A2 Business Strategy PDF | Business Studies

A2 Business Strategy Business Strategy Business Strategy: The long-term plan outlining how an organisation will achieve its objectives and gain a competitive advantage in its market by e ectively allocating resources and adapting to the external environment Establishing b...

A2 Business Strategy Business Strategy Business Strategy: The long-term plan outlining how an organisation will achieve its objectives and gain a competitive advantage in its market by e ectively allocating resources and adapting to the external environment Establishing business strategy Strengths of the business Apply business strengths when developing future strategies A long-term plan that takes a business away from a proven area of operation may require business skills and experience that it does not have In addition, the expansion of the business may be best achieved if some underperforming areas (or non-core businesses) are sold o. The business will then focus on its current successes to achieve growth. Competitive Environment Innovations by competitors may be di cult to copy or better Such leaps often lead to them increasing their market share and shifting the tastes of consumers Objectives Strategies are dependent on the speci c objectives a business is aiming to achieve The opportunity cost of certain objectives could be other, just as important business objectives that competitors could be focusing on. Its best to perform a situational analysis to determine what the business has to achieve Resources Available All business resources are nite. Limited resources force a business to choose which strategies to proceed with, and which to drop or scale back. This can be used as a determining factor of how to advise a manager/director on which business strategy to use. fi ffi fi ff ff  Strategic Management Strategic Management: Analysis of the current business situation, setting long term objectives deciding on business strategies to achieve them and then implementing these strategies. Stages of strategic management 1.) Strategic Analysis Assessing the current position of the company in relation to its market, competitors and the external environment. Decisions that do not start from knowledge of where the business is now may be inappropriate and ine ective. 2) Strategic choice Taking important long-term decisions that will push the business towards the objectives set. This process leads to a decision to use a particular strategy It also highlights the techniques used to make that choice SUCCESSFUL STRATEGIC CHOICES NEED TO BE: Achievable A ordable Lead to a competitive advantage 3.) Strategic implementation Allocating su cient resources to put decisions into e ect, and evaluating success. New business strategies always require additional resources. These must be provided at the right time and in su cient quantities to allow the new strategies to be e ective. ASSOCIATED FACTORS - An appropriate organisational structure to deal with the change - Adequate resources to make the change happen - Well-motivated sta who want the change to happen successfully - Leadership style and organisational culture that allow change to be implemented with wide-ranging support - Control and review systems to monitor the rm's progress towards the desired nal objectives. ff ffi ff ff ffi fi ff ff fi Strategy and Tactics Strategic management is the highest level of managerial activity Undertaken by or closely supervised by the chief executive o cer Approved by the board of directors Tactics - Concerned with making smaller-scale decisions aimed at reaching more limited and measurable goals, which themselves are part of the longer-term strategic aim. Strategic Decisions Long term Decisions are di cult to reverse once made Taken by directors and/or senior managers. Cross-functional - Involve all major departments of the business. Tactical Decisions Short to medium term Decision is reversible Taken by less senior managers and subordinates Impact of tactical decisions is often only on one department Approaches to developing business strategy 1.) Blue Ocean Strategy The exploiting of uncontested market space through product di erentiation and low cost The basis of this approach is stop competing and start creating by nding and developing uncontested markets. This involves being creative and original with strategies that other businesses have not yet adopted. These uncontested market spaces are newly created markets or segments that have no close competitors The goal is to make the competition irrelevant Red oceans - Highly contested markets Four Action Framework Raise - What factors could be raised above the industry's standard? Reduce - What competitive factors against competition can be reduced? Eliminate - Which competitive factors against other rivals could be eliminated altogether? Create - Which factors could be created that the industry has never o ered before? ffi ff ffi fi ff  Red Ocean Blue Ocean Compete in existing markets Create uncontested markets to enter Out-compete the competition Make the competition irrelevant Exploit existing demand Create and exploit new demand High value to the customer = High Costs to the High value to customer but low cost to business business Either product di erentiation or low cost Product di erentiation and low cost 2.) Scenario Planning Identifying possible future situations and how the business might respond to them In scenario planning, a group of senior managers begin by identifying a limited number of possible outcomes or situations, called scenarios. They then discuss what strategy the business could adopt if each scenario actually occurred. The scenarios used for each business are likely to be di erent. The identi cation of these future events will depend on the key risk factors that a ect each particular business. Making xed plans for the future leads to the risk of in exibility. Making no plans for the future leads to being unprepared for any future development or trend. BENEFITS Forces managers to consider the main risks and uncertainties that a ect their business. Managers have to develop a range of strategies to deal with di erent scenarios. Makes managers adopt a exible approach as di erent scenarios will require di erent strategies. LIMITATIONS - Managers try to consider too many uncertainties and become confused by the range of possible scenarios. - Some managers might only focus on one possible future scenario and be unprepared for others. - It will be less e ective if only short-term risks are considered. Looking far into the future can lead to more creative strategies. 3.) SWOT Analysis SWOT Analysis - A strategic tool used to assess a rm's internal and external factors to help develop future strategies. Four key components: 1.) Strengths – Internal advantages that provide a competitive edge. 2.) Weaknesses – Internal disadvantages that hinder business performance. These are identi ed through an internal audit. fi ff ff ff fi fl ff ff fl ff fi ff ff fi ff  3.) Opportunities – External factors that present growth potential. 4.) Threats – External risks that can negatively impact the business. *These are identi ed through an external audit of the market and competition. Overall, SWOT analysis helps businesses align their resources with market conditions to enhance strategic planning and decision-making. It identi es potential successful strategies by aligning a business's strengths with opportunities while recognising constraints It can also highlight weaknesses that need to be addressed to take advantage of opportunities. While SWOT is a useful starting point for developing corporate strategies, it is not enough on its own. Further analysis and planning are required before making strategic decisions. EVALUATION OF SWOT Subjectivity is a limitation of a SWOT analysis. It is not a quantitative form of assessment so the cost of correcting a weakness cannot be compared with the potential pro t from pursuing an opportunity. SWOT should be used as a management guide for future strategies, not as a speci c guide for future action. Part of the value of the process of SWOT analysis is the greater understanding that senior managers gain about their business from the focus that the SWOT analysis provides. 4.) PEST Analysis It focuses on the macro business environment. The wide range factors that would in uence a new business strategy P - Political E - Economic S - Social T - Technological PEST analysis plays an important role in assessing the likely chances of a business strategy being successful. The four key areas covered by it are clearly external to the business and beyond its control. They are considered as being either opportunities or threats. PEST is complementary to SWOT, not an alternative fl fi fi fi fi  EVALUATION OF PEST Any signi cant new business strategy should be preceded by a detailed analysis of the wider environment in which the strategy has to operate an be successful The results of the analysis should be an important part of developing strategies for the future. Once completed, PEST analysis may need to be constantly updated and reviewed, especially in a rapidly changing wider environment. 