Cost Leadership Strategy Sample Assignment

Added on - 26 Mar 2021

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BUSINESS NOTES: OPERATIONSTransformation of inputs into outputsRole of operations managementEffective operations management adds value to the business by increasing productivity,reducing costs and improving quality.Strategic role of operations management-Gaining a long-term competitive advantage over its competitors, both local andoverseas-May use a cost leadership or product differentiation strategyCost leadership strategyProduct differentiation strategyA business aims to obtain a competitiveadvantage by being the lowest costmanufacturer within its industry- increasing size of operation to reduceaverage cost of making each item (economiesof scale)- maximising productivity by producing moreoutputs from less inputs- maximising efficiency of minimizing wasteand wasting time- using less expensive inputs- having lower quality outputs- using technology- producing faster(hard to maintain quality control)Aims to obtain a competitive advantageby having outputs that are different toits competitors, unique or use leadingedge technology- better quality outputs- quicker supply of outputs- custom – designed outputs and/ormore varieties to suit different customerwants- more features, applications andversatility- new technology incorporatedGoods and services in different industriesGood outputsServices-physical, tangible-can be used-more capital intensive (machinery)-can be stored-hard to modify once manufactured-intangible-can only be used by one customerone-more labour intensive-more interaction with customers-easier to change and customiseInterdependence of operations with the other key business functions-Specialisation: where the business is separated into different functions, each ofwhich is highly skilled at its specific task or role
-Interdependence: where the different parts of a business must rely on each other toperform their task or roleAs a result of specialization, there will be interdependence between the key businessfunctions and a constant flow of information between operations, marketing, finance andhuman resources.InfluencesGlobalisation-Opportunities for consumers to purchase products from overseas-Opportunities for Australian businesses to expand overseas and source inputs fromoverseas-Opportunities to develop a global web of operations and create multinationalcorporations-Threats to Australian businesses who must be more competitive and thereforeoperations must be more efficient-New risks from the changing value of Australia’s currency, charging tastes of globalconsumers and new competitorsTechnology-The equipment and knowledge that is available to help businesses perform certainfunctions or make products-The development of new methods of production or new equipment that helpsbusinesses perform functions more quickly and achieve better quality, often at alower cost-There is a heavy reliance on the operations manager to be aware of this technologyand assess its application to the business (CAD, CAM)Quality expectations of consumers-A business that is customer focused will produce goods and services that will satisfythe desires of its customers-Consumers expect a certain level of quality for the price they pay-Expectations about reliability, durability and how well the product works-Operations must fulfil the quality promises of marketingCost-based competitionPrices can be lowered by profit margins are maintained.-Outsourcing-Lowering quality-Updating technology-Using cheaper inputs-Relocating operations to a cheaper region of the world
Government policies-Are to support Australian businesses that are innovative and able to developproducts to be exported-Trade policies to promote trade relationships with other nations-Protection policies reducing the ‘protection’ of Australian businesses, forcing themto be more efficient by reducing costs-Other policies focus on reducing the negative impacts on the environmentTrade agreements:China-Australia Free Trade AgreementLegal regulationsLaws that affect operations of Australian businesses include:-Occupational health and safety for employees-Environmental protection-Consumer protection-Trade practicesLaws will impact operations strategies:-Operations cannot release more than a legal maximum amount of pollution-Products must meet minimum standards for quality and safety for consumers-Products created by operations must perform as they are promoted to-Employees must have a safe working environment (no dangerous machinery orunsafe procedures)Environmental sustainability
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