Operations Management: Modified Auto Parts, UK Supply Chain & Lean Ops

This report provides a comprehensive analysis of operations management concepts within the context of modified auto parts in the UK market. It begins by introducing the product and detailing the various organizations involved in its supply chain, including Prestige Wrap & Customs, Mad Motors, Cosworth, Superchips, and Kahn Design. The report then explores the application of operations management concepts in meeting customer demand, emphasizing the importance of efficiency and customer satisfaction. Furthermore, it evaluates the application of lean operations and supply chain principles, illustrated through a process map that outlines both downstream and upstream activities. The report also addresses barriers to entry in various industries, including shoes, supermarkets, and car manufacturing. The analysis covers critical aspects such as decision-making, value chain management, and the role of logistics in ensuring the delivery of quality products. Finally, the report offers recommendations and conclusions based on the findings, highlighting the importance of continuous improvement and strategic alignment in operations management. Desklib provides access to this and other solved assignments for students.

Running head: OPERATIONS MANAGEMENT
Operations Management
Name of Student:
Name of University:
Author’s Note:

1OPERATIONS MANAGEMENT
Table of Contents
Assessment 1...................................................................................................................................3
Introduction to the product..............................................................................................................3
Explanation of the different organizations involved in the supply chain........................................1
Use of operations management concepts in meeting customer demand for the product.................2
Evaluating the application of lean operations and supply-chain.....................................................4
Recommendation and Conclusion...................................................................................................5
References for Assessment 1...........................................................................................................8
Assessment 2.................................................................................................................................10
Task One........................................................................................................................................10
Barriers to entry in the shoes industry...........................................................................................10
Barriers to entry in the supermarket industry................................................................................11
Barriers to entry in the car manufacturing industry.......................................................................12
Task Two.......................................................................................................................................14
Answer to Question No. 1.............................................................................................................14
Answer to Question No. 2.............................................................................................................14
Answer to Question No. 2- Part A.................................................................................................14
Answer to Question No. 2- Part B.................................................................................................16
Answer to Question No. 3.............................................................................................................17
Answer to Question No. 4.............................................................................................................17
Answer to Question No. 4- Part A.................................................................................................17
Answer to Question No. 4- Part B.................................................................................................18
Answer to Question No. 5.............................................................................................................18
Answer to Question No. 5- Part A.................................................................................................18
Answer to Question No. 5- Part B.................................................................................................19
Answer to Question No. 5- Part C.................................................................................................19
Answer to Question No. 6.............................................................................................................20
Answer to Question No. 7.............................................................................................................20
References for Assessment 2.........................................................................................................22

2OPERATIONS MANAGEMENT
Assessment 1
Introduction to the product
As discussed by Bromiley and Rau (2016), in “operations management” the role of
“logistics and the supply chain” is recognized with a broader concept of interconnected subjects
such as “value chain management, sourcing of network, value chain management and
management of the supply pipeline”. The report aims to demonstrate an operational model and
discuss about the “critical evaluation of the role of operations management” in terms of an
existing product which is currently trending and the UK. The product selected for the analysis is
seen with modified auto parts. The rationale for selection of such a product is since more number
of high-value automobile customers in the UK prefer to customize their car for “extensive
performance, mechanical and aesthetic improvements”. Several companies such as Prestige wrap
and customs, Mad Motors, Fully Loaded Car, Urban Automotive and Custom Exotics
manufactures their own car parts can be easily fitted with all the popular models of automobiles.
Some of the services offered by these companies are often seen in customization of the car’s as
per customer request. The operations of the product are based on identification of the process in
the automobile sector. The important discussions from the discourse has been acknowledged
from “placing a purchase order to delivery of quality product to the customer”. The linkage
between the decision-making and value chain is conducive for evaluating the activities studying
the operational model. The various types of value chain aspects have been taken into
consideration with activities described as per the flowchart. For instance, the “Land Rover”
defender is identified as a motoring icon. However, it goes without saying that the car has been
identified with several flaws which includes water leaks, noisy cabins, suspension issues and
poor handling. The companies dealing with the customization services manufactured their own
suspensions, brakes, spoilers, chassis, seats, exhaust, tires, rims, lighting and paints to eliminate
any existing flaws in the stock model. In addition to this, such companies have an important role
in professional racing circuits for ensuring that the cars are equipped with the best performance
and utility upgrades. Several people look for not just a modification shop but also specialists
service in terms of tuning the vehicles (Heizer 2016).

3OPERATIONS MANAGEMENT

Customer
Placing Purchase
order
Delivering Quality
Product
Checking
acceptability
of the
customer
terms?
Changes prescribed
by the customer
Confirmatio
n of the
order
Carriage Material
in stock?
Tooling
Stock
availability?
Machine Parts Inspection Post Process
requirements? Cleaning
Shipping the vehicle
to the customer
Inspection
Post Processing
Vendor Processing
Ordering of the material
Material Vendor
Tooling of order
Inspection
Material Tooling
Tooling Vendor
Scrap Parts Taking corrective action Taking corrective
action
Reconfigurati
on possible?
No
Yes
Yes Yes
Yes
No
Pass
Pass
Fail
Fail
No
Pass
Yes
No
Downstrea
m
Upstream
0OPERATIONS MANAGEMENT
Process map for supply-chain of the product including downstream and upstream operations