5.) Porter’s Five Forces A technique for analysing competitive forces within an industry FIVE FORCES: 1.) Barriers to entry The ease with which other rms can join the industry and compete with existing businesses Threat of entry(to/in the industry) is greatest when: Low economies of scale Relatively cheap technology Distribution channels are easy to access No legal or patent restrictions on entry Low importance of product di erentiation 2.) The power of buyers Power that consumers have over the producing industry Buyer power will increase when: Many undi erentiated small supplying rms Cost of switching suppliers is low Buyers can realistically and easily buy from other suppliers 3.) The power of suppliers Power that suppliers have over the producing industry Suppliers > Consumers when: Cost of switching is high The brand being sold is very powerful and well-known Suppliers could realistically threaten to open their own forward-integration operations 4.) Threat of substitutes Substitute products in other industries Threat of substitution exists when: New technology makes other options available Price competition forces customers to consider alternatives Any signi cant new product leads to a switch in consumer spending fi fi ff fi ff fi  5.) Competitive Rivalry High competitive rivalry: Cheap and easy for new rms to enter an industry A threat from substitute products Suppliers have substantial power Buyers have substantial power Great rivalry is present competing rms when: A large number of rms with similar market share High xed costs force rms to try to obtain economies of scale Slow market growth that forces rms to take a share from rivals if they wish to increase AS A FRAMEWORK FOR BUSINESS STRATEGY It helps businesses decide whether to enter an industry or not. It provides insight into the potential pro tability of markets. By analysing the existing markets, decisions may be taken regarding: - Whether to stay in these markets in future if they are becoming more competitive - How to reduce competitive rivalry in these markets and increase potential pro tability With the knowledge gained of the competitive forces, businesses can develop strategies that might improve their own competitive position. EVALUATION The bene t of Porter's model is that it enables managers to think about the current competitive structure of their industry in a logical way. It is usually regarded as a good starting point for the development of business strategy. However, it is sometimes criticised because: It is static analysis that examines an industry at just one moment in time. The model can become very complex when trying to use it to analyse many modern industries. They will each have their own competitive forces. 6.) Core Competencies Core competencies - Refer to a company's unique strengths or capabilities that distinguish it from competitors. Core competencies are essential for strategic development as they inform the direction of business operations and competitive positioning. Unlike general skills or resources, core competencies are specialised capabilities that signi cantly contribute to a rm's competitive edge. While skills are more about individual expertise, core competencies are organisational and synergistic, combining various elements to deliver unique value in the marketplace. fi fi fi fi fi fi fi fi fi fi fi  To be of commercial and pro table bene t to a business, core competence should: Provide clear bene t to consumers Be di cult for other business to copy Be applicable to a range of di erent products and markets Identifying core competencies Techniques for identi cation: - Stakeholder interviews - Employee surveys - Competitive analysis Aligning with business goals It is crucial for organisations to align core competencies with overall business goals. This ensures that strengths are utilised e ectively to meet strategic objectives, improve performance, and optimise resource allocation, ultimately supporting long-term growth. Value Creation through Competencies Competencies create value by enabling companies to deliver products and services that meet customer needs more e ciently and e ectively. This can involve leveraging technology, optimising processes, or delivering unique customer experiences that competitors cannot easily replicate. Long-Term Competitive Advantage Companies that e ectively focus on enhancing their core competencies can develop long-term competitive advantages. By continually innovating and re ning these competencies, organisations can build barriers to entry for competitors and sustain superior performance over time. EVALUATING CORE COMPETENCIES Metrics of assessment Metrics for assessing core competencies include nancial performance indicators, customer satisfaction surveys, and market share analysis. These quantitative and qualitative measures provide insights into how well a company's competencies translate into business success SWOT Analysis in context It aids businesses in identifying which competencies to leverage, improve, or retire based on market dynamics Re ning competencies over time Core competencies should be regularly re ned to adapt to changing market conditions and new technologies. This iterative process ensures that organisations remain relevant and competitive, maintaining an agile approach to capability development. fi ffi ff fi fi fi ffi ff ff fi fi ff fi fi  7.) Anso Matrix Anso Matrix - A strategic planning tool that helps businesses identify and evaluate growth opportunities. Variables in a strategic marketing decision: The market in which the business is going to operate in The product it plans to sell Managers have to options - Stay in current market - Enter new market In terms of the product - Sell existing products - Make new products Growth Strategies 1.) Market Penetration Sell more in existing markets PROS Lowest risk - product and market parameters remain the same Incentives to be e cient Higher visibility of products and services CONS Could lower pro t margins Possible harm to your company’s image Risk of pricing war 2.) Product Development Selling new products in existing markets PROS Can make a new product that better meets customer needs Increases market share Competitive edge against competitors CONS High costs Time consuming Quality Control 3.) Market Development Selling existing products in a new market PROS Diversi ed revenue streams Potential for higher pro ts Competitive edge when entering new customer segments ff fi ff fi ffi fi  CONS Risk of failure Cultural challenges Legal Compliance 4.) Diversi cation The process of selling di erent unrelated products in new markets Related diversi cation - vertical or horizontal integration Unrelated diversi cation - new market PROS Market share expansion Risk mitigation Competitive advantage CONS Brand dilution Lack of market expertise Increased costs Evaluation Anso 's matrix helps identify potential gains and risks associated with each strategy that managers can then apply decision making techniques to assess the costs involved Limitations Only considers two main factors in a strategic analysis Using only the Anso matrix would lead would lack important environmental evidence The matrix does not suggest detailed marketing options 8.) Force Field Analysis Force eld analysis - This is a technique for identifying and analysing the positive factors that support a decision and negative factors that constrain it. This technique is typically used when a company wants to make major internal changes to the business Driving forces - Positive Forces Restraining Forces - Negative Forces HOW TO CONDUCT A FORCE FIELD ANALYSIS Step #1: Analyse the current situation and the desired situation Step #2: List all of the factors driving change towards the desired situation Step #3: List all of the constraining factors against change towards the desired situation Step #4: Allocate a numerical score to each force, indicating the scale or signi cance of each force: 1 = Extremely weak and 10 = extremely strong Step #5: Chart the forces on the diagram with driving forces on the left and restraining forces on the right Step #6: Total the scores and establish from this whether the change is really viable Step #7: Discuss how the success of the change or proposed decision can be a ected by decreasing the strength of the restraining forces and increasing the strength of the driving forces ff fi fi fi fi ff ff fi ff  ADVANTAGES It provides a visual representation of the factors surrounding the proposed change. It also takes into consideration the impact of these factors on the nal decision. Promotes a collaborative set-up by involving more than one person in determining the bene ts and challenges of a proposed change Allows for a high-level overview of the situation by analysing all the factors and what they entail in relation to a proposed change Eases the evaluation process by mainly utilising a scoring method that makes it easily quanti able EVALUATION - Unskilled or inexperienced managers could fail to identify all of the relevant forces involved in the change process. - The allocation of numerical values of the driving and constraining forces is rather subjective. - Limited in dynamic business environments. - Force Field Analysis provides a snapshot of forces at a given time - The model does not account for unexpected external shocks that may shift the balance of forces suddenly. Most of these limitations occur due to: Business environments that change rapidly due to external factors like market trends, competition, and