YEAR 12 BUSINESS STUDIES

NOTES
TOPIC 1: OPERATIONS

Syb 1: role of operations management

Introduction to Operations
Operations is the transformation of inputs into outputs
● Inputs: tangible & intangible
○ Tangible = raw materials, land, labour, capital in the form of machinery and technology
○ Intangible = ideas and information
● Outputs: the products (goods and services) made from the process of transformation (the final product)

Essentially, the operations process forms the foundation of allowing a business to achieve its objectives/goals.
● This applies to both the manufacturing and service sector
○ Manufacturing: turning raw materials into resources
○ Service: processes involved in carrying out the service
● The operations process consists of
● Transformation →the conversion of inputs (resources) into outputs (goods and services)
● Value adding → creation of extra or added value as inputs are turned into outputs
1.1: Strategic role of operations management - Cost leadership, goods/services differentiation
Strategic = refers to long-term, affecting all KBF’s.

● The strategic role of operations = involves operations managers contributing to the strategic direction or strategic
plan of the business
○ To do this, businesses engage in COST LEADERSHIP and GOODS/SERVICES DIFFERENTIATION
○ This is because the strategic goal of operations = productivity, efficiency, lower costs and higher profits

Cost leadership Cost leadership is when businesses aim to have the lowest costs or to be the most price
competitive in the market

This can be done through:

Economies of Scale Cost Management

Cost advantages that can be created by an Looking for ways to manage and
increase in scale of business operations minimise costs:
- Cheaper production
This is bulk buying: because a business - Sourcing mass
is buying in bulk, the price per item produced/standardised materials
reduces (e.g. $5 for 1x t-shirt or $50 for - Outsourcing/accessing cheaper
raw materials
50x t-shirt → as you can see, buying in
bulk is more cost-effective

Example: Coca-Cola uses economies of scale to bulk-buy their packaging materials at a

lower cost to meet volume in demand. Cheaper and more profit

Walmart engages in economies of scale through its 2800 suppliers, thus allowing for the
lowest price possible for its customers.

There is a direct relationship between cost and quality

It is important that businesses ensure costs are not extremely low because this may
promote a low-quality perception in the customer's mind
E.g. SHEIN products are very cheap, thus, prompting consumers to assume that the
quality is quite questionable.

Sometimes, increasing the price may benefit the business as this may promote a high-
quality perception in the customer's mind.
E.g. APPLE prices their products at a high price to promote consumer confidence in the
quality of their products.
Goods/services Differentiation: distinguishing products in some way from their competitor's
differentiation Features, tangibility, customisation and ownership.

1. Product differentiation: goods (cost leader focus)

● Varying the actual product features e.g add ons (cereal fruits or nuts)
● Varying product quality: can be done by making a low-quality model that
is very affordable then increasing the quality
● Varying any augmented features: refers to add-ons or additional benefits
associated with particular goods. (e.g. Apple Watch to complement the
iPhone)

2. Product differentiation: service (require managers to best meet customer

needs while reflecting cost leadership principles)
● Varying the amount of time spent differentiates between service
providers.
● Varying the level of expertise brought a higher level of expertise then =
more specialised service.
● Varying the qualifications and experience; Highly qualified and
experienced service providers= high-quality service
● Varying the quality of materials/technology used in delivery: The use of
computer-based technologies such as accounting software, CAD and
CAM programs, ICTs
3. Cross branding (differentiation can be created from cross-branding)
● Differentiation can be created from cross-branding or strategic alliances.
A strategic alliance between two companies
● This approach adds value to products (goods and services) by offering
consumers added benefits from a cross-branding arrangement
● E.g woolies + Caltex alliance
● E.g McDonald's and Monopoly
● E.g Coles and flybuys

At Qantas, operations management uses cost leadership through Jetstar and product
differentiation through Qantas, to achieve a competitive advantage.

1.2: Goods and/or services in different industries

Standardised Goods
● Goods that are mass produced (usually on an assembly line)
○ Standard in quality
● E.g. McDonald’s fries are generally stanadarised

Customised Goods
● Goods that are varied according to the needs of customers
● E.g. McDonald’s in Australia has the ‘McOz’ and Japan has the ‘Teriyaki Chicken’ burger
● Market focused
● E.g. Qantas - First class, business class & economy
● E.g. Apple - the different sizes and colours of their devices
● The operations process may change
● High degree of interaction between all 4 KBF’s (especially marketing)

Perishable Goods
 ● Have a short life span and must be consumed quickly
● E.g. Milk, food
● Inexpensive and bought regularly (fruits and vegetables)
● Short production time and efficient distribution
● Operation processes must integrate high quality, safety & cleanliness
● Appropriate and robust packaging and cold storage processes both through production and distribution

Non-Perishable Goods
● More durable than perishable goods - greater quality and inventory management
● E.g. canned goods, motor vehicles, clothing
● Can be found in many different industries
● The business must implement effective inventory management strategies and be highly responsive to market
demand in order not to over produce

Intermediate goods
● Goods, having been gone through one set of operational processes, may then become inputs into further
processing
● E.g. a manufacturer may convert steel (input) into tiny screws (output) (operations process 1) → the screws
now become an input for another operations process
● E.g. converting glass into glasses

Services in different industries

● Can be both standardised and customised
● Accounting services, dental services, medical services, legal services = customised
● Fast food services = standardised
● E.g. people visiting a GP may receive a standard service, whereas a person visiting a medical specialist (e.g.
physio) may receive a customised service to cater towards their needs.
● Self-service
● Encouraging customers to take the initiative to help themselves
● E.g. Woolworths and Coles have self-service checkout kiosks.
● E.g. financial services sector and the travel industry encourage people to make their own transactions online
→ when a person cannot help themselves, businesses can then focus on customisation.
1.3: Interdependence with other key business functions

Interdependence = The mutual dependence that they four key business functions have on each other
Syb 2: Influences
2.1: Influences
The way in which it has been asked in past HSC questions:
○ 2013 Q27: Assess strategies that management may use to respond to influences on operations
○ 2015 Q23(a): how could (insert influence e.g tech) influence the transformation process at (business name)

Influences refer to the factors that positively/negatively impact the operations process.
They include:
● Globalistaon, technology, quality expectations, cost-based competition, government policies, legal regulation
and environmental sustainability
● Corporate Social Responsibility

When speaking about influences you must always speak about the positives AND/OR negatives

Globalisation Globalisation refers to the removal of barriers of trade between nations

It is characterised by:
● Increasing integration between national economics
● High degree of finance, capital labour, intellectual capital and ideas and technology
transfer between different nations

Globalisation provides Australian consumers access to a wider variety of goods and

services than would have been available on the domestic market alone (has paved the way
for E-COMMERCE AND OUTSOURCING)

Globalisation has meant that inputs, transformations and outputs can be bought and sold
internationally. This means:
● That cheaper inputs in the form of cheaper labour and cheaper materials can be
sourced or purchased internationally. Thus the supply chain is affected. However,
this may also mean they may be of lesser quality
● It has affected the organisation design and the entire supply chain from sourcing to
distribution
● Outputs can be sold to international markets meaning there are more export
opportunities and also more competition. Thus global brands have become the
norm.