0OPERATIONS MANAGEMENT
The process diagram shows the sequence of the order which is best suited for “deciding”
on the “method for decision making in the operations of the company”. This map has included
the various types of activities which takes place in both upstream and downstream operations of
the company. Some of the downstream operations of the company starts with of placing the
purchase order by the customer for parts such as suspensions, brakes, spoilers, chassis, seats,
exhaust, tires, rims, lighting and paints. The next sequence is followed by checking the
acceptability of the customer based on inventory status. The next process in the downstream
operations include conformation with the customer for prescribed changes which are to be done
in the automobile. The next sequence of the steps includes carriage and checking of the validity
of the overall order process. The company also takes the initiative of making use of any scrap
part which may be re used for any other car part. The given diagram shows the relationship
among the decision making and value chain. The different types of other downstream activities
are seen with postprocessing, vendor processing, tooling of order, tooling vendor and possibility
of reconfiguration of the present material which is to be used in the car (Hübner, Holzapfel and
Kuhn 2015).
The fundamental features of the value chain in the research has been depicted with
various types of results which may affect the acceptability of the customer’s initial ordering
process. “The process of this model can ensure about the confirmation of the order about the
postprocessing requirements with various types of the conditional statements”. The main form of
the conditioning tool is based on the condition such as “material vendor, tooling vendor with fail
or pass order”. The main considerations of the value of the supply-chain is depicted with “goods
and services, quality management, capacity design, location, job design”. The given diagram has
further illustrated the process of the operational activities for the automobile company (Jacobs,
Chase and Lummus 2014).
The main activities in the upstream operations include inspection, veryfying that
inspection is done in a proper manner then only the vehicles are passed for the cleaning phase.
The final upstream operations include Shipping the vehicle to the customer. It needs to be

1OPERATIONS MANAGEMENT
discerned that the primary upstream activity includes inspection of the various types of sub
processes which are involved in the operational cycle (Jay and Barry 2016).
Explanation of the different organizations involved in the supply chain
This section includes the explanation of the different organizations which are involved in
the supply-chain process and stated the rational way that they are based in UK or overseas.
 Prestige Wrap & Customs: “Prestige Wrap & Customs” is identified as a car
customization centre based in West London. Despite of the company being based in the
UK it also takes order in Doha Qatar, by the branches situated in that region. The
company manufactures its own products ranging from “vehicle branding and livery, car
wrapping, car window tinting, Car replications, Stone chip protection, car detailing items,
re-sprays, Engine modifications and other customised items”. “Prestige Wrap &
Customs” is seen to follow a similar supply-chain strategy illustrated in the diagram. The
process of the activities followed by the company “ensure about the confirmation of the
order about the postprocessing requirements with various types of the conditional
statements”. The main form of the conditioning tool is based on the condition such as
“material vendor, tooling vendor with fail or pass order”. The value of the supply-chain is
depicted with “goods and services, quality management, capacity design, location, job
design” (Prestigewrap.co.uk 2018).
 Mad Motors: This company is identified as “UK's leading body kits specialist”. “Mad
Motors” offers a broad range of “body styling kits for most car makes and models”. It has
been identified as the most “preferred retailer for some” of the “world's most prestigious
body kit manufacturers”. It supplies its body kits to various types of “European brands”
such as “Ibher Design, Carzone Specials and Carcept, to niche Japanese body kits for
performance Nissan's”. Some of the in-house manufacturing process of the company
further includes “Alloy Wheels Body Kits Angel Eye Headlights Lexus Lights Lambo
Doors Interior Styling” and “Carbon Products Spoilers Car Grills Fenders Headlight
Eyebrows Wind Deflectors”. The companies upstream supply-chain includes include
inspection, verifying that inspection is done in a proper manner, installation phase
followed by cleaning phase. The final upstream operations include Shipping the vehicle

2OPERATIONS MANAGEMENT
to the customer. In addition to this, the different types of downstream supply-chain
operations include of placing the purchase order by the customer for parts such as
“suspensions, brakes, spoilers, chassis, seats, exhaust, tires, rims, lighting and paints”
(Madmotors.co.uk. 2018). The next sequence is followed by checking the acceptability of
the customer based on inventory status. The next process in the downstream operations
include conformation with the customer for prescribed changes which are to be done in
the automobile (Walker et al. 2015).
 Cosworth: Cosworth (based in Cambridge; Northampton) is seen to offer a wide range
of power upgrades for the private vehicle owners and professional racers. Being one of
the well-known supplier in the automobile industry corporation ventured into a new
partnership with “Subaru in 2010” when “Cosworth upped power by 33 per cent on the
Impreza”. It is known to manufacture a wide variety of aftermarket “Road and track
performance” product mainly for the private car owners. The supply-chain operations
include both downstream and upstream operations as stated in the diagram (Auto Express
2018).
 Superchips: The main services include “Straightforward engine remapping for added
power”. This company affords affordable services for average motorist power boost their
existing vehicles. Some of the notable services offered by the company includes
modifying a “2013 VW Golf GTI” to increase its power output from “216bhp to 246bhp
and torque from 350Nm to 401Nm”. Henceforth, the company is known for and of
exiting various types of parts for engines as well (Auto Express 2018).
 Kahn Design: The company (“based in Bradford and Leeds, West Yorkshire; King’s
Road, London”) focuses on “giving luxury off-roaders added panache, but Kahn also
sells watches and personalised number plates”. The main supply-chain activity of the
company includes taking the purchase order by the customer for parts such as
suspensions, brakes, spoilers, chassis, seats, exhaust, tires, rims, lighting and paints. The
next sequence is followed by checking the acceptability of the customer based on
inventory status. The company is known for having high-end showrooms in Chelsea and
Bradford as well (Auto Express 2018).

