Table of Contents INTRODCUTION..........................................................................................................................3 TASK 1............................................................................................................................................3 P1 Explain how external and internal factors of the business environment impact upon operations...............................................................................................................................3 P2 Consider how operations are influenced by corporate responsibility and how operations managers respond...................................................................................................................5 P3 Conduct a valid external and internal environmental analysis of the business environment for an organisation..................................................................................................................7 TASK 2............................................................................................................................................9 P4 Explain how operation functions support organisational strategy and decision-making..9 P5 Explain different types of control and planning methods in application to different organisational examples.......................................................................................................11 P6 Evaluate quality systems and how operations management can add value throughout the supply chain..........................................................................................................................12 CONCLUSION.............................................................................................................................14 REFERENCES..............................................................................................................................16 2
INTRODCUTION Operationsmanagementisdeterminedasadministrationofthedifferentbusiness practices in order to create high level of efficiency that are possible with a company. It is determined with converting raw material as well as labour into the finished goods and services as efficientlyasachievableinordertomaximizeprofitandmarketsharesofan organisation(Bawiskar,2020).Thereareseveralfunctionsthroughwhichoperations management encompasses such as implementing, planning, supervising, production of good and services. The respective report is based on the case study of IKEA which is a furniture manufacturing company and they are involved in several operations such as wood purchasing, recruitment, regular training and many more. The respective report include topics related to external and internal factors which impact on operations of respective company. Moreover it also include affect of CSR practices as well as it also include role of operations function, evaluation of several quality system which add values to existing supply chain system. TASK 1 P1Explainhowexternalandinternalfactorsofthebusinessenvironmentimpactupon operations. Operations management is considered as the administration of several different business activities conducted by a company in order to attain their desire goal. There are several benefits of operation management which are attain by a company such it help in converting raw material into finished good, it also help in ensuring that all the management activities are conducted in best manner. This leads to attainment of desire goal as well as objectives in effective manner. Business environment is considered as all factors that can be internal as well as external and that impacted on the company's functions such as employees, demand, customers, management, supply,regulationsandrulesrelatedtobusinessandmanymore.Therearemainfive components of the business environment such as social, economical, political, technological and legal(Boudaghpour and Sabooteh, 2020). It is essential for a company to conduct evaluation and analysis of these components as that will help in developing effective decision so that they can attain their desire goal successfully. In context of IKEA, there are several external as well as internal factors of the business environment impact on operations, from which some are mentioned below:- 3
Internal factors of business environment Internal factors of business environment is considered as factors which impact on the company operations and functions at the internal level. These factors can be control by a management by developing decision accordingly or change it. Some of the main internal factors of business environment which impact on IKEA operations are mentioned below:- Vision of company – The vision statements of IKEA is to develop cost effective system so that they can sustain in the market for long time. In respect of this they are planning to opt for cost effective strategies as well as equipments and they are also planning to adopt recycling method so that they sustain in market by enhancing their profit(Calandro, 2020). According to this internal factors it is essential for respective company manager to develop proper strategies as well as execute in the best manner for attaining respective vision. Business operations – The respective company is manufacturing and selling furniture according to the demand as well as requirement of customers at potential marketplace. Respective company also perform several other functions which help them in developing affordable products or furniture such as purchasing of wood and fabric, recruiting of workers, planning for location, layout of furniture factors and many more. In respect of this internal factors it is essential for respective company manager to develop strategies and plans accordingly. External factors of business environment External factors refers to those factors which impact on a company operations and functions from the outside. These factors are uncontrollable by the management so they need to develop strategies and plans accordingly. It is also essential for manager to conduct market evaluation on regular basis so that they can determine changes according to which strategies can be developed. Some of the main external factors of business environment in respect of IKEA is given below:- Globalisation – In current time in order to expand or grow business every company is adopting globalisation. In respect of IKEA while adopting globalisation they experience several factors which impact their business and that will be essential for them to develop strategies according to them(Caldera and et.al., 2020). In order to adopt globalisation company need to opt several aspect such as technology, effective supply chain process 4