“Reductions in barriers to trade and foriegn investment have encouraged Australians to

compete and learn from the world's best”
“By a range of indicators Australia's firms have become much more productive and
innovative, including through the adoption of new technologies”
○ Australian Government Productivity Commission

Through globalisation
● Businesses can achieve mass economies of scale advantages → global
manufacturing plants: eg ASICS — manufacturer that designs its product in Japan
but has product manufactured in China for a global market cost advantages)
● Large-scale service based businesses will seek to standardise services to take
advantage of global employees/outsourcing employees e.g. Vodafone and Telstra
● Provides market opportunities for TNC’s (transnational corporations)
● Domestic markets are threatened - Businesses that effectively apply cost leadership
 principles through globalisation can undercut the market and dominate.
● Supply chain is significantly impact by global operations
● Globalisation has encouraged IMPORTING and EXPORTING - this impacts our
exchange rate/Australian dollar

The following must be considered to operate in a global market:

● product design must meet the needs of global consumers
● the choice of location for manufacturing facilities,
● the management of quality
● logistics and inventory management processes.

Opportunities:
● New markers of customers and suppliers
● Improved supply chain management
● Production can take place anywhere in the world
Threats:
● Competition in new global markets
● Global competitor in domestic business.

E.G. Apple - its electronic goods are designed in the US but manufactured in China then
sold globally.
Apple sources from all over the world to assemble their products for consumers.
By doing so, they can access experts in their field, at affordable prices, they can control
quality and they can then maximise their profits
Technology The design, construction and/or application of innovative devices, methods and machinery
upon operations processes.

● Improves efficiency and productivity (eg CAD, CAM, ROBOTICS)

○ E.G. Woolies introduced an IT system called StockSmart → forecasts
when stock needs to be filled up nin its distribution centres
Types
● At an administrative level → assist with organisation, planning and decision
making → in control of operational processes.
● At a processing level, technologies are used in:
○ Manufacturing, logistics and distribution, quality management, all aspects
of inventory management, supply chain management and sourcing
Effects on operations
● Cost savings → allows for more efficiency, reducing costs
● Competitive advantage → allows for better quality and new products

● Opportunity: reduced operational costs through the global web

● Threat: increased competition from overseas businesses
● Machine inputs can be used instead of labour inputs → cheaper but impacts the
unemployment rate (to increase)
● Outputs are more innovative or more can be produced and thus creates a
competitive advantage OR can be a threat if competitors are ahead.

Technology is also a strategy

Amazon
● Amazon is the worlds leading e-commerce company and is a pioneer in the use of
automation
● Amazon ships 1,600,000 orders worldwide per day
● Without the exceptional technology, they would not be able to cope with the
magnitude of orders passing through their system
Quality expectations Includes the overall degree of competence which services are organised and delivered.

● The quality expectations of customers will impact on all aspects of the operations
processes including the quality of inputs and quality of the output - final goods or
service.
● Quality expectations differ between goods and services
● Managing quality expectations in both manufacturing of goods and delivery of
services is essential to the goal of operations management.

Quality expectations = how well designed and functional goods are or how well services
are performed
● Level of quality determines level of satisfaction
● Decided by customers and influenced by operations management

Quality expectations of goods

● Quality of design, fitness for purpose and durability
Quality expectations of services
● Professionalism (cleanliness etc), reliability of service provider, level of
customisation

Opportunity = High quality products lead to customer satisfaction which in turn

improves the business's reputation
Threat = Poor quality leads to poor reputation and lower sales. High quality products may
also require businesses to spend larger amounts of money.

Cost-based competition Involves determining break even point (total costs = total revenue), and then applying
strategies to create cost advantages over competition.

● Competing against others via cost

● Similar to cost leadership
● Involves calculating break even and working out how to keep lowering costs to go
about break even = extra profit
● Trying to find the lowest costs
● Balance between cost and quality
 ● Recognises that prices cannot keep increasing → reducing costs is a way to
maximise profits when revenues are fixed
● Fixed costs = do not change regardless of the business activity level
● Variable costs = vary according to the business activity level

Why?
● To achieve cost leadership
● Opportunity: reduced costs = more profit.
● Threat: reduced costs = reduced quality = no access into certain markets
How?
● Outsourcing , sourcing cheaper inputs, updating technology
● Reduce various fixed/variable costs
● Change products/services to ensure they are standardised! (one same product is
cheaper to produce then customised products)
● Examining/scanning competitor prices and attempting to beat this

● Cost-based competition is a feature of operations decisions when businesses decide

upon a cost leadership approach to the operations function.
● Businesses will focus on reducing costs to a minimum whilst maintaining profit
margins.
● Fixed costs are not dependent on the level of operating activity in a business.
●
● Fixed costs do not change when the level of activity changes — they must be paid
regardless of what happens in the business.
● Variable costs are those that change in direct relationship to the levels of output.
Such costs include labour and energy costs.
Government policies Government policies are a source of change for business as they can influence the
processes through inputs (such as subsidies influencing the type of inputs) and the outputs
(ie taxes on certain products e.g tobacco)

● Long term plan of action that apply to a business

● Constantly evolving so businesses have to keep up with changes and take
advantage of opportunuties

Therefore they can affect operations management decisions. These effects range from:
● Taxation rates
● Required materials handling practices
● Work Health and Safety standards (WHS)
● Industry training requirements
● Policies relating to public health
● Changing environmental factors

Carbon Tax
The Australian government introduced a carbon pricing scheme or “carbon tax” through
the Clean Energy Act 2011

The initiative was intended to control emissions in the country, as well as support the
growth of the economy through the development of clean energy technologies. It was
supervised by the newly-created Climate Change Authority and the Clean Energy
Regulator.

However, although it did achieve a reduction in the country's carbon emissions, the
initiative faced significant challenges from the opposition and the public, as it resulted in
increased energy prices for both households and industry and was finally repealed
(REMOVED) in 2014.

Legal regulation Legal regulations can influence the operations processes through inputs (e.g labour costs),
transformation processes (ie WHS) and the outputs (ie safety standards)

● Legislation that is enforceable by law

● Shapes the practices and procedures the operations function must follow
● Operations management not abiding by these laws can have serious financial
consequences AND/OR PENALTIES.
● Operations has particular laws that influence how practices and processes are
conducted.