3OPERATIONS MANAGEMENT
Use of operations management concepts in meeting customer demand for the product
“Operations management” is discerned as that domain of “management” which is
concerned with “controlling the process of production and redesigning business operations in the
production of goods or services”. Some of the main responsibilities under the concept of
operations management ensure that the operations of the business are maintained with efficiency
and able to meet the customer requirements. The main concerns of the concepts are associated
with managing the entire production system which is responsible for converting the inputs such
as “raw materials, labor, and energy” into outputs “such as goods and/or services, as an asset or
delivers a product or services” (Matthias et al. 2017). It needs to be understood that the
operational products are known to create service and manage quality. For instance, the distinct
operational activities are conducive in meeting the customer demand for the products in sectors
such as “banking systems”, “hospitals”, “companies, working with suppliers, customers, and
using technology”. The operations function in an organization is identified with “supply chains,
marketing, finance and human resources” which works for ensuring maximum satisfaction to the
customers. In terms of manufacturing and service industries the operational decisions and
strategies include “product design, process design, quality management, capacity, facilities
planning, production planning and inventory control”. The aforementioned services are required
to analyse the present situation to find better solutions for understanding customer demand and
“improve the effectiveness of manufacturing or service operations” (Slack 2015).
The effectiveness of operational models such as “total quality management (TQM)” is
depicted to be conducive for managing quality and bringing efficiency among the products
manufactured. This strategy includes enhancement process on “organizational basis, this
includes: participation, work culture, customer focus, supplier quality improvement and
integration of the quality system with business goals”. The product line service approach is
applicable to food chains such as McDonald's, which requires to follow a limited and standard
menu, “an assembly-line type of production process” in the “back-room”. In the front-room it is
identified with high customer service, cleanliness, courtesy and fast service (Stevenson and Sum
2015). Minimization of cost is also seen to drive customer demand which is often brought by
application of operational management concepts such as “Business Process Re-engineering”.
This is identified as a management strategy “focusing on the analysis and design of workflows
and business processes within an organization”. The business process engineering works for

4OPERATIONS MANAGEMENT
optimizing the overall manufacturing process and finding out the most cost-effective way of
manufacturing the products. In addition to this, an individual production system is often
conducive in production systems which include operations which are carried out as per customer
demand. It is often referred as flexible manufacturing system and applicable to generally high-
end orders which has less demand and can be manufactured at any given point of time (Smith,
Maull and CL Ng 2014).
Evaluating the application of lean operations and supply-chain
As stated by Garza-Reyes (2015), the lean approach and operations management is
associated to elimination of waste and most suitable for one of exiting our service process. This
concept takes into account the waste created as an overburdened and bringing unevenness to the
workloads. The lean approach in the operations management “takes the concept of JIT and re-
examines it from the perspective of customer value”. The first step in this process involves
considering the aspects which add real value for the customers. For instance, customers seeking
to buy studio speaker will be looking for the quality of sound, affordability and durability. Based
on the principle of lean manufacturing every step of the production process had something to the
value which is desired by the customer. The conceptualization of lean manufacturing “arose in
Toyota between the end of World War II and the seventies”. This concept often idealizes that
admonition off waste improves the quality thereby reducing the time and cost of production. The
implementation of lean manufacturing is often seen with exhaustive list of tools such as “SMED,
value stream mapping, Five S, Kanban (pull systems), poka-yoke (error-proofing), total
productive maintenance, elimination of time batching, mixed model processing, rank order
clustering, single point scheduling, redesigning working cells, multi-process handling and
control charts (for checking mura)”. The second most well-known approach of the lean
manufacturing system is recognized with “The Toyota Way” (Gao and Low 2014). This
approach has focused on improving the overall flow in the supply-chain, bringing smoothness
and work, “steadily eliminating mura (unevenness) through the system and not upon waste
reduction”. Some of the most evident techniques under this includes “production leveling, "pull"
production (by means of kanban) and the Heijunka box”. The fundamental approach for the
improvement methodology includes basic application of lean manufacturing systems for
improving the overall production process (Deresky 2017).

5OPERATIONS MANAGEMENT
It needs to be further understood that “lean supply chain management” is not only for the
companies that manufacture products but also applicable to the “businesses” who wants to
“streamline their process by eliminating waste” and including various types of non-value-added
activities. It has been discerned that companies have several areas in “supply-chain where waste
can be identified as time, costs, or inventory”. Several businesses are seen to follow complex
purchasing operations and many large companies often purchase from local suppliers. In several
cases, purchasing function in their headquarters is seen to be duplicated at the lower level,
thereby creating a significant amount of wastage. By maintaining two purchasing departments
vendors can often provide different information (Sadikoglu and Olcay 2014). There may be
multiple contracts, one central and several other local contracts which may lead to variation in
the prices depending on the location. The susceptibility to the varying nature of information
needs to be stored in the computer system so that “employees do not know which vendor is the
one that they should use or be in contact with”. Henceforth, it needs to be understood that
maintaining multiple purchasing departments may lead to substantial waste within the
organization and companies practicing in “supply-chain management” reduce their procurement
function so that each vendor has only one source of contact, and contract which offers a
consistent price in all the locations. Similarly, in warehousing process “lean approach” has a
significant role in eliminating the “waste of resources and non-value-added steps”. It needs to be
understood that recommendation of excess inventory requires more resources and money for its
storage and maintenance. The reduction of unnecessary inventory by following the principles of
lean approach is conducive in minimizing space and handling process thereby minimizing the
overall costs (Dale 2015.)
Similarly, in transportation businesses seeking to implement lean operations have made
efforts to improve the customer satisfaction by improving the shipping decisions. The orders are
shipped without combination of additional instructions which would reduce the costs and
expenses of shipping operations. Businesses often tend to use a number of shippers unnecessary
then they can reduce their shipping options and drop overall cost of operations. Therefore, the
application of lean supply-chain management is required by the businesses to examine each step
in the supply-chain and recognized unnecessary resources, raw material and time. In general, the
companies applying the lean manufacturing process in a successful manner has been able to
increase overall profitability of the business (Benavides-Velasco et al. 2014).