regulations. Therefore, it may need regular updates to remain relevant for strategic planning 9.) Decision Trees A diagram that sets outage options connected to a single decision and the outcomes and economic returns that may result The diagram helps break down complex choices into simpler, step-by-step decisions The expected nancial gains or losses from each possible outcome are considered to determine the best option Expected Value - The likely nancial result of an outcome obtained by multiplying the probability of an event occurring by the forecast economic return if it does occur The purpose of a decision tree is to show the option that gives the higher expected value Shows the main features of a business decision 1. All options open to a manager 2. The di erent possible outcomes resulting from these options 3. The chances of these outcomes occurring 4. The economic returns from these outcomes fi ff fi fi fi fi  CONSTRUCTING DECISION TREES It is constructed from left to right. The tree starts from a single decision and branches out to di erent possible choices. Each branch of the tree represents an option together with a range of consequences or outcomes and the chances of these occurring. Decision points (decision nodes) are denoted by a square - a choice must be made. A circle (chance node) shows where outcomes are uncertain and depend on probabilities. Probabilities are shown alongside each of these possible outcomes. These probabilities are numerical values that measure the chance of an outcome occurring. The economic returns are the expected nancial gains or losses of a particular outcome. ADVANTAGES Simplicity Aids decision making Cost E ective Reduces Risk DISADVANTAGES - Reliance on estimates - Ignores qualitative factors - Complex for large decisions EVALUATION OF DECISION TREES Limitations - Accuracy of the data used - Circumstances may change - the probabilities may also change - Decision trees can’t replace the qualitative factors - Expected values are average returns which is assuming that the outcomes happen more than once ff fi ff  Corporate Planning Corporate Planning - The process used by companies to set long-term plans to meet certain objectives COMPONENTS OF CORPORATE PLANS A corporate plan includes: The overall objectives of the organisation to be achieved within a given time frame. The strategy or strategies to be used to attempt to meet these objectives. The main objectives for the key departments of the business derived from the overall objective. Once the strategies have been implemented, the results should be measured and evaluated. The results are then compared with the original objectives. They will also be used to help determine the corporate objectives for the next period POTENTIAL BENEFITS OF CORPORATE PLANS Senior managers have a clear focus and sense of purpose for what they are trying to achieve. The plan helps to communicate this sense of purpose and focus to all managers, employees and other stakeholders. The original objectives can be compared with actual outcomes to see how well the business's performance matched its aims. Forces senior managers to consider the organisation's strengths and weaknesses in relation to the business environment. POTENTIAL LIMITATIONS OF CORPORATE PLANS - Plans are great if nothing changes. The best-laid plans of any business can be made obsolete by rapid and unexpected internal or external changes. - Part of the planning process is to look ahead to consider how to respond to unforeseen events. - The corporate planning process should be as adaptable and exible as possible to allow corporate plans to continue to be relevant and useful during periods of change. THE MAIN INTERNAL INFLUENCES ON A CORPORATE PLAN - Financial resources - Operating capacity - Managerial skills and experience - Employee numbers and skills - Culture of the organisation THE MAIN EXTERNAL INFLUENCES ON A CORPORATE PLAN - Macroeconomic conditions - Central bank and government economic policy changes. - Likely technological changes - Competitors' actions fl Corporate Culture The values, attitudes and beliefs of the people working in an organisation that a ect the way they interact with each other. The culture of an organisation gives it a sense of identity Culture is based on the values, attitudes and beliefs of the people who work in it Values, attitudes and beliefs have a very powerful in uence on the way employees in a business act, take decisions and relate to others in the organisation MAIN TYPES OF CORPORATE CULTURE Power culture Power is concentrated at the centre of the organisation Associated with autocratic leadership Swift decisions can be made as so few people are involved in making them Role culture Each member of sta has a clearly de ned job title and role People in an organisation with this culture operate within the rules and show little creativity. Power and in uence come from a person's position within the organisation Task culture Based on cooperation and teamwork Groups are formed to solve particular problems and there will be lines of communication similar to a matrix structure. Teams often develop a distinctive culture because they are empowered to take decisions Team members are encouraged to be creative Person culture Individuals are given the freedom to express themselves fully and make decisions for themselves Most creative type of culture. There may be some con ict between individual goals and those of the whole organisation Entrepreneurial culture Encourages management and workers to take risks, to come up with new ideas and to test out new business ventures Success is rewarded in an organisation with this culture However, failure is not necessarily criticised as it is considered an inevitable consequence of showing initiative and risk-taking fl ff fl fi fl ff  CHANGING CORPORATE CULTURE The existing culture of a business can become a real problem when it restricts growth, development and success. Changing the value system of a business and the attitudes of all employees is never easy The process is time consuming It means changing the way people think and react to problems It can also involve substantial changes of personnel, job descriptions, communication methods and working practices. Much research has been done on analysing the best way to change an organisation's culture. KEY COMMON ELEMENTS TO THESE DIFFERENT APPROACHES: - Concentrate on the positive aspects of the business and how it currently operates, and develop these. - Obtain the full commitment of all senior managers. - Establish new objectives and a mission statement that accurately re ect the new values and attitudes being adopted. - Encourage employee participation when discussing how the new culture should change the manner in which decisions are taken. - Train employees in the new culture and the new value system of the business. - Change the employee reward system to avoid rewarding success using the old cultural ways. CORPORATE CULTURE AND DECISION MAKING Di erent business cultures make decisions and introduce changes in di erent ways. Consultation and participation through two-way communication could lead to employees willingly accepting change. Strong culture means that there is very widespread sharing of common beliefs, practices and norms within the business. If the business culture is people-focused and based on listening to customers and empowering workers, then this helps the implementation of a strategy that leads to an improvement in customer service. In businesses with weak cultures, employees may have no agreed set of beliefs and there is no pride in ownership of work. People may form their own groups based around cultures that con ict with the weakly held business culture. Such situations provide little or no assistance to strategic decision-making or implementation. ff fl fl ff  IMPORTANCE OF CORPORATE CULTURE The values of a business establish the norms of employee behaviour Culture determines the way in which managers and workers treat each other. A distinctive organisational culture can support a business's brand image and relationships with customers. Culture determines not just how strategic decisions are made and implemented, but also the type of strategic decisions that are taken. Corporate culture is linked to the performance and long-term success of businesses. Transformational leadership Important during periods of signi cant corporate change When introducing and implementing major changes in business, a transformational leader will aim to: - In uence employees with the leader's own behaviour and qualities. - Inspire other employees to accept change through a well-communicated vision for the future of the business. - Demonstrate a genuine concern for the needs and feelings of employees. The leader will help them self-actualise (Maslow). - Provide stimulating challenges to employees to encourage them to aim for higher levels of performance. Importance of transformational leadership - Transformational leadership increases the chances of successful change within a business. - It increases the exibility and adaptability of a business to cope with frequent change. - It focuses on leading change, not forcing it on employees with an autocratic style. - It improves employee motivation and performance. Managing and controlling strategic change 1.) Understand what change