Human resource laws

1. WHS
Usage of machinery & interacting with the business environment. Providing
ongoing safe and healthy working conditions for employees
2. Training and Development
Usage and application of technology in the most appropriate methods required.
3. Fair work and & Anti-Discrimination Laws
Treating employees with dignity and respect, free from bias and overall
discrimination.
Other areas of regulation:
1. Environment protection
 Minimising pollution, eliminating and safely disposing of any toxic residues
2. Rules related to public health
Including any fair trading rules which influence product safety standards and
fitness for purpose of products.
Environmental Environmental sustainability means that business operations should be shaped around
sustainability practices that ensure resources are used today without comprising resource use in the
future.

● The protection of natural resources for future generations

● Businesses need to reduce their carbon footprint by:
○ Minimising the use of non-renewable resources
○ Sustainable use of renewable resources
○ Reduces and minimise waste
○ Smart inventory control

Thus there is an emphasis on adopting environmentally friendly standards to reduce the

carbon footprint

Carbon footprint → refers to the amount of carbon produced and entering the
environment from operations processes.

This influences the operations process, as the idea is to ensure the inputs of businesses are
used in a sustainable manner and the outputs should also not harm the environment e.g.
recycling.

2.2: Corporate social responsibility

Corporate social responsibility refers to open and accountable business actions based on respect for people,
community/society and the broader environment.

● It involves businesses doing more than just complying with the laws and regulations → labour law
compliance, taxation, trade practices, human rights, environmental and public health compliance.
● Reduced compliance costs → structuring the business's operations so that different aspects are conducted by
outside parties (outsourcing)
● Social justice (human rights), ecological sustainability
● Legal compliance → requirements a business must follow (minimum wage, labour laws)
● Ethical responsibility → meeting legal and social obligations (animal testing)

Formally called the “triple bottom line”. CSR places value on financial returns (profits) as well as social responsibility
and environmental sustainability.

The driver of corporate decision making is not just profit but rather a range of community concerns and social
expectations

Ways in which a business can implement CSR within operations

● Social responsibility by looking after employees: undertaking employee needs (survey), providing
entitlements → legal compliance
● Abiding by the law
● Being environmentally sustainable e.g maccas removing plastic straws
● Limiting the use of toxic chemicals
● Ethical: using safe inputs, avoiding child labour/sweatshops
● Listening to customers and needs
Why is CSR so important?
● Following CSR = positive business reputation → customer satisfaction
● Provides a competitive advantage as CSR promotes a businesses
● Sustainable economic development
● Promotes compliance (legal)
● Ensure businesses orient the operations process towards being more sustainable → increased employee
satisfaction
The difference between Legal compliance refers to businesses abiding by the law (labour laws -
legal compliance and wages/antidiscrimination, work, health and safety, Consumer laws etc)
ethical responsibility ○ Enforceable

Ethical responsibility involves taking into account SOCIAL, COMMUNITY AND

ENVIRONMENTAL CONCERNS
○ Ethical responsibility is going beyond the businesses legal requirements. When
a business does this it shows that they VALUE MORE THAN JUST
PROFITS → as it becomes more expensive to be ethically responsible.
○ Based on your own conscious

Environmental
sustainability and social Environmental sustainability
responsibility
● Practising sustainable development
● Recycling
● Including environmental impacts in
costs
● Businesses using practices and
processes that consume resources
today without compromising future
access to them
● Economic development must be
accomplished sustainably
Social responsibility
● Making a family friendly
workplace
● Keeping the community informed
of decisions affecting them
● Using local employees wherever
possible
● Businesses interacting positively
with and improving the quality of
life of community members (eg
sweatshops being unethical)
● An socially responsible business
tries to: expand the business,
provide for the greater good of
society

E.g animal testing, reducing carbon emission costs, reduce-renew-recyle

Syb 3: Operations process
3.1: Inputs
Inputs are the resources used in the transformation process.
Some inputs are owned by the business, while the others are provided by suppliers

Transformed Transforming

M: H.R.: Baker
● Wheat
● Eggs F:
● Flour ● Bread factory
I: ● Bread oven
● Recipe ● Mixer
C: Customer needs
● Whole grain
● Sourdough
● Rye
● White

Transformed resources Transformed resources are those inputs that are change or converted in the operations
MIC process into something, such as a component to be used as an input by another business or a
finished good or service

Material →
● Raw ingredients, components, parts and supplies
● Are the basic elements used in the production processes and consists of raw materials
and intermediate goods

Information → (regarding how to produce the good or service)

● About how to produce, technological knowledge, analysis of performance
● Is the knowledge gained from research, investigation and instruction, which results in
an increased understanding of how how to develop a product and therefore is used in
production

Customers → (knowledge that comes from the customer on what they need or want)
● Become satisfied and have an improved quality of life
● Are inputs because their desires and preferences are the starting point to production
processes. E.g hairdresser
Transforming resources Transforming resources remain in the business and are the inputs that carry out the
transformation process.

Human Resources:
❖ Mental and physical, labour who apply their knowledge, skills and effort
❖ Employees → people who assemble the inputs, operate and maintain the
machinery, technology, raw materials, finance and equipment used in the
processes, fulfil the sale function, distribute the output and deal with the
customers
❖ Employees are extremely crucial
❖ Well qualified, hard working and disciplined employees = productivity & efficiency

● Labourers
● Baker
● Receptionist

➢ A successful business is one that can attract and retain high quality staff by providing
good wages, working conditions, benefits and motivation.
➢ Good job designs, extensive training programs, flexible work practices and good
communication can all assist the maximise performance and enable the business’s
objectives to be achieved.

Facilities:
Physical assets owned or leased which are required to produce the business output. Refers to
the plant (factory or office) and machinery used in the operations processes.
Major decisions include the design layout of the facilities, the number of facilities to be used,
their location and their capacity.
● Machinery
● Tech
● Land
● Equipment

➢ A successful business is one that has located, designed and fitted out its facilities in
optimum circumstances for efficiency and minimum operation costs.
➢ Modern facilities integrate modern technologies, are well lit, well designed and
labour friendly, which will be highly conductive to productive operations.

Case Study: Qantas

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3.2: Transformation processes

The conversion of inputs (resources) into outputs (goods and services)

The influence of Volume

volume, variety, → number of goods or services that operations needs to produce
variation in demand and ● Volume flexibility: how quickly the process can adjust to increases and decreases in
visibility demand - essential to managing lead times
(customer contact) ● Lead time is the time it takes for an order to be fulfilled from the moment it is made.
Gtime it take to place an order and then receive it. Click and collect in Woolworths
taking up to 5 business days due ot low stock is lead time because they aren’t
responding to volume
● Increase in demand = increase in volume
● How flexible a business is in responding to volume changes.
Failure to adjust can lead to
● Overproduction
● Wastage
● Increased inventory costs

Variety
→ the number of different models and variations in services that operations needs to
create (variety)
● Refers to product range
● Mix flexibility is the mix of products made, or services delivered through the
information process.
● The larger the variety, the more the operations process needs to provide for it
● Influences of product variety – businesses that produce a wide range of goods and
services will require a large range of inputs. In turn, this could be costly and places
pressure on the businesses to constantly review and monitor the prices paid for
inputs. In turn, wide variety poses a threat to cost leadership.