6OPERATIONS MANAGEMENT
Recommendation and Conclusion
The main recommendation for the management for improving the overall supply-chain is
to adopt lean manufacturing process. It needs to adopt a similar strategy such as The Toyota
Way. This approach will be conducive in improving the overall flow in the supply-chain,
bringing smoothness and work, “steadily eliminating mura (unevenness) through the system and
not upon waste reduction”. Some of the most evident techniques under this strategy will focus on
“production leveling, "pull" production (by means of kanban) and the Heijunka box”. As it has
been evident that the company also takes the initiative of making use of any scrap part which
may be re used for any other car part. The given diagram shows the relationship among the
decision making and value chain. The different types of other downstream activities are seen
with postprocessing, vendor processing, tooling of order, tooling vendor and possibility of
reconfiguration of the present material which is to be used in the car. It needs to ensure that it can
minimize the overall wastage which is identified in terms of scrap.
The important depictions for the selection of modified auto parts is seen with more
number of high-value automobile customers in the UK prefer to customize their car for
“extensive performance, mechanical and aesthetic improvements”. Several companies such as
Prestige wrap and customs, Mad Motors, Fully Loaded Car, Urban Automotive and Custom
Exotics manufactures their own car parts can be easily fitted with all the popular models of
automobiles. The various types of value chain aspects have been taken into consideration with
activities described as per the flowchart.
Process map for supply-chain of the product including downstream and upstream
operations has included placing the purchase order by the customer for parts such as suspensions,
brakes, spoilers, chassis, seats, exhaust, tires, rims, lighting and paints. The next sequence is
followed by checking the acceptability of the customer based on inventory status. The next
process in the downstream operations include conformation with the customer for prescribed
changes which are to be done in the automobile. The next sequence of the steps includes carriage
and checking of the validity of the overall order process. The company also takes the initiative of
making use of any scrap part which may be re used for any other car part. The given diagram
shows the relationship among the decision making and value chain. It is also discerned that the
main activities in the upstream operations include inspection, verifying that inspection is done in

7OPERATIONS MANAGEMENT
a proper manner then only the vehicles are passed for the cleaning phase. The final upstream
operations include Shipping the vehicle to the customer. It needs to be discerned that the primary
upstream activity includes inspection of the various types of sub processes which are involved in
the operational cycle. In addition to this, the different organizations involved in the supply chain
are identified with Prestige Wrap & Customs, Mad Motors, Cosworth, Superchips and Kahn
Design. “Prestige Wrap & Customs” is identified as a car customization centre based in West
London. The process of the activities followed by the company ensure about the authorization of
the order about the postprocessing necessities with various types of the conditional statements.
The main form of the conditioning tool is based on the condition such as “material vendor,
tooling vendor with fail or pass order”. Mad motors are also depicted to follow a similar
upstream supply-chain which includes include inspection, verifying that inspection is done in a
proper manner, installation phase followed by cleaning phase. The final upstream operations
include Shipping the vehicle to the customer.
Use of operations management concepts in meeting customer demand for the product has
been considered with meeting the customer demand for the products in sectors such as “banking
systems”, “hospitals”, “companies, working with suppliers, customers, and using technology”. In
addition to this, effectiveness of operational models such as “total quality management (TQM)”
is depicted to be conducive for managing quality and bringing efficiency among the products
manufactured. This strategy includes enhancement process on “organizational basis, this
includes: participation, work culture, customer focus, supplier quality improvement and
integration of the quality system with business goals”. Evaluating the application of lean
operations and supply-chain have found that “lean supply chain management” is not only for the
companies that manufacture products but also applicable to the businesses who wants to
“streamline their process by eliminating waste” and including various types of non-value-added
activities.

8OPERATIONS MANAGEMENT
References for Assessment 1
Auto Express. (2018). UK's top modified car companies. [online] Available at:
http://www.autoexpress.co.uk/car-news/88529/uks-top-modified-car-companies [Accessed 27
Apr. 2018].
Benavides-Velasco, C.A., Quintana-García, C. and Marchante-Lara, M., 2014. Total quality
management, corporate social responsibility and performance in the hotel industry. International
Journal of Hospitality Management, 41, pp.77-87.
Bromiley, P., and Rau, D. 2016. Operations management and the resource based view: Another
view. Journal of Operations Management, 41, 95-106.
Dale, B., 2015. Total quality management. John Wiley & Sons, Ltd.
Deresky, H., 2017. International management: Managing across borders and cultures. Pearson
Education India.
Gao, S. and Low, S.P., 2014. The Toyota Way model: an alternative framework for lean
construction. Total Quality Management & Business Excellence, 25(5-6), pp.664-682.
Garza-Reyes, J.A., 2015. Lean and green–a systematic review of the state of the art
literature. Journal of Cleaner Production, 102, pp.18-29.
Heizer, J. (2016). Operations Management, 11/e. Pearson Education India.
Hübner, A., Holzapfel, A., and Kuhn, H. 2015. Operations management in multi-channel
retailing: an exploratory study. Operations Management Research, 8(3-4), 84-100.
Jacobs, F. R., Chase, R. B., and Lummus, R. R. 2014. Operations and supply chain
management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.
Jay, H., and Barry, R. 2016. Operations Management. Pearson India.
Matthias, O., Fouweather, I., Gregory, I., and Vernon, A. 2017. Making sense of Big Data–can it
transform operations management?. International Journal of Operations and Production
Management, 37(1), 37-55.

9OPERATIONS MANAGEMENT
Madmotors.co.uk. (2018). Body Kits - Custom Car Body Kits & bodystyling kits UK | Mad
Motors. [online] Available at: https://www.madmotors.co.uk/body-kits.html [Accessed 27 Apr.
2018].
Prestigewrap.co.uk. (2018). Prestige Customs | Prestige Wrap & Customs London. [online]
Available at: http://prestigewrap.co.uk/detailingandreplicas/ [Accessed 27 Apr. 2018].
Sadikoglu, E. and Olcay, H., 2014. The effects of total quality management practices on
performance and the reasons of and the barriers to TQM practices in Turkey. Advances in
Decision Sciences, 2014.
Slack, N. 2015. Operations strategy. John Wiley and Sons, Ltd. Slack, N. (2015). Operations
strategy. John Wiley and Sons, Ltd.
Smith, L., Maull, R., and CL Ng, I. 2014. Servitization and operations management: a service
dominant-logic approach. International Journal of Operations and Production
Management, 34(2), 242-269.
Stevenson, W. J., and Sum, C. C. 2015. Operations management. New York: McGraw-Hill
Education.
Walker, H., Chicksand, D., Radnor, Z., and Watson, G. 2015. Theoretical perspectives in
operations management: an analysis of the literature. International Journal of Operations and
Production Management, 35(8), 1182-1206.

