unit 4.1 business

 Unit 4.1 - Setting operational objectives

Objective - a quantifiable target which helps to coordinate activities.

Mission statement - A statement about the organisation's aims that is designed to motivate.

Corporate objectives - These are goals for the whole organisation and are usually based on the mission statement.

Functional objectives - These are goals for each functional area of a business and are based on corporate objectives.

Objectives should be based on SMART:

Specific - easily defined 

Measurable - quantifiable 

Agreed or achievable - stakeholders involved in setting them

Realistic - not in conflict with other objectives

Timely or time bound - based on a timescale

Why do we set objectives ? 

-By having a mission it will help guide employees and motivate them in the direction the organisation wants to go

- Having corporate objectives gives a more detailed sense of direction

- Having functional objectives allow for greater co-ordination of resources to ensure corporate objectives are met.

Operational objectives - 

Broad - they encompass anything to do with the operational side of the business 

General goals - these ensure that departments can understand what they need to achieve the operational objectives 

Long and medium term - plans and strategies are devised to ensure that the long and medium term objectives are met

Short term measures are called operational tactics

What do operational objectives include?

-costs

-quality 

- speed of response and flexibility

- dependability

-environmental objectives

- added value 

as well as the internal and external influences on them

Sales revenue - (variable cost + fixed costs) = profit

Therefore for you to improve profit you could increase sales or reduce costs.

Reducing costs is frequently part of the operational management objectives

Reducing costs - 

reducing unit costs - a low unit cost enables a business either to keep prces low for customers or to enjoy higher profit margin

reducing fixed costs - this is a common aim when businesses have merged because they may have duplication of fixed costs ie two premises on the high street

reducing variable costs per unit - this could include finding cheaper supplies (ie reducing raw material costs) or cheaper manufacturing (ie reducing raw material costs) or cheaper manufacturing (ie reducing labour costs by improving labour productivity)

Quality - those features of a product or service that allow it to satisfy customers

There is no set measure of quality because it depends on peoples opinions but it can be measured using various methods

Customer satisfaction ratings - can gather satisfaction in both qualitative or quantitative form. Customer satisfaction surveys can therefore measure if quality has been achieved.

Customer complaints - this is a good measure to show whether a business has problems it needs to address. Satisfied customers returned, unsatisfied customer complain - not only to the business but to everybody else and this can damage a reputation.

Scrape rate - manufacturers track the rejects through the manufacturing process. This show whether the production process is working effectively. Scrap is wasted moneyand increases the unit costs of goods. 

Punctuality - measures how promptly a business delivers its goods (services) and is expressed as a percentage:

punctuality (%) = delivers on time / total deliveries x 100 

The better the punctuality percentage, the higher the customer satisfaction (especially important for onine and b2b businesses)

Speed of response and flexibility - 

For some businesses the speed at which they can respond to change and have the flexibility to do so is very important. For example zara the spanish clothes retailer, is famous for its speed of response.

It takes just two weeks from the design of a skirt to it being on the shop floor. This is down mainly to Zara having vertical integration of the supply chain. This means they are very flexible nd can change designs far quicker then their rivals - a very good objective for a fashion retailer.

Dependability - 

Some businesses do not want to let customers down and so focus on ensuring that they meet promises - or are dependable.

examples - 

amazon state delivery dates for their products and keep customers informed if that date changes using email - this ensures that their reputation is maintained with customers.

Environmental objectives - 

For many businesses ensuring that their operational side does not harm the environment is important - especially for their corporate social responsibility reports.

Environmental objectives would included:

-reducing waste

-reducing carbon footprint 

-minimising waste products or materials 

-increase recycling 

- achieving self sufficiency in energy use

M and S has a 'plan a' to help them achieve environmental objectives. This includes having delivery HGVs that have a slapped roof to reduce furl consumption and reducing the use of plastic bags at the counter.

Added value - 

Adding value is an operational objective because it allows the business to develop a unique selling point (USP) for its products.

Adding value objectives would include:

increased spending on R and D - and rover, for example, are one of the worlds biggest spenders on R and D.

Achieving a certain number of patents - dyson currently hold 1200 patents, sending roughly one a day.

Developing a particular innovation - google glasses add value to their brand

External influences on operational objectives - 

External influences are those outside of the business. 

Market factors - is the market growing or declining? if declining then business should consider developing a new market; if growing then market penetration should be used.

Competitors actions and performance - what are competitors doing? will it affect sales? is there a more efficient way of operating?

External influences - 

economic factors - operations management is dependent on capital investment and if interest rates are high this may increase costs or may reduce sales as customers struggle to pay back loans.

political factors - for example, car manufactures have faces increased pressure to improve the efficiency of their products and how they manufacture them. This means modern cars are manufactured in a more environmental friendly way and are far more fuel efficient than 10 years ago.

Internal influences - 

corporate objectives - the operations department has to ensure that its objectives are consistent with the overall corporate objectives. British airways corporate objective is to be the worlds leading global premium airline therefore the routes they fly, the meals they serve and the planes they fly all need to reflect that. By contrast, ryanairs objective is to be europes leading low dare airline. They have only european routes and everything is no frills.

Finance - operations management objectives rely on high capital expenditure (ie machinery, etc) so healthy finances are essential.

Human resources - skills are training as well as motivation of the workforce are essential to ensure objectives are met.

The nature of the product / service - some products are suited to mass production (ie cadbury chocolate bars) whereas others need to be high quality with good customer service (ie wedding dress design)

Summary - 

Operational objectives allow a business to concentrate on what they consider to be important to make them as efficient as possible or give to them a competitive advantage 

They can be influenced by the finance, HR and marketing of the goods and services 

external influences like competitors and the economy can affect what objectives the busines wants to achieve and how quickly they can achieve them 

Businesses can have a significant competitive advantage by having the most appropriate operationa objectives.


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