means Strategic change is the continuous adoption of business strategies in response to changing internal pressures or external forces. fl fl fi Businesses must have a vision, a strategy and an adaptable process for change management. Change management needs businesses to be able to cope with dramatic one-o changes as well as more gradual evolutionary change. Business process re-engineering - Fundamentally rethinking and redesigning the processes of a business to achieve a dramatic improvement in performance 2.) Recognise the major causes of change 3.) Understand the stages of the change process Senior managers should follow this checklist: - Where are we now and why is change necessary? - New vision and objectives - Ensure resources are in place to enable change to happen - Give maximum warning of the change - Involve employees in the plan for change and its implementation - Communicate - Introduce initial changes that bring quick results - Focus on training - Sell the bene ts - Remember the e ects on individuals - Check on how individuals are coping and support them 4.) Lead change, do not just manage it All strategic change must be managed. New objectives need to be established that recognise the need for change Resources of nance and labour need to be available for the change to be implemented Appropriate action needs to be taken to implement the planned changes Managing change e ectively is important to successful implementation. Change leadership involves having a much greater vision than just making sure the right resources are available to deal with change. Leading change means: Dynamic leaders who will shake an organisation out of its complacency and away from resistance to change Motivation of workers and managers so that change is seen as a positive force for improving people's lives Ensuring that acceptance of change is part of the culture of the organisation Getting the visible support of all senior managers to help the change process become accepted at all levels and in all departments of the business. fi fi ff ff ff  PROJECT CHAMPIONS Project champion - A person appointed by senior management to support a project and drive it forward by explaining the bene ts of change and assisting and supporting the team putting change into practice PROJECT GROUPS OR TEAMS Project Groups: Created by an organisation to address a problem that requires input from di erent specialists The responsibility for carrying the plan out still lies with the original manager PROMOTING CHANGE Eight-stage process: 1.) Establish a sense of urgency 2.) Create an e ective project team to lead the change 3.) Develop a vision and a strategy for change 4.) Communicate this change vision 5.) Empower people to take action 6.) Generate short-term gains from change that bene t as many people as possible 7.) Consolidate these gains and produce even more change 8.) Build change into the culture of the organisation so that it becomes a natural process RESISTANCE TO STRATEGIC CHANGE - Fear of the unknown - Fear of failure - Losing something of value - False beliefs about the need for change - Lack of trust - Inertia CONTINGENCY PLANNING AND CRISIS MANAGEMENT Contingency Planning:- A plan for preparing an organisation’s resources for unlikely events Crisis Management:- The process of dealing with a sudden emergency event Steps in Contingency Planning 1.) Identify the potential disasters that could a ect the business 2.) Assess the likelihood of these occurring 3.) Minimise the potential impact of crises 4.) Plan for continued operations of the business Continuity Planning: Preparing resources so that the business can continue operations after a major crisis ff ff fi ff fi  BENEFITS AND LIMITATIONS OF CONTINGENCY PLANNING Bene ts It reassures employees, customers and local residents that concerns for safety are a priority. It minimises the negative impact on customers and suppliers in the event of a major disaster. The public relations response is much more likely to be speedy and appropriate Limitations - It is costly and time-consuming - It needs to be constantly updated as the number and range of potential disasters can change over time - Employee training needs to increase if labour turnover is high - Avoiding disasters is still better than planning for what to do if they occur fi  HRM Strategy Hard HRM An approach to managing employees that focuses on cost-cutting, e ciency, and short- term gains. Employees are treated as resources rather than assets. CHARACTERISTICS: Employees are: - Hired as cheaply as possible - Used sparingly - Exploited for maximum productivity Could save costs in the short term, but might lead to: - Higher labour turnover - Low morale - Bad publicity Little concern for work-life balance or employee well-being Based on Theory X management, assuming employees are only motivated by money. Often used for peripheral workers, who are seen as replaceable. Soft HRM An approach that develops employees, helps them reach self-ful lment, and motivates them to stay with the business. CHARACTERISTICS: Focuses on: - Training - Development - Motivation Employees are considered an asset to the business and are cared for. Encourages high morale and job satisfaction. Based on Theory Y management, assuming employees are naturally motivated. Applied to core workers, as businesses want to retain them. fi ffi  Job Sharing Two employees sharing the responsibilities of one full-time job. ADVANTAGES Improved Work-Life Balance: Both employees share the workload, allowing for more free time. Retaining Experienced Workers: Attracts individuals who need reduced hours, like parents or semi-retired people. Diverse Skills: Two employees bring varied skills and experiences to the role. DISADVANTAGES Coordination Challenges: E ective communication is required to ensure smooth handovers. Reduced Responsibility: Job sharing can limit career advancement opportunities. Increased Costs: Employers pay two people for a role typically lled by one, increasing salary expenses. Shift Work A work schedule covering di erent time slots, often outside regular o ce hours. ADVANTAGES 1.Increased Operational Coverage: This allows businesses to operate around the clock, increasing e ciency and customer satisfaction without interruptions. 2.Better Pay (Shift Premiums): Many employees who work night shifts or weekends are paid extra (shift premiums). This provides workers with a nancial incentive to take undesirable shifts, increasing e ciency. 3.Flexibility for Personal Commitments: Shifts o er exibility to people who need to accommodate personal schedules, like students or parents. DISADVANTAGES 1.Health Impacts: Night shift workers often experience sleep disruption, which can lead to chronic fatigue, decreased immune function, and higher risk of conditions like heart disease. This can negatively impact workers' physical and mental health, leading to fatigue and burnout. 2.Social and Family Life Disruptions: An inconsistent social life or family routine. These irregular hours can create challenges in maintaining relationships and social activities, leading to feelings of isolation or stress. 3.Decreased Productivity and Concentration: Employees working long shifts may experience fatigue, which a ects their focus and performance. So as shift work extends over long periods, the potential for decreased concentration and productivity increases, a ecting both quality and safety at work. ff ffi ff ff ff ffi ff fl fi fi ffi  Compressed working hours Working full-time hours in fewer days, such as four 10-hour days instead of ve 8-hour days ADVANTAGES More Free Time: Employees get longer weekends or additional days o. Improved Work-Life Balance: Extra time o allows employees to manage personal matters more easily. Reduced Commuting: Fewer days in the o ce means less time and money spent on travel. DISADVANTAGES Longer Workdays: Employees must work longer hours on compressed days, which can be tiring. Reduced Flexibility: If the compressed hours don't match personal schedules, they may cause inconvenience. Potential Productivity Decline: Longer days could lead to fatigue, decreasing focus and e ciency. Employee Contracts Full-Time Contracts:- Legally binding agreements in which an employee works a set number of hours per week with bene ts like health insurance and paid leave. Permanent Employment Contracts:- A contract with no xed end date, o ering long- term job security and bene ts. Evaluation of full-time and permanent contracts ADVANTAGES Satisfy employees' safety or security needs Employee loyalty to the business and low labour turnover Employers are usually prepared to nance training programmes for employees on these contracts as the workers are more likely to stay with the business DISADVANTAGES Labour costs become xed costs as they cannot easily be varied with output or demand for the products of the business The contracts are in exible as they do not allow employers to vary the number of workers or the number of hours they work quickly ffi fl fi fi fi fi ffi ff fi ff ff fi  Temporary contracts A xed-term agreement where employment ends after a speci c period or project completion. ADVANTAGES Flexibility for businesses: Can hire employees during peak commitments. Opportunities for workers: Temporary roles can lead to permanent positions or provide experience. Cost savings: Employers