Variation in demand
→ refers to the ability (or responsiveness) of a business to meet an increase in demand for
products made by the business
→ the variations in demand over time; operations need to be flexible to increase or
decrease output.
Influences of variation in demand -
○ Businesses are pressured to adjust their inputs and transformation processes if
demand increases
○ Suppliers of inputs need to be contacted and urged to increase availability
○ Human resources need to be retrained, worker harder or more need to be located
○ Widening of process layout and purchasing of facilities and technologies must occur.
This could put pressure on cost leadership.
○ This could eventually lead to differentiation and could lead to the business producing
goods and services demanded by customers.
○ If demand increases, businesses need to change process layout if products being
produced are durable (warehousing/storage) or if they are perishables
(refrigeration/preservative ingredients)
 ● High demand = increase in inputs
● Demand of the product. Eg during Christmas, Christmas decorations are in demand.
In summer demand for swimwear is higher than in winter
Three Demands
Constant demand
- full-time workers
- Bulk material orders
Seasonal demand
- Contract workers
- Seasonal material orders
Unpredictable demand
- Casual workers
- Frequent material orders
- Face masks and hand sanitiser in covid

Visibility
→ refers to the influence of customer preferences and tastes received through direct or
indirect feedback.
→ the degree to which customers can see the operations in action. Customer input. E.g
providing feedback on chocolate in which the business responded to.
- How customer influence transformation process
- Customers are visible to the business
- Surveys, verbal feedback, online feedback
Influence of variation in visibility - if businesses receive direct feedback like surveys,
letters, blogs or social media posts, businesses can monitor customer needs/wants and make
adjustments to the operations processes accordingly. Allowing businesses to achieve a point
of difference.
Direct contact :
○ Surveys
○ Interviews
○ Warranty claims
○ Letters
○ Wikis and blogs
○ Verbal contact
Indirect contact:
○ Review of sales data and market share data,
○ Observation of people’s decision-making processes
○ Consumer reviews e.g. iPhone 11

Case Study: Qantas

4 V’s at QANTAS

High volume – high level of customers

Mid variety – different seat classes eg economy; food choices
Variation in demand – predictable increase in demand during school holidays and special
events eg world cup; there have been unpredictable changes due to covid pandemic –
Qantas needs to be able to adjust to this.
Visibility – service based industry so high level of customer contact throughout the
process ie the people in the business deal with customers – think of flight attendants
Sequencing and Sequencing → identifying the order in which tasks need to be performed
scheduling - Scheduling → identifying the time required for each task in the assembly process
Gantt charts, critical
path analysis - If a manager does not have a good handle on the S&S, then this could lead to less
efficiency, productivity and ultimately a loss of profit.
Keeping track of all activities can be done through:

Gantt Charts
A Gantt Chart is a type of bar
chart that shows both the
scheduled and completed work
over a period of time. It is often
used in planning and tracking a
project.

Outlines the activities that need to be

performed, the order in which they
should be performed and how long each activity is expected to take.
- used for any process that has several steps and involves a number of different
activities that need to be performed.
- Main advantages of using a gantt chart
● force a manager to plan the steps needed to complete a task and to specify the
time required for each task
● make it easy to monitor actual progress against planned activities.

Advantages Disadvantages

- Records the number of tasks - Does not show the relationship

involved - this is good for planning between each task
purposes - Can be very time-consuming to
- Shows estimated time frame create and may not always be
- Allows business to compare actual accurate.
progress against planned progress
- Forces a manager to plan the steps
needed to complete the task/specify
the time required for each task to
make it easier to monitor

Critical path analysis

CPA is a scheduling method or technique that shows what tasks need to be done, how long
each takes and the order necessary to complete those tasks.
- It aims to find the SHORTEST PATH (usually longest length of time) to complete
the task.
- All tasks must be completed - find the path that encompasses the most activities in
the shortest time
Advantages
- Helps reduce risk and costs of complex
activities
- Encourages careful assessment of the
requirements of each activity in a
project
- Help spot which activities have some
slack ‘float’ and could therefore transfer
some resources= better allocation of
resources
- A decision making tool and a planning
tool- all in one
- Provides managers with a useful
overview of a complex project
- Links well with other areas of business
planning- including budgeting and cash
flow forecasts
Disadvantages
- Reliability of CPA largely based on
accurate estimates and assumptions
made
- CPA does not guarantee the success of a
project
- Resources may not actually be as
flexible as management hope when they
come to address the network float
- Too many activities make the network
diagram too complicated. Activities
themselves may have to be broken
down into mini- projects.
Technology, task design Technology
and process layout Technology in operations involves the use of machinery and systems that enable B’s
transformation process to be more effective and efficient
● How has technology paved the way for machinery and reduce human labour?
● Technology as something that facilitates the process
● Two types : manufacturing and office technology
● Technology are highly specialised equipment or computers used by a business or in a
factory
● Task design and process layout are used by an operations manager to use this
technology efficiently
Operation uses manufacturing technology that has allowed businesses to make new and
sophistication products (eg. CAD, CAM robotics) → this has allowed businesses to
respond to the influence of globalisation and technology and has paved the way for improved
productivity/efficiency (thus = competitive advantage)

Manufacturing Technology
➔ robotics, computer-aided design (CAD) and computer-aided manufacturing (CAM).
CAD can be manufactured by CAM
Robotics are specialised forms of technology capable of complex tasks:
- Engineering, specialised research and assembly lines
- More accurate than human labour. Also performs repetitive and/or dangerous tasks
- There are high costs but make the transformation processes consistent and effective
and minimise waste

CAD: Computer Aided Design CAM: Computer Aided Manufacturing

A computerised graphical design tool that A software used to allow the manufacturing
generates three-dimensional diagrams from process to become computer controlled
a set of given input data - Linked to CAD (used with CAD)
- Material usage can be calculate, as - Used more broadly to calculate how
can time for the task to be much of each input resource is
completed → quantifies the cost of needed
- Can store historic purchasing
the project records to assist with present
- Input parameters can be altered if purchasing decisions
cost is too high
- Linked to printers so hard copies can
be given to clients
- Easy to customise → meet
customer needs

Office Technology
Office technology has created the opportunity for people to do more work in less time
● Allow workers to work away from the office (COVID-19)
Development like computers and modern have helped people:
● Do more work in less time
● Greater range of completed tasks
● Allowed people to work away from the office
Telecommute is to ‘commute’ or travel to work, electronically. Some include:
● Working from home
● Working from a different location
● Delivering work through emails, SMS, google hangout etc.

