Business Functions in Context Notes

B203 Business Functions in Context – Revision Notes Introduction * Communities of Practice (Wenger, 2007) – are groups of people the come together to share knowledge and experiences and learn from one another whilst providing a social context for that work. Three characteristics are crucial: 1. The Domain – It has an identity defined by a shared domain of interest. Membership implies a commitment to this and therefore a shared competence that distinguishes members from other people. 2. Community – In pursuing their interest, members engage in joint activities and discussions, help each other, and share information.
They build relationships that enable them to learn from each other. 3. Practice – Members of a community of practice are practitioners. They develop a shared repertoire of resources: experiences, stories, tools and ways of addressing recurring problems – in short a shared practice. This takes time and sustained interaction * Hoftstede’s (1980) dimensions of culture 1. Power distance 2. Individualism/ Collectivism 3. Masculinity/ Femininity 4. Uncertainty avoidance 5. Confucian/ Dynamism * Varieties of knowing action (Amin and Roberts, 2008)
Knowledge-in-action type| Innovation| Organisational dynamic| Craft/task-based| Customised, incremental| Hierarchically managed. Open to new members| Professional/specialised| Incremental or radical but strongly bound by institutional/professional rules. Radical innovation stimulated by contact with other communities| Large hierarchical managed organisations, or small, peer-managed organisations. Institutional restrictions on the entry of new members| Epistemic/creative| High energy, radical innovation| Group/project managed. Open to those with a reputation in the field.
Management through intermediate and boundary objects| Virtual| Incremental and radical| Carefully managed by community moderators or technological sequences. Open, but self-regulating| * Reflective Cycle (Gibbs 1988) * Task Management System (Taylor 1911) is a system of scientific management based on Taylor’s system of breaking down each job down into its individual motions which were then analysed these to determine which were essential. He believed that with unnecessary motion eliminated, the worker, following a machinelike routine, became far more productive. Gilbreath (1917) and her husband believed the concepts formulated by Taylor fell short when it came to managing the human element on the shop floor. The Gilbreth’s helped formulate techniques to breakdown and analyse work tasks into the smallest possible components of movement. * Experience Approach (Barnard 1938) states that to be effective the main purpose of an organisation should be divided down into parts. Bernard argued that so long as the organisations members accepted these divisions and there was sufficient communication between them they could achieve their own objectives.
If the balance was right the overall objectives of the organisation would be met and the business would survive and grow. * Psycho – Sociological Approach (Parker Follett 1974) based her philosophy on the idea that it is impossible to separate work from human beings hopes, fears and aspirations. She believed in three types of conflict, domination (least favourable), compromise and integration (most favourable). She suggested trying to avoid order giving ‘power down’, encouraging managers to allow employees to participate in decision making ‘power with’. To be governed by the situation not by superiority.
This is known as the Law of Situation. * Five Sources of Power (Handy 1976) 1. Physical – power of a superior force 2. Resource – power control and possession of valued resources 3. Position – result of an organisational role or position 4. Personal – power of charisma, personality 5. Expert – vested in someone because of their expertise * Balanced Scorecard – is an operational control model for business which aims to identify and improve various internal functions. It can provide feedback to organisation to help assist in the decision making process. Explicit Knowledge – can easily be communicated in words and numbers and can be easily communicated and shard in the form of hard data, scientific formulae, codified procedures or universal principles. * Tacit Knowledge – is not easily visible or easily expressed eg. subjective insights, intuitions and hunches * Management fiat – an order or instruction given by a manager * When looking at how organisations achieve effective functional integration, 4 modes have been identified (Kim 2003) 1. People (integration of managers, teams etc. ) 2. Information (flow of information through impersonal communications system eg. mail, databases) 3. Formulation (standardised functional activities in the workplace) 4. Centralisation (central, hierarchical decision making) * Routines – Recurrent patterns of functional interaction * Absorptive Capabilities – the capacity of an organisation to acquire new knowledge * Knowledge-intensive (KI) firms are organizations composed of multiple communities with highly specialized technologies, expertise, and knowledge domains (Boland and Tenkasi 1995) * Creative knowledge-intensive project-based firm: a model * KI organisations’ capacities to integrate new knowledge are limited.