don’t need to provide long-term bene ts like pensions. DISADVANTAGES Job insecurity: Employees may face uncertainty about future income. Lack of bene ts: Often, such contracts don’t receive perks like health insurance or bonuses. Training costs: Employers must repeatedly train temporary sta , which can be ine cient. Part-time Contracts A contract with fewer hours than full-time, often with fewer bene ts. ADVANTAGES Work-life balance: Part-time roles suit parents or students balancing work with other commitments. Cost e ciency: Employers save on salaries and bene ts for part-time workers. Increased talent pool: Who prefer exible hours. DISADVANTAGES Limited earnings: Workers earn less and may struggle with nancial stability. Reduced career progression: Part-timers may be overlooked for promotions or training opportunities. Scheduling con icts: Managing part-time rotas can complicate workforce planning. Zero hour contracts A exible contract where the employer is not obliged to provide a set number of hours, and the employee works only when needed. ADVANTAGES Flexibility for employers: Perfect for industries with uctuating demand, like hospitality. Adaptability for workers: Some workers, like students, appreciate choosing when they work. DISADVANTAGES Income uncertainty: Workers can face nancial instability due to unpredictable hours. Low morale: Uncertainty about work can lead to dissatisfaction and a lack of commitment fi fl ffi ffi fi fl fl fi fl fi fi fi ff fi fi Gig economy contracts A labor market where individuals work short-term, freelance, or exible jobs rather than traditional employment. ADVANTAGES Independence: Workers can choose gigs that suit their schedules. Earning potential: Skilled workers can earn well in high-demand gigs. Scalability for businesses: Companies can scale up or down without long-term contracts. DISADVANTAGES Lack of stability: Workers have no guaranteed income or bene ts. No worker protections: Gig workers are usually classi ed as self-employed, lacking sick pay or pensions. High competition: Platforms often oversaturate the market, reducing earnings. Flexible work arrangements Flexitime arrangements A work schedule allowing employees to vary start and end times while completing required hours. ADVANTAGES Improved Work-Life Balance: Employees can adjust working hours to t personal commitments. Increased Autonomy: Workers have more control over their schedule, leading to greater job satisfaction. Reduced Absenteeism: Flexibility allows employees to manage personal matters without taking unplanned leave. DISADVANTAGES Coordination Issues: Scheduling meetings or team collaboration can be di cult with varying work hours. Potential Overwork: Without clear boundaries, employees may end up working more than expected. Unequal Coverage: Some times of the day might have fewer sta available, a ecting service or productivity. Home working Employees work remotely rather than commuting to an o ce. ADVANTAGES No Commuting: Employees save time and money on travel, improving work-life balance. Increased Flexibility: Work from a comfortable environment, potentially boosting productivity. Cost Savings for Employers: Reduced need for o ce space and resources. ffi fi ffi fi fl ff fi ffi ff  DISADVANTAGES Isolation: Workers might feel disconnected from their team and company culture. Distractions at Home: Household responsibilities or family interruptions can a ect focus. Communication Barriers: Remote work can slow down collaboration and decision- making. Annualised hours contract A contract where employees work a set number of hours per year but with exible scheduling. ADVANTAGES Flexibility: Hours can be adjusted based on workload and personal needs. Better for Seasonal Workloads: Employers can better match sta ng levels to demand throughout the year. Cost-E ective: Prevents oversta ng during slow periods, saving money for employers. DISADVANTAGES Unpredictable Hours: Employees may struggle with inconsistent schedules and income. Stress During Busy Periods: Intense work phases may cause burnout or dissatisfaction. expected without additional compensation. Employee Performance INDICATORS HRM USES TO ASSESS EMPLOYEE PERFORMANCE 1.Labour Productivity: The output per worker over a speci c period. Higher labour productivity indicates that employees are working e ciently by producing more with the same or fewer resources. 2.Absenteeism: The number of days employees are absent relative to the total number of workdays. High absenteeism rates can indicate low motivation, workplace dissatisfaction, or personal issues. 3. Wastage Rates: The proportion of materials wasted during production. A lower wastage rate suggests higher e ciency and employee attention to detail. 4. Quality Levels and Reject Rates: The proportion of output that does not meet quality standards. A lower reject rate indicates improved employee performance. 5. Customer Complaints: The number of customer complaints relative to total customers served. A decrease in complaints signi es better employee performance. ff ffi ffi fi ffi fi ffi fl ff  FIVE REASONS WHY PRODUCTIVITY MIGHT INCREASE OVER TIME 1.Improved Employee Motivation and Higher Levels of E ort: Motivated employees tend to work harder and more e ciently. 2.More E cient Capital Equipment: Advanced technology and automation can enhance productivity. 3.Better Employee Training: Well-trained employees perform tasks more e ciently and with fewer errors. 4. Increased Worker Involvement in Problem-Solving: Employees who contribute to nding solutions for operational ine ciencies tend to work more e ectively. 5. Improved Operations E ciency: Streamlining processes can eliminate unnecessary delays. CHALLENGES OF MEASURING PRODUCTIVITY IN THE SERVICE INDUSTRY 1.Service Quality vs. Speed: In many service-based businesses, quality is as important as e ciency. 2.Variability in Services Provided: Di erent customers require di erent levels of service, making standard measurement di cult. 3. Customer Satisfaction as a Key Factor: Unlike manufacturing, where output is tangible, service industry productivity often depends on customer satisfaction. 4. Intangible Output: Many service-based roles involve knowledge work, which is harder to quantify. 5. Dependency on Human Interaction: Services often require personal interaction, limiting automation opportunities. Absenteeism The habitual or frequent absence from work, school, or other responsibilities without a valid reason. Formula NOTE 1.Absenteeism can re ect employee motivation—highly motivated workers avoid missing work. However, Herzberg’s ‘hygiene factors’ (e.g., poor working conditions or excessive supervision) may also contribute to absenteeism by causing illness or stress, leading to absences. fi ffi ffi fl ffi ffi ffi ffi ff ff ff ff ffi 2.For absenteeism to be a reliable performance measure, HRM must investigate its causes. If due to health or family issues, support should be o ered. However, if absenteeism stems from laziness or a second job, disciplinary action may be necessary. Hard vs Soft HRM strategies for employee performance HARD Focuses on measurable outcomes, strict targets, and performance monitoring - Lower cost - Lower motivation SOFT Emphasises employee well-being, motivation and development - More expensive - Greater motivation Soft HRM approaches Training and Development: Enhance skills through workshops and mentoring. Employee Engagement and Recognition: Involve employees and celebrate achievements through appraisal. Work-Life Balance: O er exible hours and mental health support. Empowerment: Delegate tasks and give decision-making autonomy. Career Progression Opportunities: Provide clear paths for growth and promotions. Strong Communication: Maintain open feedback channels. Management by Objectives A strategy where employees and managers set clear, measurable goals together. Aligns individual goals with organisational objectives. Focus on regular feedback and performance evaluation. Implementing MBO The MBO process is best undertaken after discussion and agreement between managers and workers at each level of the organisation. This form of sta involvement is a key feature of job enrichment. It can be very e ective way of delegating authority and motivating people. This approach would be used by managers with a Theory Y approach to workers. Individual targets for performance are established during the annual appraisal process. For maximum e ect, these targets should be agreed with each worker and not without the employee's agreement. For an MBO system to be e ective, targets and objective should be agreed and discussed with the managers and employees at departmental and individual levels. This form of employee's participation is a key feature of job enrichment and should help provide a motivating force. ff ff fl ff ff ff ff Usefulness of MBO Each manager and subordinate will know exactly what they have to do. This will help them prioritise their time. Everyone should be working to the same overall target. This will avoid con ict and should ensure a consistent and well-coordinated approach. Objectives act as a control device. By setting targets agreed with the people who have authority to reach them, managers are able to monitor everyone's performance and measure success or failure. Limitations of MBO Very time consuming, especially as