Unit 4 Flashcards
(50 cards)
Why does a business set operational targets?
- to act as a focus for decision making and effort
- to provide a benchmark against which success or failure can be measured
- to improve co-ordination, by giving teams and departments a common purpose
- to improve efficiency, by examining the reasons for success and failure in different areas
Operational objectives:
- concerned with those aspects of the business which are directly linked to the fulfilment of customer orders.
- takes inputs
- process them to form an output
- distributes outputs to customers
- related to how efficiently aspects of this process are achieved.
Numbers of measures of efficiency related to operational objectives:
- cost:
→ the cost to the business of each individual product of service supplied - quality:
→ quality of raw materials processes, output and customer service to match customers’ expectations - speed of response and flexibility :
→ speed with which customers’ needs are met & the ability to tailor good to meet individual needs i.e. Matching supply to demand - dependability:
→ getting the right product, with the right quality & quality to the right customer on time. - environmental objectives:
→ meeting targets to minimise any detrimental effects of the operations of the business on the environment. - added value
→ the ability to ensure that the value of the output is higher than the sum of the value of all the value of all the inputs
What are the 4 measures of operational performance?
- labour productivity
- unit costs (average cost)
- capacity
- capacity utilisation
Labour productivity calculation:
Output per period
—————————————————
Number of employees per period
How can an increase in labor productivity benefit a business?
- Increase output without affecting costs
- reduce costs without affecting output
-∴ possible for a business to increase output & cut costs at the same time.
What are the 2 main types of business growth?
1) organic growth: growth that comes from within the business- such as increasing sales or opening new branches
2) inorganic growth: growth that comes from external sources, such as mergers, acquisitions or takeovers
What is a strategic objective?
Long-term goal / target a business aims to achieve / help fulfill missions & visions. Objectives guide businesses strategy & decision-making
What is the difference between mission & vision statements?
- Mission statement: declaration of company’s purpose & primary objectives
- vision statement: forward-looking statement, outlines where business sees itself in future.
What are some advantages of internal (organic) growth for a business?
- Less risk compared to external growth.
- more control over the process
- can improve efficiency & productivity without need for acquisitions (when a company purchases another company)
What are disadvantages of mergers and acquisitions?
- High costs involved
- integration issues, differences in cultures
- potential job losses
- risk of negative impact on brand reputation.
What is a SWOT analysis?
Strategic planning tool, identifies businesses Strengths, Weaknesses, Opportunities, and Threats. Helps businesses understand current position, make informed decisions
What is the definition of operational objectives?
Specific, measurable goals set by a business’s operations function to support overall corporate objectives.
What’s an example of setting operational objectives?
- Improve quality by reducing product defects by 10% over the next 12 months
- increase capacity utilisation to 85% within 6 months
What are some types of operational objectives?
- Cost and volume targets
- quality targets
- efficiency and flexibility
- environmental objectives
- Innovation
- dependability
Why do businesses set operational objectives?
- improve coordination
- guide decision-making
- motivate staff
- measure performance
What is the formula for labour productivity?
Labour productivity = output per period / number of employees
What is the formula for unit costs?
Unit costs = total costs / total units produced
What is the formula for capacity utilisation?
Capacity utilisation (%) =( actual output / maximum possible output) x100
Why is analysing operational performance important?
- Identifies strengths/weaknesses
- aids benchmarking
- informs strategic decisions
What is the definition of efficiency?
a company’s ability to produce goods or services whilst minimising input, such as resources, labor, or time, while maximising output
How can you increase efficiency?
- Invest in technology
- train employees
- improve layout of production
- lean production (minimisation of the resources used in production)
What are some lean production techniques?
- Kaizen
- just-in-time (JIT)
- time-based management
What are the benefits of higher productivity?
- lower unit costs
- competitive pricing
- higher profitability