Task Design
Involves classifying job activities which make it easy for an employee to successfully
perform and complete the task.
Grouping based on job activities

Task design refers to planning all the separate activities that need to be done to complete a
task. Each activity is broken down into separate steps and allocated to machines and
employees with the appropriate skills.
If the flow of activities are organised into a logical sequence, employees will be able to
successfully perform and complete allocated tasks. Task design usually involves the
following steps:

Process Layout
Layout is where operation processes take place. There are many ways to organise the layout
of a workplace. There are different layouts for plants or offices.
This is determined by process flow: the path the raw materials and components will follow
as value is added. The layout will depend on the type of tasks performed
1. Process layout
The arrangement of equipment/machinery are grouped by the function they perform.
 Advantages → allows for flexibility and customisation as staff are specialised

2. Product layout
Characterised by the manufacturing of a high volume of constant quality goods e.g.
assembly line + mass production
- Product layout is where the equipment arrangements relates to the sequence of tasks
performed in manufacturing.
- Operations managers set times for production.
- Emphasis on sequencing from one work cell to another.
The product moves from station to station - HIGH VOLUME/ CONSISTENT QUALITY
Advantages → faster, standardised

3. Fixed position
Product production deals with layout requirements for large-scale, bulky
activities. E.g. bridges and aircraft.
- Product remains in the one location due to its weight or bulk eg construction sites.
Office layout:
Aim of efficiency → minimal disruption and time wastage
- Safe office environment.
- Workstations: desk area for office workers.
- Made to suit the business.
- Suit also include a break room for employees.
Monitoring, control and This is an important part of the operations process as transformation processes need to be
improvement controlled, monitored and improved upon.
Monitoring → watching what happens, watching the process, scanning the environment
to ensure everything is going right
Controlling → fix the defects, fixing as you go
Improving → changing the design, often after the product is sold through feedback,
revamping using feedback, can also improve before selling according to personal
feedback and opinion

Monitoring
Refers to the collecting and analysing of information (actual vs planned) so that processes
can be improved. Monitoring the process of measuring actual performance against planned
performance. Businesses will put into place Key Performance Indicators (KPI) so that they
can actually see if targets are being met.
Control
Is the process of comparing the predetermined target against the actual result and assessing
what action is needed to correct a shortfall.
Control occurs when KPIs are assessed against predetermined targets and corrective action is
taken if required. Fix during the process.
Improvement
Refers to systematic reduction of inefficiencies and wastage, poor work processes and the
elimination of any bottlenecks.
A bottleneck is an aspect of the transformation process that slows down the overall
processing speed or creates an impediment leading to a backlog of incompletely processed
products.

3.3: Outputs
Outputs = the final result of the businesses efforts….this can be the final product or the service provided.

The overall transformation process must ensure that the output is of high quality and meets customer expectations!
● Output must always be responsive to customer demands.
● Issues of quality, efficiency and flexibility must be balanced against the resources and strategic plan of the
business

The most obvious output = the good/service

However…customer service and warranties are essential in measuring the effectiveness/performance of the output.

Case Study:
Outputs at Qantas
Customer service Customer service refers to how well a business meets and exceeds the expectations of
customers in all aspects of its operations.

Customer service is a non-physical output of the operations process. It refers to how well the
business can meet the expectations of customers.

Operations management is responsible for the provision and quality of the product and if
customers are disappointed in these things, they will look to other businesses for an
alternative product.

A good quality product, which is provided in a timely fashion, will not only encourage
customer loyalty but will often let the business charge a higher price than competitors.

Why is customer service important?

Market research has shown that those businesses capable of providing superior customer
service can:
○ charge an average of 10 per cent more for the same goods and services
○ grow twice as fast as their competitors
○ increase their market share and profits

Thus, through providing high quality customer service, a business can ultimately achieve a
competitive advantage as customers are more satisfied = customer retention/loyalty =
increased sales = increased profit

Warranties A warranty is a promise made by a business that they will correct any defects in the goods
they produce or services they deliver. A warranty is an assurance that a business stands by
the quality claim of the product it makes and provides to the market.

The amount of warranties applied to a product can indicate how effective the quality is - if a
product has many warranties, this can mean that the quality is poor.
 ● Measures the effectiveness of operations processes
● Made against goods that hace defects arising from an issue in transformation
● The number of claims made against a business will give an indication of problem
● Costly to recify the problem
● Lead the business to improve transformation processes.

Case Studies

The article: https://www.abc.net.au/news/2019-12-17/accc-issues-new-takata-airbag-

warning-affecting-thousands-cars/11805928

The recent recall of cars carrying Takata airbags that were sold in Australia.
● The recall of tens of thousands of cars led to the replacement of the faulty bags.
However, these rectification costs are expensive.
● Operations managers need to trace the source of the fault in manufacturing and
rectify it. In this way, the warranty claims lead the business to improve
transformation processes.
Syb 4: Operations strategies
Competitive advantage → in business report
Use examples of businesses that utilise strategies
Include performance objectives and strategic roles

4.1 Performance objectives

Performance objectives are goals that relate to particular aspects of the transformation processes.
These objectives or targets will be set so that the business achieves a competitive advantage through improved
efficiency, and productivity resulting in profitability.
The 6 main performance objectives include:

Quality Often determined by consumer expectations, which are used to inform the production
standards applied by the business. Consider quality of design, conformance and service

Speed The time it takes for the production and the operations processes to respond to changes in
market demand. Include reduced wait times, shorter lead times, faster processing times.

Dependability How consistent and reliable a business’s products are

Flexibility How quickly operations processes can adjust to changes in the market

Customisation The creation of individualised products to meet the specific needs of the customers.
Services are often customised.

Cost The minimisation of expenses such that operations processes are conducted as cheaply as
possible.

4.2: New product or service design and development

New product or service design refers to a businesses efforts in actively trying to improve the product or service design.
E.g Apple is renowned for continously changing their product or service design to meet the changing preferences
of consumers/society (iPhone 14) → this change in preferences ultimately determine which products are
designed/developed.
● Changes and innovations in technology enable new appealing products to be made. E.g face ID, fingerprints,
online chats etc
● Businesses have adapted to reflect new technology

New Product Design

When designing/innovating a new product, the following must be considered: quality, supply chain management,
capacity management and cost
● Supply chain management → a new product will draw from suppliers and may extend the range of supplies,
timing or the volume of supplies.
 ● Quality → customers will demand particular quality, and certain attributes and features.
● Capacity management → may increase use/range of present resources or require investment in new
technology and machinery.
● Cost → arises from value adding. determined from the amount of inputs, time and energy used.

Product utility = the usefulness and value that a product has from the consumer’s point of view.

Design and Development

There are two approaches to take when determining design:
1. The preferences and desires of consumers, as identified by market research, change therefore determining which
products are designed and developed
2. Changes and innovations in technology that enable new, appealing products to be made because they use
advanced technologies, which give products greater functionality.
One of Apple’s major strengths is that it maintains complete control over the design and development of both software
and hardware. Apple matches the changing preference of consumers with changes in technology. (Intuitive human
friendly interface).
4.3: Supply chain management
Integrating and managing the flow of supplies throughout the inputs, transformation processes and oupts to meet the
needs of customers

‘Top down’ or systems approach = tracing backwards through all processes that add value, all the way to inputs.