this is best performed only after full consultations with the most a ected. Objectives can become outdated very quickly and xing targets and monitoring progress against them can be less than useful if the economic or competitive environment has changed completely. Setting targets does not guarantee success. Issues such as adequate resources and employee training must also be addressed if the original targets are to have any real meaning or act true motivating goals. The changing role of IT and AI in HRM Some uses of IT in HRM are very common and have been in use for many years. They include: 1. Keeping employee records on databases 2.Recording exible work schedules on planning software, so all workers have access to information on when they are expected to work 3. Holiday planning on similar software, so workers can enter their preferred annual holiday dates RECRUITMENT Web portals allow employers to post details of vacant positions, and the quali cations and experience required of applicants. TRAINING AND DEVELOPMENT Training Programmes can be uploaded on IT, such as essential such as essential induction training programmes. They can be viewed by employees as many times as essential. EMPLOYEE PERFORMANCE MANAGMENT Computerised performance management software allows regular recording and updating of employee performance. ff fl fi fl fi HOW WILL IT AND AI IMPACT BUSINESSES IN YEARS TO COME Although AI is not currently extensively used to interview candidates, it can read hundreds of job applicants' details very rapidly and can then evaluate these candidates without human bias or error. Many companies are adding chatbots to their HRM systems to provide answers to employees questions. Virtual reality (VR) is being used to develop realistic and interactive training courses. Biometric time clocks use biological markers to identify employees Evaluation of increased use of IT in HRM The use of IT frees up HRM time for more important strategic issues It can reduce social and personal contact between HRM and employees, making the HR managers seem remote. The increased dependence on IT-based communication methods reduces the opportunity for two-way group discussions unless conferencing software is used. There is a risk of creating a sense of being watched and monitored at all times amongst employees  Marketing Strategy Market Planning Market Plan: A detailed and fully researched written report on the marketing objectives and the marketing strategy to be used to achieve them Market Strategy: Long-term plan established for achieving marketing objectives Contents of a Marketing Plan 1. Purpose of the plan and mission of the business 2. Situational analysis 3. Marketing objectives 4. Marketing strategy 5. Integrated marketing mix 6. Marketing budget 7. Executive summary and timeline PURPOSE AND MISSION This section of the plan gives information about the plan's purpose. The mission statement and other background information about the business help users of the report to understand where the marketing plan ts in with the existing business. SITUATIONAL ANALYSIS AND MARKET RESEARCH Where is the business now? To develop e ective new marketing strategies, it is essential to know about the following: - The current product portfolio - Market research into the target market - Competitor analysis - The economic and political environment MARKETING OBJECTIVES These objectives should be SMART so that progress towards achieving them can be monitored at regular intervals. Marketing objectives can be expressed in terms of: Sales level to be reached by a given date Market share target Rate of sales growth Pro t margin targets for the new product. MARKETING STRATEGY This section of the plan analyses how the business intends to achieve its marketing objectives. Marketing strategies could include: - Mass or niche marketing - Selling to the existing markets and consumers - Selling to a new market segment - Developing new markets fi ff fi MARKETING MIX The marketing plan gives details of the speci c marketing tactics that will be used as part of the coordinated strategy. These tactics are the 4Ps of the marketing mix and details in the marketing plan will include: Product - USP & product di erentiation Price - Pricing strategy [Skimming, penetration pricing e.t.c] Promotion - Advertising methods Place - Main distribution channels The marketing plan should explain how the 4Ps are linked and coordinated with each other, and how they should work together to achieve the marketing objectives. MARKETING BUDGET The plan should make clear the amount to be spent on each promotion method with a clear month-by-month timetable. EXECUTIVE SUMMARY AND TIMELINE Overall summary of the plan Timescale over which it will be produced Reviewing the marketing plan A crucial test of the marketing plan’s e ectiveness Changes to the overall plan for the next time period might need to be made ff ff fi  Bene ts and limitations of marketing planning BENEFITS Can add value to a business plan when pitching a start-up idea to new investors Reduces the risk of failure when venturing into new markets Helps give clear direction to the other departments within the business LIMITATIONS Small businesses may lack skilled managerial expertise The plan has to be exible - prevents its failure in the presence of sudden changes Can result in inappropriate marketing strategies Approaches to marketing strategy Factors to consider when creating an e ective marketing strategy Consistency A new marketing strategy must be consistent with the quality, quantity and message the marketing activities portray. Should be consistent with: The business - Re ecting the image of the business and the brand’s identity The product - The planned image of the product should be consistent with its production promotion and distribution The market - Should re ect the nature of the target market. Coordination All marketing activities need to be tied together so that a consistent message is communicated to customers and potential customers E.g. Marketing Mix -> Marketing Objectives Promotion Tactics -> Marketing Budget Marketing mix decisions - combine the 4Ps Focused Marketing strategies must be focused on achieving speci c marketing objectives. Di erent marketing objectives will require di erent strategies. ff fi fl fl fl ff ff fi  The changing role of IT and AI in marketing It applications in marketing - Internet - Email - Mobile - In store - Social Media Potential applications of AI in marketing Analysis of patterns from social media Optimise the e ectiveness of digital marketing campaigns Create detailed consumer pro les so that the right message can reach the right people in the correct format Limitations of AI in marketing - Consumer resistance to large scale data collection - Management supervision and control is still required - Signi cant investment - AI lacks human creativity and imagination Strategies of International Marketing Economic collaboration:- Countries working together to achieve common aims Free Trade Agreements:- Agreements made between countries to reduce or eliminate trade barriers between them Key features of globalisation that have an impact on business strategy: - Increased international trade - Growth of MNCs - Freer movement of workers between countries World trade has grown as a result of: - The WTO and the free-trade agreements it has negotiated - Growth of regional free trade blocs Globalisation and increased economic collaboration have positive and negative implications for marketing: POSITIVE IMPLICATIONS Greater opportunity for selling goods in other countries without tari s and quotas One global marketing strategy can be used to create a global brand identity Businesses should be able to reduce prices and become more competitive More opportunities to arrange mergers, takeovers and joint ventures fi ff fi ff  NEGATIVE IMPLICATIONS Businesses from other countries now have freer access to the domestic market. This increases competition. Increased competition from multinational businesses will force national businesses to reduce prices and pro ts may fall. Does not consider the cultural and taste di erences between consumers of di erent nations. 'think global but act local’. Activity from anti-globalisation pressure groups may result in bad publicity for multinationals in particular. Importance of international marketing for a business An opportunity to pro tably expand their sales The rapid development of major developing countries is also leading to huge marketing opportunities for businesses prepared to sell their products and services in these international markets An increasing number of businesses market their products internationally. Why is international marketing so important to so many businesses? Saturated home markets Pro t opportunities Spreading risks Legal di erences creating opportunities abroad International markets: identi cation, selection and entry Moving into international marketing is a major strategic decision for a business. It should not be taken quickly or without adequate research. There are four stages in the decision-making process to select which foreign country to sell products in and how to sell them in this new market: 1.) Identify potential suitable markets - Research GDP growth - GDP per head (standard of living) - Main cultural in uences - Geographical location 2.) Screen potential markets - Political stability - Currency stability - The size of the potential market - Number and strength of competitors - Cost of transportation - Location in each country - Distribution channels available   fi ff fl fi fi fi ff ff  3.) Select the market to enter A shortlist of the most suitable markets is drawn up. The marketing manager should visit each one, meet with potential retailers or distributors and analyse other foreign companies' rates of success in each country. A nal decision is made based on all the data gathered and analysed. 