine the expectations of customers in the industry
18 (b) Be the best in the industry
(c) Be as good as competitors
(d) Refurbish the stores so they are clean and tidy.

Sh rt resp nses
1. Outline the strategic role of operations management. 5 marks

2. Explain the difference between cost leadership and good/service differentiation. 10 marks

RedPeg Publishing HSC Business Studies

 Role of Operations Management
© 2011 Don Sykes & Kim Crawford - www.redpeg.com.au

Marking your work

Multiple choice answers: 1 (b), 2 (d), 3 (c), 4 (d), 5 (a).

Checklist to mark short response 1

* An introductory sentence that includes the phrase operations management
* Defines the term operations management in the second sentence
* Explains the idea of trying to achieve business goals in a dynamic environment
* Illustrates the concept of the strategic role of operations management with the Kmart
case study
* Is carefully planned with cohesive links between sentences and paragraphs.

Checklist to mark short response 2

* An introductory sentence with the idea that there are two approaches to gaining a
competitive advantage and they are cost leadership and good/service
differentiation
* Defines the terms cost leadership and good/service differentiation in the second sentence
* Mentions a couple of features of cost
leadership 19
* Illustrates the idea of lowest cost with Walmart
* Mentions some of the features of good/service differentiation
* Illustrates these ideas with Apple products
* Indicates careful consideration of cohesion in the sentences and paragraphs.

Answers for Word Search

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operant operation opiate orate oration ornate pain paint painter pant part pate patron peat
piano pirate prat rain rant rapt rate ratio ration repaint retain retina roan rota tape taper
tapir tare tarn tarp tear tinea train trap

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