10OPERATIONS MANAGEMENT
Assessment 2
Task One
Barriers to entry in the shoes industry
The global brand such as Nike and Adidas are seen to target a diverse set of customers
whose focus is not only seen with the utility but also differentiated products in the footwear
industry. It has been further discerned that as per the market analysis the barriers to entry in the
footwear industry ranges from “high to moderate”. The brand loyalty is considered to be
extremely high in this segment has the “economies of scale” and scope restricts entry of small
players as industries dominated by a few giants who would be able to reap huge profits from the
volumes and supply chain integration (Seamans and Zhu 2014). It needs to be further understood
that economies of scale include activities such as “advertising, marketing costs and R&D spent”.
In addition to the “voluminous production” and economies of scope is seen to be benefited from
a wide number of branding which is only available to large conglomerates such as “Nike &
Puma”. Henceforth, the new entrants will find it difficult to raise the suppliers. It just before the
discerned that the bargaining power of buyers is seen to be ranging from moderate to high. This
is due to the fact that switching cost is particularly low for buyers as there has been endless
options available to the consumers except in cases where brand loyalties extremely high. The
buyers have been seen to be having easy access to the products via online shopping and big
players dominate the industry's rate. Henceforth, the new entrants find it particularly difficult to
cope up with the competitive rate which is already set by the industry leaders (Bedre-Defolie and
Biglaiser 2017).
The main raw materials needed for the production in this industry comprises of “rubber,
cotton and foam”. The industry leaders such as “Nike and Adidas” lay out “stringiest norms”
which a supplier must comply with to meet quality. Henceforth, the switching cost between the
supplies is also depicted to be very high. The supplies power is low in most cases and henceforth
the sourcing of the raw materials prices mostly governed by the big players of the industry. In
addition to this, the rivalry among the existing leaders of the business is considerably high and

11OPERATIONS MANAGEMENT
mostly being nonprice. Some of the most eminent competition is seen with companies such as
“Nike and Adidas”. Additionally, specialty shoes like “Geox, Rockport and Ecko also compete
in niche segments”. The competitive analysis has further identified that the food wear industry is
a mature phase which has completely transformed the market structure. The brand image focus is
considerably high in this segment. This trend is evident with Nike choosing to sell it regularly
and only through high-end retailers. Another important factor driving the market structure is
considered with the technology focus and specialization. The most eminent companies such as
Nike and Adidas have always focused on delivering performance plus style. And Adidas aims to
manufacture high-end performance shoes which are mostly preferred in the soccer industry.
Reebok on the other hand is deemed as a fitness and health conscious brand similarly New
Balance is seen as similar player in this category. The footwear brand crocs have positioned itself
as outwear brand predominantly used for boating. Puma has been able to position itself as a
major competitor in the lifestyle segment (Ide, Montero and Figueroa 2016).
“Barriers to entry in the supermarket industry”
The advent of modern retail formats and supermarkets are having a pivotal role for the
consumers and suppliers in developing countries. The competition among the supermarkets
influence “pricing, quality, access, and choice of products and services to consumers”. The
conduct of supermarkets is also seen to be having an important impact on supplies as a main
route for the market. The key barriers to entry in this segment is seen with the function of
inherent characteristics of supermarket chains. Some of the most noted barrier is seen with
substantial investment which is required in terms of distribution centres and logistics networks
for supply-chain off supermarkets (Bachmann, Bauer and Frings 2014). The investment
consideration is also high due to the scale and scope of economies in having multiple stores. The
capital required in distribution centres by the largest supermarkets such as “Shoprite and Pick n
Pay” is discerned to be having a massive amount of annual investment for distribution centres,
vehicles and related equipment’s. The annual investment by such supermarkets was seen with
around “R400mill in 2014 and over R650mill in 2015 (an increase of 63%)”. In 2015, this was
around “14% in terms of the total capital expenditure”. The total investment by Pick n Pay is
discerned with R628 million in 2010 which is considered as one of the largest investment
(Rocha, Carneiro and Varum 2015).

12OPERATIONS MANAGEMENT
It is to be understood that the lack of access of distribution centres and logistics networks
is the new entrants at the considerably disadvantageous position. The suppliers are often able to
provide the additional discounts required for sales to distribution centres which is even required
for same volumes of product. The total investment in distribution centres can therefore contribute
to levelling the playing field with respect to sourcing off smaller players who need access to
them. Some of the other barriers to entry is considered with advertising costs needed for
expansion of the supermarkets. The bad is to the small players include absence of management
skills in the business, access to finance and retail capabilities. The market structure has been for
the seen to be affected with government providing subsidies to the new entrants and buying
groups in assisting the independent retailers for advertising, marketing, supporting in cash flow
management and waste management. Some of the various types of other barriers to the small
retailers is depicted with lack of access to the “prime retail locations” in the shopping malls and
retail centres. It is further depicted that the advertising costs have a significant load on small
local superstores with single outlets (Lee and Mukoyama 2015).
Barriers to entry in the car manufacturing industry
The automotive industry globally is recognised as a multibillion-dollar industry which
goes to extremely high competition in order to “gain majority or complete market share”. The
most eminent industry environmental factors are seen to play a vital role so that the
manufacturers cannot depend on just safety and reliability for staying competitive. The threat of
new entrants is absolute high as very few entrepreneurs have the potential of venturing into the
automotive sector due to high “capital investment, set up of manufacturing facilities” along with
a complex distribution network. In addition to this the existing multinational company does
advantages from the economies of scale and makes it difficult for the new entrants and offering a
competitive price. Furthermore, the main factors such as “safety, reliability and durability” are so
salient, that the new entrants find it extremely difficult in placing their new models (Laufs and
Schwens 2014). Henceforth, it takes several years for the new entrants to build a strong
reputation to sustain in this industry. Another significant barrier to entry is seen with increasing
“fuel prices which is pushing urban drivers use public transportation”. The buyers are having the
power to enable should the prices that extract profit from the seller. It needs to be understood that
“private individuals, commercial companies and governments are the primary buyers of motor