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and many more. Due to this external factor respective company need to develop strategies and plan so that they can attain their desire goal successfully. Government – It is one of the main external factor which impact on the company operations and functions. IKEA is operating in furniture manufacturing and selling industry so it is essential for them to develop strategies and plans according to rules, regulation and policies because through that they able to conduct business operations moreeffectivelyinpotentialmarket.Moreovertheserulesalsoimpactuponthe operations because manager need to update policies which affect process and procedure of working at respective company. P2 Consider how operations are influenced by corporate responsibility and how operations managers respond Corporatesocialresponsibilitiesisconsideredasactivitiesorpracticeswhichis conducted by a company in order to support environment as well as society. In current time it is essential for each and every company to conduct corporate social activities for the society and environment(Canbolat and Erbey, 2020). CSR activities are beneficial for both company as well as community. There are numbers of CSR practices which a company may conduct such as reducecarbonfootprint,improvelabourpolicies,charity,volunteeringincommunity, participating in fair trade, social and environmentally investment and many more. Through these activities companies able to support society as well as they also able to enhance their goodwill, market value, profitability and many more. In respect of IKEA their several operations are influenced by the corporate social responsibility from which some are mentioned below:- Develop better customers relation – By conducting CSR activities respective company able to develop better customers relations which help in conducting more effective sales operations. It is so because CSR practice will increase goodwill in market as well as it also increase customers loyalty which aid in enhancing sales successfully. Increase profitability and value – CSR activity also help IKEA in enhancing their profit and market value which leads to conducting every business operations in effective manner. This will be possible because company have proper funds through which they can buy resources successfully. Do cost saving – By conducting CSR activity IKEA able to cut the cost which leads to enhance in saving or profit(Khasheand Meshkati, 2020). For example by adopting solar 5
panel respective company able to reduce their electricity bill as well as it also enhance the positive brand image. Through that saving respective company able to adopt more effective resources for conduct other operations in effective manner. These are the main aspects which show how IKEA business operation get impact by their corporate social responsibility. In addition to this, CSR activities will help respective company in gainingseveralbenefitssuchasincreaseingoodwill,marketvalue,customersrelation, profitability ratio, sales, retention of employees and customers and many more. While this manager of the respective company plays main role so that they can attain their desire goal and objectives successfully. In this operations manager of IKEA will respond like they develop strategies as well as plans so that they will attain their desire goal as well as objectives in successful manner. In respect of operation manager of respective company they will develop strategies related to implementation of solar power panel so that their electricity bill get reduce and that amount can be used in other operations and functions of company(Kidd and et.al., 2020). In addition to this respective company operations manager may also conduct changes in the manufacturing process that will include adopting of recyclable or reusable raw material. In addition to this they also ensure that the waste produce in production will be reuse in next process or other operations. Operations manager of respective company must also implement business ethic in the operations in order to ensure that all the work are conducted in ethical and legal way.In addition to this their are several positive impact of the new technologies on the operational management system and processes such as that help in conducting business in effective manner as well as it also leads to accomplishment of work properly with no or minimum wastage(Komarova and et.al., 2020). This will also help in saving resources as well as time which leads to sustainability and enhance effectiveness and management flows. There are several software system which a company may adopt for conducting business operations effectively such asEnterprise Resource Planning systems(ERP),SupplyChainManagement(SCM),New-ProductDevelopment (NPD)andCustomer Relationship Management (CRM). From these SCM i.e. supply chain management help in management supply process in effective manner so that customers will get proper products or services on time and in effective ways. From all these software supply chain management (SCM) is one of the most useful software which help firm in attaining their predetermined goal successfully.Supply chain 6