This is because: 1. A firm requires specific capabilities in order to be able to assimilate new knowledge. These are costly to develop and maintain. 2. Acquiring the capability to acquire new knowledge is costly for organisations, so Cohendet and Simon (2008) that communities may play a role in acquiring and providing organisational knowledge that is otherwise ‘expensive’ to acquire. * New knowledge in a firm is acquired through what Cohendet and Simon describe as the ‘delicate balance’ between specialist communities and formal functional units Hard knowledge architectures are the functional units and hierarchical structures, often visible from organisational structure charts. * Soft knowledge architectures are the communities that create specialised, innovative, organisational knowledge Operations Management * Is concerned with activities that produce goods or deliver services to the customer. Seen as the ‘doing’ part of the organisation it is typically responsible for around 70% of total costs. * Relationship between the operations function and other core and support functions * Transformation process Transformed resources – are treated transformed in a process, usually a mixture of material, information and customers * Transforming resources – the resources that act on the transformed resources, usually classified as facilities * Products = tangible, service = intangible * Facilitating services – a those produced by an organisation to support its products. Facilitating products are the opposite * 3 levels of operation and process management 1. Supply network (arrangement of interconnected operations) 2. The operation (arrangement of interconnected processes) 3. The process (arrangement of interconnected resources) The 4 V’s model – shows the difference between different types of operation by using the following dimensions 1. Volume – how many products or services are made by the operation 2. Variety – how many different types of products or services are made by the operation 3. Variation – how much does the level of demand change over time 4. Visibility – how much of the operation’s internal working is exposed to the customer * Possible roles for the operations function 1. Implementing business strategy 2. Supporting business strategy 3. Driving business strategy * Hayes and Wainwright Four-stage model . Internally neutral – The operations function is internally focused and reactive, the best that the organisation hopes for is that operations don’t make mistakes 2. Externally neutral – The operations function tries to be as good as the competition, or to achieve parity with industry norms. Such an organisation is likely to benchmark its operations against its competitors. 3. Internally supportive – an operations strategy will be developed which will be derived from, and support, the business strategy. The organization’s operations are likely to be amongst the best in its industry 4.
Externally supportive The operations function provides the basis of competitive advantage for the organisation, by setting the standard in their industry. Emulates best practice wherever it is to be found. Operations will be seen as the means of exceeding expectations by delighting the customer * The Four Stage Model of Operations Contribution * 5 performance objectives that can be applied to any type of organisation 1. Quality 2. Speed 3. Dependability 4. Flexibility 5. Cost * The External Effect of the 5 Performance Objectives * Four perspectives of operation strategy 1.
Top-down perspective – what the business wants operations to do 2. Bottom-up perspective – what day-to-day experience suggests operations should do 3. Market Requirements perspective – what the market position requires operations to do 4. Operations resources perspective – what operations resources can do * Order winners – the competitive factors that directly and signi? cantly contribute to winning business * Quali? ers – the competitive factors that have a minimum level of performance (the qualifying level) below which customers are unlikely to consider an operations performance satisfactory Structural decision areas| Infrastructure decision areas| FacilitiesCapacity ManagementTechnology Supply network| Planning and controlQualityWork organisation HRPerformance ManagementNew Product Development | * Generic Manufacturing Process Types 1. Project eg. large construction projects, movie production 2. Jobbing eg. tailors, specialist toolmakers 3. Batch eg. bakeries, the manufacture of sports shoes 4. Mass eg. automobile plant, dvd production 5. Continuous eg. steel making, electricity utilities * Generic Service Process Types 1. Professional Services eg. architects, lawyers . Service Shops eg. banks, high street shops 3. Mass Services eg. supermarkets, airports * Product Process Matrix * 3 aspects to all products and services that have to be designed 1. The concept – the understanding of the nature, use and value of the service or product 2. The package – the group of ‘component’ products and services that provide those bene? ts de? ned in the concept 3. The process – the way in which the component products and services will be created and delivered * Stages of product/ Service Design * Concept Screening includes 3 categories of design criteria . Feasibility – ‘can we do it? ’ 2. Acceptability – ‘do we want to do it? ’ 3. Vulnerability – ‘do we want to risk it? ’ * Influences on location decisions Supply side| Demand side| Labour costsLand costsEnergy costsTransportation costsCommunity factors (tax, language