13OPERATIONS MANAGEMENT
vehicles”. Considering certain “exceptions buyers” have the right to walk away from purchases
was the don’t prefer and take their purchases elsewhere and the dealer of the same manufacturer.
The consumers are having a considerable influence on the dealership price over the
manufacturers (Cavallari 2015).
The increase in the foreign competitors in the “1970's and 80's” has spread the
competition in the “automotive industry” which has made it more intense for the forms to
compete in both nonprice dimensions and price dimensions. Different companies are seen to be
providing incentives to appeal customers purchasing their own vehicles. The fact that automotive
industry is maturing nature, competition is seen to be fierce and rivalry the only increase over
time. It is further depicted that with the existence of such competitors, the industry growth is flat
and all the existing players have a “huge capital leverage” (Plakoyiannaki et al. 2014). At times,
it can be difficult for the new companies find acceptable means of distribution at the space within
the distribution is not limited. It is also important to know that the average individual is not
having the means to come along and start a new carbon reduction companies such as “Toyota
have been able to enter the US market to compete with such companies as Ford, General Motors,
and Chrysler”. The barriers to entry in the market structure is intensified with five major auto
manufacturers including “GM, Toyota, Ford, Cerberus (which owns Chrysler), and Honda”.
These companies are seen to comprise of 73% market share in the US (Fattal Jaef and Lopez
2014).
The US market structure is depicted with major leaders in this segment such as GM and
Ford. The increase of globalisation has made it even tougher for the domestic companies to
compete with these automotive giants. The prison market is for the discerned to be led by
European and Asian automakers. There has been a new segment of electric which is seem to
pose a major threat to the existing automobile manufacturing companies (Pongelli, Caroli and
Cucculelli 2016).

14OPERATIONS MANAGEMENT
Task Two
Answer to Question No. 1
Some of the main factors affecting the demand and supply of coffee for Dreams Café is
identified with “geopolitical factors, climatic factors, spectacular effect enterprise trading and
global demand outlook”. Based on the given case study the coffee grown in Brazil are often
exposed to severe weather conditions and global warming due to high altitude. In addition to
this, the recent droughts have also affected the harvest of coffee beans which will negatively
impact the supply in this region. Due to political instability there has been always the concern for
dropping supplies especially from Brazil. In addition to this, since coffee is a highly traded
commodity, the market activities of the traders significantly influence the price and demand of
the product (Chulkov and Nizovtsev 2015). Moreover, the price of other related commodities
such as oil may also influence the price and demand of the item. The enterprise trading is to keep
a tab on what the big coffee companies are buying. The main suppliers such as “Kraft, P&G,
Sara Lee and Nestle – purchase approximately 50% of the coffee produced worldwide”.
Henceforth, any changes brought about by these organisations will have a significant impact on
price and demand of the coffee. Lastly, the global demand outlook has suggested that demand for
coffee is on the rise. As per understanding of this concept one can expect that demand for coffee
will rise significantly as the country become more developed. It needs to be understood that as
Wolverhampton is a developed region the demand for the coffee is depicted to be significantly
on the higher side.
Answer to Question No. 2
Answer to Question No. 2- Part A
In general, equilibrium price refers to market price where “quantity of goods supplied is
equal to the quantity of goods demanded”. At this point that demand and supply curves of the
market intersect with each other. As per the given data £ 4.50 is identified as the equilibrium
price as the demand for coffee per hour and the supply of coffee per hour at this price is 16 units.

Price (£)
Quantity
1.5
2.5
3.5
4.5
5.5
6.5
7 12 17 22 27 32 37 42 47
Equilibrium Price
15OPERATIONS MANAGEMENT
Price per cup of
coffee £1.50 £2.50 £3.50 £4.50 £5.50 £6.50
Demand for
Coffee/per hour 40 32 24 16 8 0
Supply of
Coffee/hour 0 8 12 16 20 24
Figure: equilibrium price and equilibrium quantity of Dreams Café
(Source: As created by the author)

Price (£)
Quantity
1.5
2.5
3.5
4.5
5.5
6.5
7 12 17 22 27 32 37 42 47
Equilibrium Price
Excess
Demand
16OPERATIONS MANAGEMENT
Answer to Question No. 2- Part B
“Excess demand” refers to that condition there the demand of commodity is higher than
its market supply thereby causing the market price to increase. As per the findings of the given
case the excess demand is depicted to be 14 Units when the price £ 2.5.
Figure: Excess demand for Dreams Café at a price of £ 2.5
(Source: As created by the author)

