Business_Concepts

Question 27: How does an understanding of the influences on operations contribute to business success' An understanding of the influences on operations will contribute to business success because it allows managers to deal with a range of external influences that impact on operations. These main influences include globalisation, technology, quality expectations, cost-based competition, government policies, legal regulation, and environmental sustainability as well as corporate social responsibility. It is important to understand these influences as they can cause businesses to undergo change and to continually adjust to external factors. It can also act as a threat and opportunity to the operations processes of businesses such as Jamba Juice Pty Ltd and Gems Juicebar Pty Ltd. It is important for businesses to understand how globalisation can influence and contribute to business success. Globalisation refers to the removal of barriers of trade between nations and by increasing integration between national economies and causing a higher degree of transfer of capital, labour, intellectual capital and ideas, financial resources and technology, globalisation can provide a source of market opportunities, such as a larger customer base. When Jamba Juice Pty Ltd expanded to North America and Europe, it also experienced the threat in effectively applying cost leadership principles to undercut the market and dominate. Having to orient their practices towards the global market, Jamba Juice had to adjust their ingredients to incorporate local ingredients to meet the needs of global consumers. Other operations that Jamba Juice had to adjust were product design – translating their menu board into other languages, quality management, logistics and altering their inventory management processes to suit a significantly larger global market. Businesses also need to understand how technology can influence operations management. Technology refers to the design, construction and/or application of innovative devices, methods and machinery upon operations processes. With the increasing development and innovative products, businesses such as Woolworths have embraced new technology and added it into their operations to both improve supply chain management in replenishing stock on the shelves of their retail outlets, replenishing stocks available at their warehouses (distribution centres), and delivering stock to their retail outlets – saving almost $7 billion in doing so. Woolworths have also used technology to increase efficiency in their operations by introducing an IT system called StockSmart that forecasts when stock needs to be replenished in its distribution centres. Making use of a wireless network here, the distribution centre staff use wireless network (such as handheld devices) to receive instructions on what goods in the warehouse needs to be located and transported to a particular Woolworths. In now being more efficient, their numbers have decreased from 31 to 9 regional workers and two national distribution centres. Quality expectations also influence business operations. Quality can be defined as the totality of features and characteristics of products and services that bears its ability to satisfy stated or implied needs. Because consumers all have different quality expectations, this has influenced product design, product creation and delivery. Because of this, businesses such as Gems Juicebar Pty Ltd have had to change their quality of design in 2009 to minimise waste of ingredients and improve the nature of the materials used. They have also had adopted new policies to meet quality expectations of services such as their professionalism in better maintaining the cleanliness and layout of the juice bar as well as in their levels of customisation. In 2011, Gems Juicebar Pty Ltd introduced the ‘pick-your-own-fruits’ policy in their establishments to encourage another level of customisation, allowing them to better meet the needs of consumers. An understanding of cost-based competition will also contribute to business success as it allows businesses to determine the breakeven point (the level at which the firm matches total costs and total revenue) and then applying strategies to create cost advantages over competitors. This can determine business success as it allows businesses to recognise that prices cannot keep increasing and therefore, reducing costs is a way to maximise profits when revenues are fixed. Businesses such as Blundstone, a Tasmanian footwear group have benefited from an understanding of cost-based competition because it has lead to the business to outsource its manufacturing operations to Asia because labour costs are too high in Australia. This has contributed to their business success because it has meant for the right size of operation with the cheapest costs – due to finding the right economy of scale. Another factor which can influence a business’s operations is through government policies as all businesses operate in a political-legal environment. As all political decisions affect business rules and regulations, this therefore also affects the management of the key business functions. An example of this is the recent carbon tax introduced in Australia, where there is a levy applied on business in the ratio in which it produces carbon. Because of this, the costs of production will increase and so businesses need to be aware of this price change and alter their existing operations in order to be prepared. An understanding of laws and regulations may also contribute to business success. Businesses must pay compliance costs, which are the expenses associated with meeting the requirements of legal regulations and so, being aware of these expenses will encourage businesses to make clear the standards of society and the standards of behaviour imposed by legal regulations. In the operation of a business, there are specific laws that all establishments must follow such as the Work Health and Safety Act (WHS), which promotes a safe and healthy working environment as well as relevant laws to promote better training and development, fair work and anti-discrimination and environmental protection such as the Racial Discrimination Act 1975 and the Workers Compensation Act 1987. For a business to be successful, they must also shape their practices around being environmentally sustainable, meaning that their resources used do not compromise access to those resources for future generations. Businesses such as Qantas have become successful with the help of having understanding of preserving the environment. They participate in environmentally friendly practices such as their participation in the annual Clean Up Australia Day and their 15 year partnership with Clean Up, including the provision of flight services and site support for the annual event. Qantas is also part of Flora and Fauna Internal Australia (FFI), which is the world’s oldest established international conservation organisation. Their ongoing support for FFI contributes to the long-term conservation of landmarks such as the Great Barrier Reef. Qantas has also adopted strategies to minimise their carbon footprint, such as participating in more fuel efficient work. Corporate Social Responsibility is also another influence of operations management which can contribute to business success. This refers to the open and accountable business actions based on respect, community/society and the broader environment. It is important for businesses to do more than just complying with the laws and regulations because by demonstrating a commitment to ethical responsibility – they should go beyond the law and take into account broader social, community and environmental concerns and this will improve their reputation and public perception of the business. This is evident in businesses such as Levi Stauss and Company where the business has developed its own environmental policy, which includes strict wastewater guidelines and the reduction in greenhouse gas emissions from its global operations. Reebok has also established a ‘Reebok Human Rights and Production Standards’, which is a human rights code of conduct which includes no forced or compulsory labour, fair wages and benefits, a safe and healthy work environment, freedom of association and no child labour. When businesses have a better understanding of the influences on operations, they are able to better manage external influences such as globalisation, technology, quality expectations, cost-based competition, government policies, legal regulation, and environmental sustainability as well as corporate social responsibility which may have an impact on operations. Businesses should continually adjust their practices to suit external factors as this will better contribute to business success.