management is considered as method which help in handling entire flow ofproduction of products and services. This process is initiate from raw components in order to deliver the final products to the potential customers. There are several activities which are involve in the supply chain management which help respective company in attaining their desire goal successfully such as packaging, farming, manufacturing, designing as well as transportation. P3 Conduct a valid external and internal environmental analysis of the business environment for an organisation External environmental analysis: In order to conduct analysis of external environment IKEA opt for PESTEL analysis which is mentioned below:- Political: IKEA is conducting business in several nations due to which they need to follow several political forces so that they run business smoothly. Political stability help a company in maintaining economic stability which enhance profit, sales and market value. IKEA want to expand itself in Asian market but its supply chain is present in Europe which show that their will be negative impact of political conduction. Economical:Economic condition of every nation is different and it is essential for a companyto conductelevationof that so thattheydevelop strategiesaccordingly (Lytvynov and et.al., 2020).In respect of IKEA analysis of economic factor is impact positively because that help in developing decision. Social:This factor change on continuous basis due to which company need to conduct evaluation regularly and develop strategies accordingly. In respect of IKEA, this will impact negatively because respective company manager need to develop new design and strategies for fulfilling specific demand. Technological:Currently technology change operational functions of each and every business including marketing, human resource department, finance, customers services and many others(Mawle, 2020). In respect of IKEA, technology help them in improving their operations, process and functions in effective manner. This will also help in developing more attractive furnitures as well as it also aid in minimising wastage. Environmental:In order to sustain in the market it is essential for company to adopt strategies related to environment benefit. In respect of IKEA, they must adopt strategies which are beneficial for the environment such as they recycle waste material, they also 7
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opt material which not harm environment. In addition to this they may also adopt for solar power for electricity generation which is effective for environment as well as company as it save their funds by reducing electricity bill. Legal:It is essential for a company to follow legal aspects of nation as that will help in conducting business operations smoothly. In respect of IKEA, they are operating at the different nations and it is essential for them to follow all legal aspects of nation related to specific industry. It is so because that will help them in conducting operations effectively as well as properly. Internal analysis: In order to conduct international environment analysis IKEA opt for the SWOT analysis which is mentioned below:- StrengthsWeaknesses IKEA adopt innovation on regular basis which help in attractive more and more customers. Respectivecompanyprovidetheir products at the affordable price which help in retainingcustomersfor long time. The presence of respective company is at the world wide level which enhance sales and profit successfully. Respective company products are know as the low quality due to low cost at some places which impact on their sales and profit(Obrecht, 2020). OpportunitiesThreats IKEA has opportunity to expand their businessattheotherlocationslike Brazil,MalaysiaandMexico(Patel, Sedeek and Wilson, 2020). Respective company can also expand their products like related to food and beverages. Competition is the main threat which is experiencedbyrespectivecompany becausetheyareoperatingatthe several different location. For example Walmart. 8
TASK 2 P4 Explain how operation functions support organisational strategy and decision-making Operations management involves various functions that ensure that business processes are conducted in an effective manner. It is one of the important components within the organization. Various functions of operations and how they support organizational strategy as well as decision-making is explained below – Managing Projects –This is one of the many functions of operations management as lot of business processes take place within an organization(Popović and Popović, 2020).Operations management ensures that different projects are managed in an effective manner and the desired output is achieved. Management of Finance –The operations department at IKEA also takes care of finance. The financial activities can be related to either sales and managing the payments. Continuous Evaluation –There are continuous evaluations that are carried out in order to make sure that all business processes are being carried out effectively in terms of productivity. Also, any areas of improvement are also identified. Determining future sales –Operations management also plays an important role in forecasting future needs as well as buying pattern of the customers. As a result, products are manufactured based on the same. Continuouslyimprovingprocesses–Oneoftheotherfunctionsofoperations management is to focus on improving processes continuously. This not only helps in delivering an improved and high-quality output, but also help the company attract a greater number of customers. Decision-making is another important component for the organization as it allows the management of IKEA to make informed decisions as well as achieve its goals and objectives. The operations manager in the respective company is responsible for making all the important decisions relating to the inventory as well as operational process(Terziev, 2020). This helps in supporting the organizational strategy as well as promote effective informed decision-making. The different aspects of operations management that contribute to the improvement of decision- making process are explained below – 9