17OPERATIONS MANAGEMENT
Answer to Question No. 3
The recent droughts have significantly affected the harvest of coffee beans which will
negatively impact the supply from Brazil. The drop-in harvest of the coffee due to drought will
significantly increase the price of the coffee beans as they are becoming harder to produce. In
situations when farms endure multiple dry periods “coffee plants have a difficult time surviving
the dry season that follows”. This results in either wearing down of the crops or dying due to
adverse conditions. It has been also discerned that under the conditions of uneven rainfall, and
drought coffee does not respond well as it needs to sustain broader spectrum of variance in the
temperature which would have been managed under “both strong rainfall and longer periods of
drought, and that can adapt to a variety of soil conditions are the climate capable crops of the
future”.
The recent drought in Brazil has further brought about the application of the report
published by “Intergovernmental Panel on Climate Change”. It has been for the discerned that in
most of the cases “big coffee houses tend to buy on what’s called the futures market — locking
in a set price for their goods, often for years in advance. Traders are also holding large stockpiles
of beans after a bumper harvest last year”. Henceforth, it needs to be understood that the world
changes in the climatic conditions will tend to increase the final price of product prior to arrival
the market.
Answer to Question No. 4
Answer to Question No. 4- Part A
As stated by Simonovska and Waugh (2014), “price elasticity of demand” is considered
as that measure used in economics which depicts the elasticity, responsiveness and quantity
demanded for goods and services as part of the changes in the price assuming other factors are
constant. In a more precise way, price elasticity of demand is discerned as “percentage change in
quantity demanded in response to a one percent change in price”. In general, the price elasticities
are always negative except for the goods which do not conform to the “law of demand, such as
Veblen and Giffen goods”. The goods falling under this category will be having a positive “price
elasticity of demand”. It needs to be further understood that demand for goods is considered to

18OPERATIONS MANAGEMENT
be inelastic when “PED is less than one” and the variations in value have a relatively small effect
in the quantity demanded. On the contrary, the demand for goods is set to be elastic when “PED
is greater than one (in absolute value): that is, changes in price have a relatively large effect on
the quantity of a good demanded”. In general, the revenue is maximised when the price is
considered at PED equal to one. In addition to this, the “PED of a good” is used to predict the
“incidence (or "burden") of a tax on that good” (Labandeira, Labeaga and Lopez-Otero 2017).
Answer to Question No. 4- Part B
Price inelasticity is depicted to be beneficial for Dreams Café. It will offer flexibility in
terms of the prices in the “percentage change in demand it elicits remains essentially the same”.
It needs to be further understood that in the given case the percentage change in quantity
demanded will be minimum for Dreams Café with respect to percentage change in price. In case,
the business decides to reduce the price at this point of inelastic demand, then it will not only run
at a loss also earn reduced revenues even if the quantity demanded will be high. Henceforth, it is
recommended for Dreams Café to increase the prices however selling at a little less quantity will
ensure higher revenues. “Price inelasticity” shows that “customers – and by extension, demand –
are more tolerant to price changes” (Sano et al. 2014).
Answer to Question No. 5
Answer to Question No. 5- Part A
The costs and Revenues for Dreams Cafe
Total
Production Average
Revenue (£)
Average
cost (£)
Total
Revenue
(£)
Total Cost (£) Marginal
Revenue (£) Marginal Cost (£)(Cups of
Coffee per
hour)
1 105 110 105 110 105 110
2 95 90 190 180 85 70
3 90 80 270 240 80 60
4 85 75 340 300 70 60
5 80 74 400 370 60 70
6 75 76 450 456 50 86

19OPERATIONS MANAGEMENT
Answer to Question No. 5- Part B
Table 2: The costs and Revenues for Dreams Cafe
Total
Production Average
Revenue (£)
Average
cost (£)
Total
Revenue
(£)
Total Cost
(£)
Marginal
Revenue (£)
Marginal
Cost (£) Profit(Cups of
Coffee per
hour)
1 105 110 105 110 105 110 -5
2 95 90 190 180 85 70 15
3 90 80 270 240 80 60 20
4 85 75 340 300 70 60 10
5 80 74 400 370 60 70 -10
6 75 76 450 456 50 86 -36
Answer to Question No. 5- Part C
Table 2: The costs and Revenues for Dreams Cafe
Total
Production Average
Revenue (£)
Average
cost (£)
Total
Revenue
(£)
Total Cost
(£)
Marginal
Revenue (£)
Marginal
Cost (£) Profit Total
Profit (£)(Cups of
Coffee per
hour)
1 105 110 105 110 105 110 -5 -5
2 95 90 190 180 85 70 15 10
3 90 80 270 240 80 60 20 30
4 85 75 340 300 70 60 10 40
5 80 74 400 370 60 70 -10 30
6 75 76 450 456 50 86 -36 -6
Overall Profit 99
Answer to Question No. 6
In economics, variable cost of the company is associated with those cost which are
required for the quantity of goods and services it produces. The company’s increase or decrease
in the variable cost that is with volume produced. Some of the main examples of variable cost for

20OPERATIONS MANAGEMENT
Dreams Café will include from the product and containers which are used to hold the coffee. The
cost will vary based on the “product served and, on the quantity”, which goes into making the
drink (Ben Lakhdar, Vaillant and Wolff 2016).
Fixed costs on the other hand do not vary with the quantity produced. It needs to be
understood that fixed cost does not change with the amount of goods or services produced by a
company. This remains the same even if “no goods or services are produced”. Some of the main
types of fixed costs for Dreams Café may include “rent, staff cost, professional fees, utilities,
licenses, advertising, and maintaining the shop and its equipment” (Gillingham 2014).
Answer to Question No. 7
In “economics, externality is recognised as a cost or benefit which affects a party who did
not choose to incur a cost or benefit”. The economists are often seen to urge government for
adopting the policies which “internalise an externality, so that costs and benefits will affect
mainly parties who choose to incur them”. Some of the most evident negative externalities
generated by Dreams Café is seen with the possibility of misallocation of resources. It needs to
be also understood that there may be significant amount of overconsumption are overproduction
of the resources which would act as negative externality for the business (Galvis and Costa
2016). The most eminent wastage from overproduction is discerned with loss of drinking water.
In addition to this, the paper cups used for serving the coffee then pose a significant
environmental concern for cutting down trees and nonrecyclable waste. In several cases, the cold
coffees need to be served in plastic laminated lining cups which exerts methane when burnt. This
has a significant danger for causing respiratory diseases. The use of calorie content in the coffee
is considered as another negative externality this will affect the consumers of the product thereby
leading to obesity. To keep the costs down the company maybe adopting various unethical
purchases of coffee to maximise profits (Economics Wiki 2015).
“Efficiency and productivity” are considered important for running any successful
business enterprise. The managers need to ensure that the layout of workstation is done in such a
way that it does not cause any harm to the business of local coffee vendors. In addition to this the
workstation needs to be designed perfectly which would provide easy access to the “fridge, cups,
grinder, accessories, storage supplies and sink”. Coffees are often criticised to create caffeine