“supply chain management involves both sourcing (supply-side) as well as logistics and distribution.”

Sourcing- global sourcing

Also called ‘procurement’ or ‘purchasing’, sourcing refers to the purchasing of inputs for the transformation processes.

Sourcing strategy revolves around these four factor

s:

In recent years there have been four particular trends in Supply Chain Management (SCM).

These trends include:

Supplier rationalisation (assessing the number and diversity of its suppliers)

Vertical integration (backwards so the supplier is owned by the business, business is its own supplier)

Cost minimisation (use of offshore suppliers)

Flexible/responsive supply chain processes (‘lean’ processes - minimise waste, seek to continually lower costs or
improve processes and processing speed).

Logistics Defined as: distribution but includes transportation, the use of storage, warehousing
and distribution centres, materials handling and packaging.

Distribution of the good:

= the methods of getting the goods or services to the customer and everything that happens
in between. Was it shipped? Where was it manufactured?

Various distribution channels:

Transportation & distribution

- = The physical movement of inventories

- type of product and cost of transportation will determine the transport

Storage, warehousing and distribution centres

- Storage = a secure place to hold stock until it is required.

- necessary when there are numerous outlets through which stock is sold and when
demand is variable and needs a responsive supply chain.

- may be long term or short term

Warehousing

- Warehousing = use of warehouses for the storage, protection and, later, distribution
of stock.

- a place for holding inventories = associated costs

- useful as a storage for items that need to be transported with little notice

Distribution centres

- These are not intended for long term storage.

- located to minimise the time it take to supply stock to retail outlets

- requires managers to balance DC cost with the time saved in logistics.

Materials handling and packaging

- particular standards and methods of operating need to be applied

- ^ some products require particular skills, care or attention when being moved

- gov. Regulations for methods of storing dangerous or delicate goods

- requires packaging to be of a particular standard and to carry warnings

E-commerce E-commerce involves the buying and selling of goods and services via the internet.
- must be able to manage supplies that are affected by online ordering
- stock levels must be managed well and information exchanged frequently

E-procurement (Electronic ordering) , or the use of on-line systems to manage supply,

allows suppliers direct access to the business’s level of supplies. This process is enabled
by B2B which refers to direct access from one business (the supplier) to another (the
buyer).
- B2B = business 2 business → direct access from one business (the supplier) to
another (the buyer)
- When stock falls to a predetermined point, the supplier will supply even
without a formal request from the buyer.

Business to consumer directly

- B2C = business 2 consumer → the selling of goods and services to consumers
over the internet
- Eg agoda.com → sells accommodation to travellers on behalf of hotels.
- This means that distribution from the business to the consumer must be
quick, efficient and secure.

The Iconic, Australian clothing E-retailer, has made express delivery their competitive
advantage. In Sydney, clothes are delivered 3 hours after ordering and they offer free
returns if you don’t like your purchase

Global sourcing Buying or sourcing from wherever the suppliers are (on a global scale) that best meet the
sourcing requirements.

● Benefits include:
○ cost and expertise advantages
○ access to new technologies and resources.
● Challenges include:
○ the possible relocation of aspects of operations
○ the increased cost of logistics, storage and distribution
○ managing different regulatory conditions between nations
○ the increasing complexity of overall operations when sourcing from diverse
locations.

4.4: Outsourcing
“The use of external providers to perform business activities”
“Outsourcing is widely used for improving business efficiency and profitability”

What can be outsourced?

- Manufacturing products, certain inputs or the whole product. Value-adding manufacturers, design,
merchandising, sourcing, distribution and logistics. e.g Nike outsourced the manufacturing of their t-shirts,
Apple outsources their cameras
- Human resources including employee remuneration, employee counselling, pensions, data management, training
and development e.g outsourcing call centres, Vodafone outsources labour from India → these people attend
to customer phone calls at a cheaper rate
- Skills/certain functions e.g a social media agency outsourcing the accounting getting function by another
accounting company to create their invoices.

● Goods (inputs) can be outsourced

● Services can also be outsourced → when a service is performed by an external provider that specialises in a
particular business function, it will do so at a lower cost and with greater effectiveness than the same task
done within the business hierarchy

Difference of sourcing (global sourcing) & outsourcing

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Types of ‘outsourcing’
Onshore → domestic outsourcing, within the same country
Offshore → in another country

● Outsourcing allows a business to access specialised services.

● This can reduce cost and give access to activities that
● improve quality.
● A business can then focus its efforts on driving brand value,
● accountability and profits – NOT on its “core function”!
● The core function – production – may have been outsourced.
● Outsourcing is an ongoing business trend called BPO
● (Business Process Outsourcing).
 ● Services can be outsourced just as production can be.
● Services may include marketing, human resources and finance tasks.

Q2. 2 advantages 2 disadvantages

Advantages Simplification:
● Reduces the number of activities within a business

Efficiency and Costs Savings:

● Cheaper labour, skilled labour in offshore locations (equals lower costs). It is more
cost effective to pay a highly skilled individual than to train and develop current
employee skills

Access to skills/resources lacking within the business:

● access to highly skilled persons therefore there is no need to spend money on
training and development.
● Improve the quality of work

Increased process capability:

● access to improved tech & skilled labour = products are produced / delivered to the
market with improved levels of service

Improvements to in-house performance

● A business using outsourcing can therefore focus on core competencies → this
can improve in-house performance as it can really focus on making internal
changes that reduce cost and improve profitability.

Further advantages include:

● Increased accountability
● Creation of partnerships
● Can avoid trade barriers
Disadvantages Cost vs. benefits - payback costs
● This refers to how long it takes to repay the cost of organising outsourcing and
make the required organisational changes.

Communication and language:

● With language and communication barriers with international outsourcing, there
might be confusion over expectations, cultural differences and differences in the
way B issues and problems are managed, misunderstandings about agreed service
levels and acceptable KPI’s
● This can lead to confusion.

Loss of control standards and information security

● When businesses outsource, some information becomes disclosed.
● As the business is not in full control of operations, the business might risk their
standards being jeopardised.

Organisational change and redesign:

● There may be downsizing, causing the loss of domestic employment → job
migration can help but the difficulty of acquiring a work visa may impose a
barrier on this.

Further disadvantages include:

● Hierarchies become disrupted and changed → outsourcing may force more
hierarchies to be created.
● Loss of corporate memory & vulnerability due to reliance on outsourcing provider

4.5: Technology
- The pursuit of technological breakthroughs to improve product features, or to improve operational processes,
leading to greater efficiency, productivity, lower operational costs and higher profitability
- Firms should always pursue a competitive advantage by utilising technologies created by other businesses or
pursue interval innovations through R&D.
● Technology is an influence, but also a strategy

When to apply this strategy?