etc. )| Labour skillsSuitability skillsImageConvenience for the customer | * Indirect Process Technology – assists the management of a process rather than directly contributing to the creation of products and services * Integrating technology – processes combinations of materials, information and customers 4 Questions operations managers need to ask about technology 1. What does it do? 2. How does it do it? 3. What advantages does it give us? 4. What constraints does it impose * 3 types of material processing technology 1. Material-processing technology – form, shape and move materials 2. Information-processing technology (IT) 3. Customer-processing technology – interaction between customers and technology This can be a. Active (ATMS) b. Passive (Cinemas, moving walkways) c. Hidden (CCTV, barcode scanners) d. Through an intermediary (call centres, travel agents) Planning is concerned with: 1. What activities should take place in an operation 2. When should they take place longer term 3. What resources should be allocated to them * Control is concerned with: 1. Understanding what is actually happening in the operation 2. Deciding whether there is significant deviation from what should be happening shorter term 3. (If there is deviation) Changing resources in order to affect the operations activities * Enterprise Resource Planning (ERP) – The integration of all signi? ant resource planning systems in an organisation that, in an operations context, integrates planning and control with the other functions of the business * Materials Requirement Planning (MRP) – A set of calculations embedded in a system that helps operations make volume and timing calculations for planning and control purposes * Independent Demand – is demand which is not obviously or directly dependant on the demand for another product or service. In contrast Dependant demand is relatively predictable because it is derived from some other known factor. * Four distinctive ways in which operations can respond to demand: . Produce to stock – producing outputs prior to their being demanded by customers 2. Part-produce to order – producing work in progress prior to outputs being demanded by customers 3. Produce to order – producing outputs only when they are demanded by customers 4. Resource to order – buying in resources and producing only when outputs are demanded by customers * P:D ratios – A ratio that contrasts the total length of time customers have to wait between asking for a product or service and receiving it (D) and the total throughput time to produce the product or service Four sets of activities that need to be undertaken in order to plan and control the volumes and timing of outputs of an operation: 1. Loading – allocating work to each stage (or work centre) of an operation 2. Sequencing – deciding on the order in which work is to be performed. 3. Scheduling – producing a detailed timetable showing when each work activity should start and end. 4. Monitoring and controlling – checking any deviation from what has been planned and taking any corrective action required * Pull Control – workstation requests work from the previous station only when it is required Push Control – work is sent forward as soon as it is finished on the previous workstation * Managing capacity over time involves 3 steps: 1. Measuring aggregate demand and capacity 2. Identifying the alternative capacity plans 3. Choosing the most appropriate capacity plan * The second stage of capacity planning involves: 1. Level Capacity (i. e. , absorb demand) 2. Chase Demand (i. e. , adjust output to match demand) * 3. Demand Management (i. e. , change demand) *includes overtime, idle time, annualised hours, hire and fire, part-time staff, sub contracting Most operations use a mixture of the three above methods. Yield Management is a collection of such methods that can be used by an operation (usually with a fixed capacity) to maximise its potential to generate profit * Five types of inventory 1. Buffer (aka safety) 2. Cycle (eg. baking 3 types of equally popular bread on rotation) 3. De-coupling (creates the opportunity for independent scheduling and processing speeds between process stages) 4. Anticipation (accumulated to cope with expected demand or interruption to supply) 5. Pipeline (exists because material cannot be transported instantaneously) More common inventory classifications based on their position in the transformation 1. Raw materials 2. Work in progress 3. Finished goods * Economic Order Quality – determines the optimum order quantity that a company should hold in its inventory given a set cost of production, demand rate and other variables. This is done to minimize variable inventory costs. The full equation is as follows:    EOQ = v(2CoD/ Ch) Co = cost of placing an order D = annual demand (in units) for the item Ch = the annual stockholding cost * Two approaches to the timing or reorder 1. Continuous review 2. Periodic Review Pareto law – A general law found to operate in many situations that indicates that 20 per cent of something causes 80 per cent of something else, often used in inventory management (20 per cent of products produce 80 per cent of sales value) and improvement activities (20 per cent of types of problems produce 80 per cent of disruption) * ABC Inventory Control is approach to inventory control that classes inventory by its usage value. Similar to the Pareto principle, ‘A’ items will typically account for a large proportion of the overall value but a small percentage of number of items.