Different processes that will be involved in achieving the final output, therefore it is important to make effective decisions when it comes to deciding the quality as well as the quantity of goods. This is done with the help of operational capacity and help in the quantity of goods as well as services that are to be produced within a particular frame of time. Next, the processes that will be involved in turning the raw material to the finished goods are also decided upon. This ensures that quality goods are produced. It is important to set quality standards as they help in encouraging the employees to perform productively and be more competent. HRM or Human Resource Management should be done as it will help in fulfilling the requirement of more employees. It will also assist in dealing with a situation of ever staffing within the workplace(Yu and et.al., 2020). As a result, the overall operational efficiency will be maintained and different business processes will take place smoothly. Lastly, making decision regarding the stock needed for the inventory is also an important aspect and should be done based on the level of production as well as amount of sales. Different types of planningOperational planning: This is considered as a helpful of tools in order to states the strategic objectives that firm have. Moreover, it is regarded as operational planning is procedures of deciding in advance of what is to be performed to attain the tactical business goals. This assists IKEA to align different operational activities such as plan for different processes, resources that will be required, people who will be required to carry out the jobs etc. with the organizational goals and objectives.Strategic planning: It is considered as planning for attaining the vision of firm. Moreover, it is systematised procedures of envisioning the expected future as well as transmitting it into widely described objectives as well as sequences of steps to attain them. This assists IKEA to direct daily decision as well as also determining progress and changing approach while going forward. Tactical planning: This is considered as procedures of highlighting plans of business for coming year. It differs from strategic planning as it encompasses long term objectives which show the directions of firm as well as their intent highlighted into their mission statement. 10
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This assists IKEA operations team to have clear defined steps for attaining objectives at specified time and short term results. P5Explaindifferenttypesofcontrolandplanningmethodsinapplicationtodifferent organisational examples Both control as well as planning are necessary to ensure that business operations are carried out in an effective manner. Both planning as well as control are needed at all levels of management. Planning Methods IKEA has adopted certain planning techniques in order to ensure smooth functionality of different businesses. Some of the planning methods that help the respective company in achieving its operational goals and objectives are described below – Planning for warehouse facilities –The store operations of IKEA are supported by high flow facilities and low flow warehouses. There is a facility wherein the storage of products is automatic. The revenue system is also there that is used for bringing the unnecessary costs down. Maximum and minimum proprietary systems –The company has different store logistic managers that help in managing the inventory(Zaitsev, Butarovich and Smirnov, 2020). They re-order the stock items whenever there is a need. Two types of settings, minimum as well as maximum proprietary systems. The minimum system indicates the minimum amounts of products that are available before new ones are ordered. On the other hand, maximum settings that indicate the maximum amounts of products that can be ordered at one time. Operational Planning –This method of planning allows the company to align different operational activities with the organizational goals and objectives. This includes planning of different processes, resources that will be required, people who will be required to carry out the jobs etc. As a result, desired output is obtained in an effective way and it is ensured that goals and objectives are achieved with high operational efficiency as well as effectiveness. Controlling Methods The different types of controlling methods that the managers of IKEA use in order to maintain the efficiency of the different business activities. Some of the methods are explained below – Internal audit –Internal auditing is referred to as a technique that is used in operations management. This helps in identifying any mistakes or errors that may have occurred during the 11
transactions(Κωνσταντή, 2020). An internal audit is an important component that allows effective management of financial resources of an organization. Controlling the budget –There are different types of budgets that IKEA can prepare in order to control the expenses that are related to its inventory as well as other operational processes. The main aim of controlling the budget is to ensure a proper regulation of the activities as well as manage the finances of the company in an effective way. With a budget, the company will be able to measure its current performance and implement necessary options. Direct supervision and observation –This is one of the oldest control methods that is used by almost all companies. The operations manager can supervise the different operational activities and the performance of employees. This helps in getting a better understanding of what improvement techniques can be implemented. Also, observation is a method used for controlling the different processes as well as the production of goods. Top down approach: This is considered as traditional of project management approaches. This calls for whole decision to be developed through project manager. When a project is managed from top level to downwards, the breaks down framework as well as project plan are generally accomplished through project manager individually. So, this approach assists IKEA manager to focus upon planning part in this decision making is centralised. Also, it is helpful in determining the roles and accountabilities of whole top to down staff. Bottom up approach: This is rapidly obtaining popularity, mainly into sector in which project intent to include new challenges which needs unique solutions. The company like IKEA utilises respective approach in order to gain high staff involvement which is helpful in improving morale as well as responsibility. Also, in this there is less chance of problems in future as capabilities of workers are undertaken at outset. P6 Evaluate quality systems and how operations management can add value throughout the supply chain Quality management is an important component of operations management that helps an organization to achieve its goals and objectives in an effective way(Ruan, 2019). There are different techniques of quality management that are used in IKEA that ensure an efficient operational management. Some of the same are explained below - Total Quality Management (TQM) –TQM is a quality management technique which ensures that the customers are satisfied and that they receive high quality goods and 12