4.) Enter the new market The business needs to decide on the best marketing strategies to sell the product successfully in the new market. International Marketing Strategies Two broad approaches Pan-global marketing strategies Marketing a standardised product across the globe as if it was a single market Global corporations can operate at relatively low costs by treating the entire world as a single country There is growing concern about cultural imperialism(extending their culture and in uence) There is also increasing scope for businesses to bene t from adapting and selling products that are geared directly towards the particular cultural, religious and consumer requirements of each country. The political and cultural backlash experienced in some countries by multinational giants indicates the danger of trying to use a policy of one marketing strategy suits all. The more changes that are made to a marketing mix to re ect local and regional di erences, then the closer this comes to global localisation. Pan-global marketing may continue to be important for two groups of products in particular. The rst is upmarket brands with international appeal for their exclusivity. The opportunity to buy the same product as famous pop stars and lm actors is the key promise made by these brands. Consumers do not want them adapted to suit their local markets. The second is mass-appeal brands which have substantial opportunities for global campaigns and standardised products, and the economies of scale that result from these. Global localisation strategies Global localisation:- Adapting the marketing mix to include di erentiated products and adjusting for national and regional tastes and cultures in order to maintain local di erences SOME WAYS COMPANIES CAN DO THIS IS BY: Selling some products to only certain countries where the product type is ideal Varying price levels between di erent countries to re ect average incomes Advertisements contain local people ff ff fi  fi ff fl fi fl ff fi fl  Choosing the strategy to develop a global market The choice of strategy will be in uenced by the di erences between the existing national market and the target global markets. The greater these di erences are, the greater the need for a localised strategy and not a pan-global strategy. THE MAIN DIFFERENCES BETWEEN INTERNATIONAL MARKETS: Economic and social di erences Average living standards vary greatly across the globe. Decisions about international marketing activities need to take the cost of living into account as well as di erences in tax rates, interest rates and the age structure of the population. Social di erences, such as the role of women and the importance of marriage in society, vary substantially too. These social factors may have a considerable impact on the choice of products to sell in foreign markets and the marketing strategies used to sell them. Legal di erences There are many di erences in laws around the world and they will impact on international marketing strategies in key ways. Product safety and product labelling controls are much stricter in certain countries. Goods can be illegal in certain countries Advertising restrictions Cultural di erences Cultural di erences are a key factor to consider in international marketing, yet they are often di cult to de ne and measure. They can exercise a powerful impact on people's behaviour. Failure to recognise cultural di erences, including language di erences, can have a disastrous e ect on a rm's marketing strategy. Di erences in business practices Accounting standards and rules can vary in di erent parts of the world. The business may be planning on using direct marketing by setting up a local company to manage the distribution and selling. The ease and cost of setting up a limited company vary widely between countries. ff ffi ff ff ff ff fi ff fi ff ff ff fl ff ff ff ff ff Selecting the method of entry into international markets Once a business has decided to adopt international marketing, it must choose which method of entry into this market it should adopt. There are various options, as follows: Exporting products Exporting can be undertaken by selling the product directly to a foreign customer. This happens with online e-commerce sales. Direct exporting is also commonly used for large and expensive items of capital equipment sold to business customers. Alternatively, the exporting business could set up its own marketing division in each target country. Exporting can also be done indirectly through international trade agents or trading companies. These intermediaries specialise in managing the sale of products from businesses that may not know the target country well. International franchising International franchising means that foreign franchisees are used to operate a rm's activities abroad. This can take the form of one foreign company being used as a franchisee for all the branches in their own country. Another option is for individual franchisees to be appointed to operate each outlet. The foreign franchisee(s) will have important local market knowledge. Joint ventures An example of using this method to enter an international market is the 50-50 joint venture between McDonald's and two Indian restaurant chains, Hardcastle Restaurants and Connaught Plaza restaurants. fi  Licensing Licensing allows another business in the foreign country to produce the branded goods or patented products under licence. This will involve strictly controlled terms over quality. Licensing means that goods do not have to be physically exported, saving on time and transport costs - and making food products fresher too. The business selling the licence avoids the capital cost of setting up its own operating bases abroad. LIMITATIONS: - Possible lapses in quality - Unethical production methods used by the licensee to cut costs, re ecting badly on the main business - Business failure of the licensee, cutting production and sales of the product and reducing income to the business selling the licence. Direct investment in foreign subsidiaries Taking over or merging with local companies in other countries can result in major problems. The di erences in business culture, organisational structure and technology between the original company and the locally acquired business can create signi cant obstacles. An alternative is to set up wholly owned subsidiaries. Studies have shown that these can achieve more success than takeovers or mergers. The subsidiaries can be factories set up in foreign countries or retailing operations. They may be almost completely decentralised, where local managers take most key decisions, or organised with centralised control from head of o ce in the home country. Notes Coordinated Marketing Strategy 4Ps coming together How al the other departments help marketing achieve marketing objectives Operations Strategy Operational Decisions In uence of resource availability on operation decisions Strategic operations decisions include: - Expanding or reducing capacity - Locating a business or relocating it - O shoring or reshoring - Outsourcing - Changing operations (production) methods - Application of IT and Al ff fl ff ffi fl fi  These important, long-term decisions all require the operations department to assess the resources of the whole business: human resources, marketing and nancial. If there are insu cient resources available from these departments, then operations decisions may have to be revised or abandoned altogether. For example, decisions to: Expand capacity will require long-term sales forecasts from marketing, a revised workforce plan from HR and nancial resources to pay for it. Relocate operations will require a suitable supply of labour in the new location, an e cient distribution system to customers from the proposed site, and nancial resources to pay for the costs of buying and developing the site. THE CHANGING ROLE OF IT AND AI IN OPERATIONS MANAGEMENT Computer Aided Design CAD is the use of computer software to create, modify, analyse, or optimise a design. It allows engineers and designers to create precise drawings and 3D models of products or structures before they are physically made. Bene ts of CAD Lower product development costs Increased productivity Improved product quality Quicker development of new products Good visualisation of the nal product Great accuracy Limitations of CAD Complexity and cost of the programs Need for extensive employee training It requires large amounts of computer processing power Computer Aided Manufacturing CAM refers to the use of computer software and systems to control machine tools and manufacturing processes. It converts CAD designs into machine-readable instructions to automate production. Bene ts of CAM - Precise manufacturing and reduced quality problems. - Faster