Example of ABC classes are: ‘A’ items – 20% of the items accounts for 70% of the annual consumption value of the items. ‘B’ items – 30% of the items accounts for 25% of the annual consumption value of the items. ‘C’ items – 50% of the items accounts for 5% of the annual consumption value of the items. * Just in time (JIT) – is a production strategy that strives to improve a business return on investment by reducing in-process inventory and associated carrying costs.. Inventory is seen to obscure intrinsic production problems * Lean Philosophy comprises of 3 main elements 1. Eliminate waste 2.
Include Everyone 3. Continuous improvement (Small steps to expose waste and eliminate it) * 7 types of waste 1. Defectives 2. Inventory 3. Processing 4. Waiting 5. Motion 6. Transport 7. Overproduction * The 5 S Terminology 1. Sort (Eliminate what is not needed) 2. Straighten (things can be reached when needed) 3. Shine (clean and tidy workplace) 4. Standardise (maintain order) 5. Sustain (commitment and pride in standards) * Value stream mapping – a lean manufacturing technique used to analyze and design the flow of materials and information required to bring a product or service to a consumer MRP vs JIT 1. MRP is best suited to low-volume, high-variety production, where products and processes are complex 2. JIT, on the other hand, is best suited to high-volume, low-variety operations with simple products and processes 3. Slack argues that MRP is good for planning, while JIT is good for control. These conclusions would be relatively uncontested by most operations management authorities. However, their claim that JIT and MRP can operate in combination is somewhat controversial and would provoke debate * The supply side of the supply network refers to supplier side of the operation.
The demand side refers to customers * The first tier are suppliers and customers that are in immediate contact with the operation. The second tier are those separate from the organisation by only the first tier. * The Intermediate supply network is the suppliers and customers that have direct contact with the organisation. The Total supply network is all suppliers and customers involved in the supply chain that passes through the operation * Downstream cover the stages of the supply chain between the operation in question and the customer. Upstream is the other way, towards the supply side Vertical integration – ‘do or ‘buy’ decisions * Long-term capacity management – decisions that determine the level of physical capacity of an operation long term (usually one year plus) * Disintermediation – suppliers make direct contact with customer ‘cutting out the middle man’ eg. Dell Computers * Co- opetition – a business strategy based on a combination of cooperation and competition, derived from an understanding that business competitors can benefit when they work together eg. restaurants clustered together * The decision logic of outsourcing Sourcing, the activity of selecting which supplier to purchase from, is a vital task within the purchasing function. 1. Single and multiple sourcing: Single is obtaining one type of input from just one supplier. In contrast multiple is using more than one supplier, with the aim of maintaining market bargaining power or continuity of supply. There has been a trend in recent years for organisations to move towards more single sourcing. 2. e-procurement – Over the last few years, many organisations have sought to capitalise on the internet as a vehicle for purchasing supplies. 3.
Global sourcing – Increasing economic globalisation has led many organisations to purchase numerous goods (and increasingly also services) from outside their own country. * The Business/ Consumer Matrix * Customer relationship management (CRM) – a widely implemented strategy for managing a company’s interaction with customers and clients. It involves using technology to organise, automate, and synchronize business processes * The Bullwhip effect – the tendency of the supply chains to amplify relatively small changes at the demand side so that the disruption at the supply end is much greater, see below Channel alignment – the adjustment of scheduling, materials movements, stock levels, pricing etc. to bring all operations in the chain in line with one another * Vendor-managed inventory (VMI) – allowing an upstream supplier to manage the inventories of its down stream customer * Quality is hard to define. Slack defines it as: ‘Consistent conformance to customers expectations’ * Operation function is mainly responsible for making sure there is no gap between the product/service produced and its specification 1. Define quality characteristics 2.
Decide how to measure them 3. Set quality standards for each characteristics * Total Quality Management (TQM) is defined by Slack as: ‘A holistic approach to the management of quality that emphasizes the role of all parts of an organization and all people within an organisation to in? uence and improve quality; heavily in? uenced by various quality “gurus”, it reached its peak of popularity in the 1980s and 1990s’ Involves understanding quality from the perspective of the customer (both external and internal) * The costs of quality 1. Prevention costs 2. Appraisal costs 3.