● when rival firms invest heavily in technological innovations
● when internal technologies are dated, inefficient and costly (repairs)
● when firms seek to obtain long term competitive advantage through advanced production capacity
Leading-edge ● Most advanced level of technology at that time (frontier innovation - 3D printing)
● Innovations developed internally (R&D - expensive, time-consuming)
● First mover advantage; if hard to imitate, the competitive advantage over rival
firms is secured.
● Risk: innovation fails, increasing defects, loss of productivity, hard to repair.

Established ● Widely used, proven to work, the standard for an industry

● Easier to repair, functionally sound, fewer glitches
● Cheaper and more accessible (barcoding, CAD, CAM)

4.6: Inventory management

Advantages and Inventory stock: refers to the quantity of raw materials, work-in-process and finished
disadvantages of holding goods that a business has on hand at any particular point in time.
stock
Inventory management will have a significant impact on transformations processes and in
operations strategies.

Holding sock → not selling just keeping

Advantages Disadvantages

- Consumer demand can be met - Costs including storage charges,

when stock is available.
- It reduces lead times between
order and delivery.
- Stock can be moved to distribution
centres, which can then ensure that
it is transported to customers as
required.
- Making goods in bulk may reduce
costs as there are economies of
scale in purchasing discounted
inputs.
spoilage, insurance, theft and
handling expenses.
- The invested capital, labour and
energy cannot be used elsewhere
as it has been used to create the
stock.
- The cost of obsolescence, which
can occur if stock remains unsold
for an extended period of time.
Holding old stock that will go to
waste, no use, can’t be sold, no
one is interested in buying it,
taking up space
LIFO (last in first out) LIFO is a method of pricing inventory that assumes that the last goods purchased are also
the first goods sold and therefore the cost of each unit sold is the last cost recorded.
Last= newest, most recent
In Businesses applying LIFO, the B would apply cost on a last-in-first-out basis → the
stock bought last would assume to have been sold first.

The newest products make the most profit, therefore they sell them at a high price

E.g. the sale of iPhones at Apple use the LIFO method

(the last batch would be considered the ‘newest’ batch, allowing the business to price it
higher, and the first batch would be the ‘oldest’ batch, which would be priced lower) . If
Apple doesn't sell new items first they can’t take advantage of the higher prices.

Advantage:
The advantage of using LIFO is that the prices used to calculate the cost of sales, and
therefore the gross profit, are more recent and therefore more closely reflect their
economic value.

Disadvantage:
However, in times of falling prices, LIFO overstates profits and maximises taxes.

FIFO (First in first out) FIFO is a method of pricing inventory that assumes that the first goods purchased
are also the first goods sold and therefore the cost of each unit sold is the first cost
recorded.

In B’s that apply a FIFO, the B would apply cost on a first-in-first-out basis → the
stock bought first would assume to have been sold first.

Perishable goods use FIFO method GROCERY STORES- e.g. managing the
inventory of fresh milk
- This is because perishable goods usually have a short life span and must be sold
before their use-by date is over.
JIT (Just in time) Just-in-time (JIT) an inventory management approach which ensures that the exact
amount of material inputs will arrive only as they are needed in the operation process

★ ensures that the exact amount of material inputs will arrive only as they are needed
in the operation process.

★ allows retailers to display a range of products as they need to store less and can
order in response to consumer demand.

★ saves money as there are no expensive holding and insurance costs.

★ requires flexible operations function with flexible processing.

★ requires high ability to respond to changes in market demand & reliable

supplier deliveries → must be received at the appropriate time

E.g. Fruits and vegetables, butchers with meat, poultry - they order stock just in
time!!!

4.7: Quality management

Quality management refers to those processes that a business undertakes to ensure consistency, reliability, safety and
fitness of purpose of product.

Note: quality is also a PERFORMANCE OBJECTIVE → Since quality is a performance objective and something
that is constantly assessed by customers, quality management is an important strategy that needs to be embedded
in all businesses to achieve a competitive advantage!!!

There are 3 stages:

1. Quality control
The process of undertaking inspections at specific points of the operational process.
- This is a reactive approach to quality management, but systems can be developed to automatically
intervene in the process
2. Quality assurance
The adherence to international standards through embedding quality standards into the manufacturing process.
- This can be materials, strength and durability, and safety standards. International standards ensure firms
can enter and compete in global markets.
3. Quality improvement
Focuses on two aspects: continuous improvement & total quality management.
- Continuous improvement → the belief that over time processes will be made more efficient and
effective
- Total quality management → ‘holistic’ approach however in that quality becomes both a
 commitment and the responsibility of every employee of the business.

The holistic approach to quality management is ‘total quality management’

Control
Quality control (QC) check the quality of final output using inspections, measurements
and interventions at various points in the production process.
● This approach reduces problems and defects in the product by using inspections at
various points in the production process, before the product is finalised.
● Businesses must ensure labour is appropriately trained to apply quality standards
○ quality standards = standards that have been designed to assess the quality
of a product - B must assess the quality of products and processes against
the standards.
● These inspections ultimately ensure the quality standards are being met
● In service businesses → inspection of employee performance may be conducted
● Controlling various stages of the production process. Ensuring everything is going
well at every stage in order to fix any problems straight away.

Example: YAKULT Australia Pty Ltd

- its quality management system complies with International Organisation for
Standardisation’s relevant Standard (ISO 9001:2015) which ensures that it meets
the highest international food manufacturing standards.
- All company procedures are regularly audited. Further, all bottles are randomly
inspected for incorrect printing and lid seals.
- Yakult samples are collected for sampling, quality assessment and taste in the
company’s onsite quality control area.
Assurance
Quality assurance (QA) involves the use of a system to ensure that set standards are
achieved in production.

● done through taking measurements & assessing them against pre-determined

quality standards.
● Eg → storing fresh meat below 4 degrees to prevent salmonella bacterium
● Using certification → E.g. a motor vehicle assembly industry would not be able
to deal with a supplier that was not certified
● QA standards developed in response to the impact of globalisation and the
international emphasis on quality→ applied universally,
● Widely used international standard= ISO 9000 series of quality certification (ISO =
International Organization for Standardization)
● System, measurement, checklist
● Can delay products if they have to wait for standards to be met

ADVANTAGES DISADVANTAGES
• Less wastage as defects are identified • Can cause delays
early
• Fewer warranty claims
Improvement Continuous improvement is an ongoing commitment to improving a business’s goods
or services.

- the inclusion of staff into improvement processes

- all staff are encouraged to demonstrate initiative and to suggest areas where
improvements can be made.
- a focus on improvement is applied to obtain + maintain a competitive advantage

ADVANTAGES
• Highest level of quality should be
evident
• Involves all employees
• Employees are encouraged to take
initiative to suggest ways to improve
DISADVANTAGES
• Employees need to be supportive of
the process
• Expensive as workers need to be
retrained and may involve use of
better equipment etc.