21OPERATIONS MANAGEMENT
dependency thereby making the consumption habitual. The consumers are more likely to
consume more over time to extent that one cup will give them less utility. Henceforth, in market
the marginal private benefits will greater than the marginal social benefits. This will lead to
greater expenditures du to health issues such as nausea, insomnia and stomach-ache and leading
to increased medical fees. Overtime the consumer will be more dependent for product and this
will considerably affect their productivity (Burke and Liao 2015).

22OPERATIONS MANAGEMENT
References for Assessment 2
Bachmann, R., Bauer, T. K. and Frings, H. (2014) ‘Minimum wages as a barrier to entry:
Evidence from Germany’, Labour, 28(3), pp. 338–357. doi: 10.1111/labr.12034.
Bedre-Defolie, O. and Biglaiser, G. (2017) ‘Contracts as a barrier to entry in markets with
nonpivotal buyers’, American Economic Review, pp. 2041–2071. doi: 10.1257/aer.20151710.
Burke, P. J. and Liao, H. (2015) ‘Is the price elasticity of demand for coal in China increasing?’,
China Economic Review, 36, pp. 309–322. doi: 10.1016/j.chieco.2015.10.004.
Cavallari, L. (2015) ‘Entry costs and the dynamics of business formation’, Journal of
Macroeconomics, 44, pp. 312–326. doi: 10.1016/j.jmacro.2015.03.002.
Chulkov, D. and Nizovtsev, D. (2015) ‘Problem-Based Learning in Managerial Economics With
an Integrated Case’, Journal of Economics and Economic Education Research, 16(1), pp. 188–
197.
Economics Wiki (2015) ‘Price Elasticity of Demand’, investopedia.com. Available at:
http://www.investopedia.com/terms/p/priceelasticity.asp%5Cnhttp://www.econowiki.com/en/
price-elasticity-of-demand.
Fattal Jaef, R. N. and Lopez, J. I. (2014) ‘Entry, trade costs, and international business cycles’,
Journal of International Economics, 94(2), pp. 224–238. doi: 10.1016/j.jinteco.2014.08.008.
Galvis, J. C. and Costa, A. (2016) ‘Demand Side Management Using Time of Use and Elasticity
Price’, IEEE Latin America Transactions, 14(10), pp. 4267–4274. doi:
10.1109/TLA.2016.7786304.
Gillingham, K. (2014) ‘Identifying the elasticity of driving: Evidence from a gasoline price
shock in California’, Regional Science and Urban Economics, 47(1), pp. 13–24. doi:
10.1016/j.regsciurbeco.2013.08.004.
Ide, E., Montero, J. P. and Figueroa, N. (2016) ‘Discounts as a barrier to entry’, American
Economic Review, 106(7), pp. 1849–1877. doi: 10.1257/aer.20140131.

23OPERATIONS MANAGEMENT
Labandeira, X., Labeaga, J. M. and L�pez-Otero, X. (2017) ‘A meta-analysis on the price
elasticity of energy demand’, Energy Policy, 102, pp. 549–568. doi:
10.1016/j.enpol.2017.01.002.
Ben Lakhdar, C., Vaillant, N. G. and Wolff, F. C. (2016) ‘Price elasticity of demand for
cannabis: Does potency matter?’, Addiction Research and Theory, 24(4), pp. 300–312. doi:
10.3109/16066359.2016.1139699.
Laufs, K. and Schwens, C. (2014) ‘Foreign market entry mode choice of small and medium-
sized enterprises: A systematic review and future research agenda’, International Business
Review, 23(6), pp. 1109–1126. doi: 10.1016/j.ibusrev.2014.03.006.
Lee, Y. and Mukoyama, T. (2015) ‘Entry and exit of manufacturing plants over the business
cycle’, European Economic Review, 77, pp. 20–27. doi: 10.1016/j.euroecorev.2015.03.011.
Plakoyiannaki, E., Pavlos Kampouri, A., Stavraki, G. and Kotzaivazoglou, I. (2014) ‘Family
business internationalisation through a digital entry mode’, Marketing Intelligence & Planning,
32(2), pp. 190–207. doi: 10.1108/MIP-01-2013-0016.
Pongelli, C., Caroli, M. G. and Cucculelli, M. (2016) ‘Family business going abroad: the effect
of family ownership on foreign market entry mode decisions’, Small Business Economics, 47(3),
pp. 787–801. doi: 10.1007/s11187-016-9763-4.
Rocha, V., Carneiro, A. and Varum, C. A. (2015) ‘Entry and exit dynamics of nascent business
owners’, Small Business Economics, 45(1), pp. 63–84. doi: 10.1007/s11187-015-9641-5.
Sano, N., Tamura, S., Yada, K. and Suzuki, T. (2014) ‘Evaluation of price elasticity and brand
loyalty in milk products’, in Procedia Computer Science, pp. 1482–1487. doi:
10.1016/j.procs.2014.08.213.
Seamans, R. and Zhu, F. (2014) ‘Responses to Entry in Multi-Sided Markets: The Impact of
Craigslist on Local Newspapers’, Management Science, 60(2), pp. 476–493. doi:
10.1287/mnsc.2013.1785.
Simonovska, I. and Waugh, M. E. (2014) ‘The elasticity of trade: Estimates and evidence’,
Journal of International Economics, 92(1), pp. 34–50. doi: 10.1016/j.jinteco.2013.10.001.

24OPERATIONS MANAGEMENT