Internal failure costs 4. External costs At some point it may not become economically viable to keep sinking costs into a business in pursuit of further small gains in quality. This goes against TQM’s goal of continual pursuit for the highest possible quality regardless of other factors. * A quality system is defined as the organisational structure, responsibilities, procedures, processes and resources for implementing quality management * ISO 9000 is a set of worldwide standards designed to help organizations ensure they meet the needs of customers and other stakeholders.
Third party certification bodies provide independent confirmation that organisations meet the requirements of ISO 9001. * A lot of TQM initiatives fail or lose their impetus over time (known as Quality Disillusionment). Those which succeed will likely have the following features: 1. A quality strategy 2. Top-management support 3. A steering group 4. Group-based improvement 5. Success being recognised 6. Training at the heart of quality improvement * The Six Sigma Approach seeks to improve the quality of process outputs by identifying and removing the causes of defects (errors) and minimizing variability in processes.
It uses a set of quality management methods and creates a special infrastructure of people within the organisation who are experts in these methods. 1. Master Black Belts – act as in-house coaches on Six Sigma. They devote 100% of their time to Six Sigma. They assist champions and guide Black Belts and Green Belts. Apart from statistical tasks, they spend their time on ensuring consistent application of Six Sigma across various functions and departments. 2. Black Belts – Operate under Master Black Belts to apply Six Sigma methodology to specific projects. They primarily focus on Six Sigma project execution.
Again 100% of their time devoted. 3. Green Belts – are the employees who take up Six Sigma implementation along with their other job responsibilities, operating under the guidance of Black Belts * Polar diagrams can be a useful way of depicting performance * Importance–Performance Matrix – A technique that brings together scores that indicate the relative importance and relative performance of different competitive factors in order to prioritize them as candidates for improvement * Breakthrough improvement assumes the main vehicle of improvement is major and dramatic change in the way an operation works (more Western Approach).
It tends to favour innovation and technology as a means for improving performance. * In contrast Continuous Improvement (a more Japanese approach) is an ongoing effort to improve products, services, or processes. using a greater number of smaller, incremental steps over time. Seen as more people driven. * DMAIC cycle – Define, Measure, Analyse, Improve, Control. Increasingly used improvement cycle model, popularised by the Six Sigma approach to operations improvement * PDCA cycle – Stands for Plan, Do, Check, Act cycle, perhaps the best known of all improvement cycle models * 5 challenges for Operations Management . Globalisation 2. CSR – Cooperate Social Responsibility 3. Environmental Protection 4. Technology Awareness 5. Knowledge Management Marketing * Marketing – Individual and organisational activities that facilitate and expedite satisfying exchange relationships in a dynamic environment through the creation, distribution, promotion and pricing of goods, services and ideas * Marketing Concept – The philosophy that an organisation should try to provide products that satisfy customers’ needs through a coordinated set of activities that also allows the organisation to achieve its goals Marketing Mix – The tactical ‘toolkit’ of the marketing programme; product, place/distribution, promotion, price and people variables that an organisation can control in order to appeal to the target market and facilitate satisfying exchange * Marketing Orientation – organisation which devotes resources to understanding the needs and buying behaviour of customers, competitors’ activities and strategies, and of market trends and external forces – now and as they may shape up in the future; inter-functional coordination ensures that the organisation’s activities and capabilities are aligned to this marketing intelligence. Marketing Programmes – A marketer’s marketing mix of activities and implementation processes designed to operationalise the marketing strategy * Marketing Strategy – The selection of which marketing opportunities to pursue, analysis of target market(s), and the creation and maintenance of an appropriate marketing mix that will satisfy those people in the target market(s) * Marketing Environment – External changing forces within the trading environment: laws, regulations, political activities, societal pressures, economic conditions and technological advances.