Total Quality Management

TOTAL QUALITY MANAGEMENT (TQM) focuses on managing the total business

to deliver quality to customers.
- Ongoing commitment to excellence that is applied to every aspect of the business
- Emphasis on employee involvement in the prevention of quality problems.

To achieve TQM objectives there are four elements that must be met:
1. Benchmarking
2. Employee empowerment
3. Focus on the customer
4. Continuous improvement

Innovation, employee involvement and quality are closely aligned and indicate
quality working processes.

4.8: Overcoming resistance to change

When the internal or external environment change, managers may feel reluctant and resistant to implementing change in
the business.

A key influence on any operations strategy arises from the need to manage and be responsive to change. All
businesses are subject to changes from:
 • The external environment eg legislative and regulatory changes, changes in economic conditions, social changes
over time and technological breakthroughs. This links back to ‘influences’ on operations.

• Within the business through the initiative of staff or the application of technology and a focus on innovation.
However, change can often be resisted, due to:
• Financial costs
• Psychological/emotional: inertia
Thus, a business needs to apply particular skills to help manage change processes change the resistance put up by
workers.

The following steps are needed to manage change effectively to reduce such resistance:

1. Identify the source(s) of change and assess whether there is a need to accommodate change through adjustments
to business processes.

2. Lower the resistance to change through communicating with employees about the need for change and getting
widespread support for the change.

3. There may be a need to use change agents as staff who are included in the process of creating a culture of
change and setting goals, will generally be more supportive.

4. It may be necessary to apply change models such as Kurt Lewin’s unfreeze-change-refreeze model or the more
contemporary Kotter’s eight-step change model. See page 111 of textbook for more information.
Financial costs The cost of change is a significant reason why managers may demonstrate a resistance to
change.
The main financial costs associated with change include the:
● cost of purchasing new equipment – e.g Film for digital
● cost of redundancies – loss of work arising from obsolete skills
● costs of retraining employees – new technology requires new skills
● costs associated with structural reorganisation of the business, including changes
to plant and equipment layouts.

Purchasing new equipment The purchase of equipment such as machinery and technology is considered a capital cost.
Advantages:
● Improved processing flexibility and speed, and reduced lead times
● Consistency in production
● Higher quality in processing
● Reduced waste and loss from equipment failure

Redundancy payments Introducing new equipment often leads to redundancy of employees, which incurs a huge
cost to the business in redundancy payments as these workers are entitled to compensation
for losing their jobs. If these costs are too high, there will be resistance to the changes
occurring. One strategy to overcome these higher costs is to issue more shares to raise
extra capital.

Reorganising plant layout
● A production line is generally laid out in the most efficient way to save time
between processes. If new equipment is purchased, this layout may need to be
changed. If the changes are minor, little reorganisation will be required and it
would make minimal disruptions to the production process.
● If major reorganisation is required or if the whole plant must be relocated, a lot of
down time would be necessary, costing the business money. There may be some
resistance to purchasing new equipment if the old equipment is still working well.

Inertia Inertia is the psychological resistance to change.

Inertia – a feeling of uncertainty or fear of the unknown, when change is imminent or

pressing, can lead people to resist. Basically, inertia refers to a psychological
resistance to change.

- Although inertia is not financial resistance to change, when people do not change
or adapt then the business can feel the financial effects of that resistance.

4.9: Global factors

Several global factors present opportunities when assessing the operation strategies om managing a business

Each of these factors facilitate a comprehensive examination of the impact of globalisation on operations strategy.

The 4 global factors S.E.R.G

Global sourcing Global sourcing is a broad term that refers to businesses purchasing supplies or services
without being constrained by location

● Purchasing inputs/services across the globe to achieve cost advantages!!!

● Involves undertaking any business decision that leads to achieving cost advantages
● Also known as a ‘procurement strategy’ - e-procurement (procurement is the act of
obtaining goods/services)

Byron and bow

GOAL: expand production capacity
How will global sourcing maintain the success of this business?
- Can globally source materials/fabric from other countries eg, China at lower costs
- Can hire employees from their new overseas location → the locals would have a
better understanding of the overseas location → can improve customer service
due to cultural understanding
- Can improve efficiency
- Can globally source machinery if they choose to operate domestically. Through
global sourcing, they are able to buy high-tech machinery for production from
other countries e.g USA that is highly efficient and bring it to Australia. Thus
increasing productivity, efficiency and maintaining control and quality
Economies of scale Economies of scale refers to cost advantages that can be gained by increasing the size,
or scale, of production.

- This means that businesses can lower their per unit input costs.

Economies of scale becomes a global factor when businesses respond to increases in

demand and volume that necessitate making higher product volumes.

- As the scale of production increases, the costs per unit falls. This means that
profitability can rise.

For multinational corporations (MNC), economies of scale can arise in marketing, with
branding and advertising saving costs on duplication. as seen with homogenised
advertising and branding in companies like Nike or McDonalds.

Further economies of scale can be created in the field of human resources through the
application of training and development and the range of strategies globally.

Bryon and Bow

- due to increasing demand, B and B can bulk buy their inputs at a cheaper cost to
respond to expansion in production capacity

→ this enables them to achieve cost advantages and competitive adv

- E.g they can buy 500x units of fabric for $100 instead of 1 unit for $5 for uniforms

Scanning and learning Refers to learning the best practice from scanning the internal and external
environment.

● This allows businesses to achieve a competitive advantage by scanning/learning

from their competitors and doing better
● Management journals, industry and business associations, conferences and other
forums act as opportunities for businesspeople to learn from one another.
● Another source of learning comes from staff members and managers who have
worked in other businesses sometimes internationally.
○ Diversity of experience helps businesses learn how to develop flexibility
and insight.

Who are the competitors? What are they doing? Override competitors. Learn from
competitors. Implement the effectiveness of competitors' strategies

Example:
‘environmental scanning’ in the supermarket industry - this means scanning the external
environment to invest in innovations that improve customer experience/satisfaction.

Coles invested in self-scan technology to improve efficiency for customers. Woolies

‘scanned’ and followed with an innovative approach to override Coles.
 Aldi was overriding Coles and Woolies in terms of costs due to their strong supplier
relationships, which forced Coles and Woolies to implement cost-leadership practices
(because of scanning)

Research and development R&D helps businesses to create leading-edge technologies and to create innovative
products and solutions.

● It involves researching and developing what the consumer wants so that the
business can achieve their goals and heighten success
● Companies such as CSL Ltd and 3M spend huge amounts of money on R&D,
developing innovative products to better meet the needs of consumers.
● A central aspect of R&D is ascertaining what consumers want and assisting to
create products that meet their needs.

Cost leadership
Goods and service in different industries → Customised goods
Interdependence