services. IKEA uses TQM to make sure that all of its products are of highest quality so that the needs as well as preferences of the customers are met. The company also involves its employees while making decisions related to new products and services. Lean Management –This is another approach of quality management that the respective company has implemented to establish a workflow that is stable. It also helps in utilizing the resources in an optimal manner(Κωνσταντή, 2020). Not only this, lean management allows the company to meet the needs of the customers and continuously improve their products. ISO 9001 –This is a quality management system that has various standards that an organization is expected to adhere to. It is developed by the ISO. Operations Management serves to be an important component for all organizations and adds value to the products as well as services that are manufactured by a company. It is important that there is a relationship between supply chain of a company as well as its operations management. This is because supply chain involves an effective movement of the raw material as well as the final products. If managed properly, operations management can help in adding value to the supply chain of a company. The same is explained below in context to IKEA. Reduction of suppliers –A proper operations management system allows the company to reduce any unnecessary costs that are associated with suppliers. For example, materials like cardboard can be transported to the third-party logistics. This will help in eliminating one step in the supply chain. Effective management of transportation costs –This is important as it can help in making sure that the distribution of the products takes place smoothly and reaches the end destination. There can be various costs associated with transportation of finishes goods and services. Continuous Improvement –Implementing ways to improve the products and services manufactured continuously can help the respective company, IKEA to satisfy the needs of its customers as well as offer them with improved experience. Also, the company will be able to respond to their preferences more effectively. Therefore, from the points mentioned above, it can be said that effective supply chain in a company can not only help in making effective decisions, but also make sure that the company gains loyalty as well as trust of the customers by offering them high and improved quality of products as well as reducing any unnecessary costs in an effective manner. 13
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Value chain analysis: This is considered as strategy tool which is utilised to determine internal organisational activities. Their objectives are to identify, that practices are very much valuable to entity as well as that one’s could be developed to facilitate competitive advantage. Moreover, it is a way for enterprises to identify practices they perform to form product. Once practices are evaluated a firm like IKEA may utilise the outcomes to determine ways to develop their competitive advantage. Competitive advantage: This is what sets their business besides from rivals. For developing an edge, IKEA will required a clear idea of their target marketplace, the advantage its goods facilitates to target marketplace as well as effective knowledge of their competitors as its products. Business may obtain a competitive advantage in one of the following areas:Cost leadership: The intent of cost leadership is to become the low cost facilitator into their sector or marketplace. Firms who excel in this have extreme operative effectiveness a well as utilise lower material cost and resources for minimising the whole product prices. Differentiation:Withthis,competitiveadvantageisobtainedthroughprovidingan innovative products or services. The business required to provide time and resource to innovation, investigation and development. a successful differentiation strategy enables firm to set out a premium price for their goods. Therefore, among the above IKEA should utilise cost leadership strategy as this assists them to gain competitive advantage effectively into targeted market through setting lower product or services cost. CONCLUSION By conducting analysis of above mentioned topics it can be summarised that operations management is essential aspects for every company because that will directly or indirectly help in attainment of desire goal and objectives. In a company operations management functions impact on the different practices such as corporate social responsibilities as well as they ways for which manager are responsible such as changes. Moreover, there are several internal as well as external factors which are impact on company environment and operations. There are several activities in a company which impact on the decision making so it is essential for a company to conduct proper planning. In addition to this it is also responsibility of a company to adopt 14
changes and develop strategies in order to add value to the supply chain system. This will also enhance the effectiveness of business operations, sales as well as profitability ratio in successful manner. 15
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