Micro = the business, suppliers, buyers, competitors etc. Macro = laws, regulations, technological, social/green etc. * Marketing management – A process of planning, organising, implementing and controlling marketing activities to facilitate and expedite exchanges effectively and efficiently * Market segment – A group of individuals, groups or organisations sharing one or more similar characteristics that cause them to have relatively similar product needs and buying characteristics * Targeting – The decision about which market segment(s) a business prioritises for its sales and marketing efforts Competitive advantage – The achievement of superior performance vis-a-vis rivals, through differentiation to create distinctive product appeal or brand identity; through providing customer value and achieving the lowest delivered cost; or by focusing on narrowly scoped product categories or market niches so as to be viewed as a leading specialist * Differential advantage – An attribute of a brand, product, service or marketing mix that is desired by the targeted customer and provided by only one supplier * Concentric Diversification – A process that occurs when new products related to current products are introduced into new markets Conglomerate Diversification – A process that occurs when new products unrelated to current technology, products or markets are introduced into new markets * Horizontal Diversification – A process that occurs when new products not technologically related to current products are introduced into current markets * Advertising – A paid-for form of non-personal communication about an organisation and its products that is transmitted to a target audience through a mass medium * Environmental Scanning – The process of collecting information about the forces in the marketing environment Green Marketing – The speci? c development, pricing, promotion and distribution of products that do not harm the natural environment * 4 Types of Buying behaviour 1. Routine Response Behaviour 2. Limited Decision Making 3. Extensive Decision 4. Impulse Buying * Routine Response Behaviour – Behaviour that occurs when buying frequently purchased, low-cost, low-risk items that need little search and decision effort * Consumer Decision Making Process 1. Problem Recognition 2. Information search 3. Evaluation of Alternatives 4. Purchase and 5. Post-purchase evaluation Level of Involvement – The level of interest, emotion and activity the consumer is prepared to expend on a particular purchase * Selective Distortion – The changing or twisting of currently received information * Selective Exposure – The selection of inputs that people expose to their awareness * Selective retention – The process of remembering information inputs that support personal feelings and beliefs, and of forgetting those that do not * New Task Purchase – An organisation’s initial purchase of an item to be used to perform a new job or to solve a new problem Straight Rebuy Purchase – The routine repurchase of the same products under approximately the same terms of sale * Modi? ed Rebuy Purchase – A new task purchase that is changed when it is reordered or when the requirements associated with a straight rebuy purchase are modi? ed * Relationship Management – The process of encouraging a match between the seller’s competitive advantage and the buyer’s requirements over an item’s life cycle * Relationship Marketing – All of the activities an organisation uses to build, maintain and develop customer relations Market segmentation involves three stages: 1. Segmenting: grouping similar customers into market segments (Demographic, Geographic, Psychographic, Behaviouristic) 2. Targeting: identifying the segments on which marketing effort will be focused 3. Positioning: creating an appropriate image for the product * Exploratory Research – Deliberately flexible data gathering used to discover the general nature of a problem and the factors that relate to it * Descriptive Research – Data collection that focuses on providing an accurate description of the variables in a situation Casual Research – Data collection that assumes that a particular variable X causes a variable Y * Quota Sampling – A sampling method in which the final choice of respondents is left to the interviewers, who base their choices on two or three variables (such as age, sex and education) * Random Sampling – A sampling method in which all the units in a population have an equal chance of appearing in the sample * Stratified Sampling – A sampling method in which the population of interest is divided according to a common characteristic or attribute; a probability sampling is then conducted within each group Syndicated Data Services – Organisations that collect general information and sell it to clients * Product Life Cycle – the four major stages through which products move: introduction, growth, maturity and decline * Product Mix – The composite group of products that a company makes available to customers * 3 level product analysis 1. Core – the benefits of the product to the consumer 2. Actual – A composite of the features and capabilities offered in a product, quality and durability, design and product styling, packaging and brand name 3. Augmented – Support aspects of a product, including ustomer service, warranty, delivery and credit, personnel, installation and after-sales support * Convenience Product – Inexpensive, frequently purchased and rapidly consumed item that demands only minimal purchasing effort * Shopping Product – Item chosen more carefully than a convenience product; consumers will expend effort in planning and purchasing these items * Speciality Product – Item that possesses one or more unique characteristic; consumers of speciality products plan their purchases and will expend considerable effort to obtain them New Product Development – The process a product goes through before introduction, involving seven phases: 1. Idea generation 2. Id

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