production and increased labour productivity. - More exible production operations - Integrating with CAD and CAM allows more design variants of a product to be produced. ffi fl fi fi ffi fi fi fi fi  Limitations of CAM - Costs of hardware, programs and employee training. - Hardware failure and breakdowns can occur - Quality assurance is still needed AI IN BUSINESS OPERATIONS Automates repetitive tasks to increase productivity and improve customer service. Transfers complex issues to employees when necessary. Reduces search times and processes large datasets to make informed decisions. Frees employees for higher-level tasks requiring creativity and exibility. Enhances operational e ciency, customer satisfaction, and employee work experience. AI applications Banking: Processes loan requests quickly, improving response times. Online Payments: Detects and prevents potential fraud. Legal Sector: Identi es relevant previous court cases. Manufacturing: Schedules maintenance to optimise equipment usage. Pharmaceutical Research: Predicts success rates of developing medical drugs. Cybersecurity: Monitors online behaviour, detects threats, and issues alerts. Flexibility and Innovation IMPORTANCE OF OPERATIONAL FLEXIBILITY Operational exibility: The ability of a business to vary both the level of production and the range of products following changes in consumer demand This exibility can improve business e ciency by: Adapting the volume of output to changes in market demand Changing delivery time schedules to meet changes in timing of customer requirements Responding to the demand from customers for unique/unusual product speci cations. Operational exibility can be improved in a number of ways: - Increasing capacity by extending buildings and buying more equipment - Outsourcing some production so that output can be varied rapidly - Holding high inventories (Just-In-Case) - Employing a exible and adaptable labour force - Investing in production systems that allow for mass customisation PROCESS INNOVATION De nition: Process innovation refers to the implementation of new or signi cantly improved production or delivery methods. fi fl fl fl fl fi ffi ffi fl fi fi  This could involve changes in techniques, equipment, or software that result in more e cient or cost-e ective processes. Examples: Robots in manufacturing Computer tracking of inventories Internet tracking of parcels ENTERPRISE RESOURCE PLANNING ERP is a software system that integrates all key business functions into one database. Coordinates and links together: Controlling inventory Ordering supplies Planning operations Marketing Planning human resources Invoicing customers E ciency Improvements Supply only according to demand Quicker response to changes More e ective capacity utilisation JIT Reductions in all costs at all stages of production More accurate costing and pricing Improved delivery times Departments closely linked together Management Information is increased Limitations - High Setup Costs - Employee training costs - Resistance to change - Long Implementation time LEAN PRODUCTION Any business processes that aims to reduce waste The main sources of wasted resources in industry are: 1. Excessive transportation of components and products 2. Excessive inventory holding 3. Unnecessary movement by employees 4. Waiting time 5. Over-production 6. Over-processing 7. Defects 8. Underutilised talent ffi ffi ff ff  Approaches to Lean production 1.) Kaizen Continuous Improvement All employees have something to contribute to improving business e ciency and the way a product is made 2.) Quality Circles Small groups of employees discuss quality issues 3.) Simultaneous engineering Parallel product development Di erent stages are done at the same time 4.) Cell Production Flow production split into self contained groups responsible for a complete unit of work 5.) Just-In-Time (JIT) inventory management 6.) Waste Management Reducing the causes of waste in business organisation Advantages Reduced waste of time and resources Increased e ciency The work area is less crowded There is less risk of damage to inventories New products are launched faster Quality is improved. Job enrichment Flexible working improves capacity management Limitations Businesses may have di culty in forecasting demand. Some businesses depend on customer service as their unique selling point. A less lean approach with higher inventories could support this USP. Can result in job losses The costs of new technology and retraining might be too high. Some manufacturers which specialise in one-o job production may decide against investing in lean production techniques. Links between lean production and other operations issues Inventory control - JIT vs JIC Quality - TQM, zero defects, e.t.c. Employees' roles. ff ffi ffi ff ffi  - Need for exible employment contracts - Willingness to participate in groups to suggest ways to reduce waste and improve e ciency - Preparedness to be retrained to gain multi-skills Capacity management - Flexible and lean operations lead to more e ective use of available capacity E ciency - Make businesses more competitive by cutting average cost of production Operations Planning NEED FOR PLANNING OPERATIONS To minimise resource use and the time taken to complete the chosen project. Projects are speci c tasks that result from the need for an organisation to change. Examples of business projects include: - Setting up a new IT system - Relocating company operations - Marketing products in another country Resources are expensive The most expensive resource is one that is not used or underused Unused inventories take up space and working capital Machinery left idle wastes capital and can require protective maintenance Labour left waiting for supplies to arrive will add unnecessarily to the wages bill E cient rms always aim to use their resources as intensively as possible and avoid wasted time and idle assets. Critical Path Analysis (CPA) - A planning technique that identi es all the tasks in a project, puts them in a correct sequence and allows for the identi cation of a critical path Network Diagrams - Diagram showing the logical sequence of activities and the logical dependencies between them, so the critical path can be identi ed Critical Path - The sequence of activities that must be completed on time for the whole project to be completed by the agreed date CPA uses network diagrams to indicate the shortest possible time in which a project can be completed. This gives the critical path. The process of using CPA involves the following steps: ffi ffi ffi fi fl fi ff fi fi fi 1. Identify the objective of the project 2. Put the tasks that make up the project into the right sequence and draw a network diagram of that sequence 3. Add the durations of each of the activities. 4. Identify the critical path 5. Use the network as a control tool when problems occur during the project. NETWORK DIAGRAMS A network diagram uses the following notation: An arrow indicates each activity. An activity takes up time and resources. A node (circle) indicates the end of each activity. If the critical activities should be delayed in any way, then the whole task will take longer than the expected time. In CPA, there are often independent activities - Can be done simultaneously and do not have to be performed in sequence. Some are not time-critical and may have some spare time. (Float time). In more complex projects, this can be useful for achieving an even more e cient use of resources Earliest Start Time (EST) The time an activity cannot begin before Latest Finish Time (LFT) The time an activity cannot nish after without the risk of delaying the whole project Total Float The amount of time an activity can be delayed without delaying the whole project duration Free Float The length of time an activity can be delayed without delaying the start of the following activities Dummy Activities - Not strictly an activity at all - Does not consume either time or resources - Shows a logical dependency between other activities that must be included in certain Networks to prevent the creation of an illogical path BENEFITS OF CPA Allows businesses to give accurate delivery dates Calculating an EST for each activity allows the operations manager to order special equipment or materials needed for that task at the correct time fi ffi  Calculating the LFT of each activity provides a useful control tool for the operations manager The operations manager can see which other activities need to be speeded up if one has been delayed The additional resources for speeding up a critical activity could come from the non- critical ones The sequential and logical structure of the diagram lends itself well to computer applications Forces managers to plan each project carefully by putting activities in the correct order Shows design and engineering departments the tasks that can be undertaken simultaneously in developing a new product EVALUATION СРА is a planning and control technique to assist with project management. It cannot guarantee a successful project by itself and requires skilled and motivated employees to put it into e ect. A plan is only as good as the management behind it. Experienced managers need to identify the cheapest option for using and switching resources from non-critical activities. Workers will feel more committed to the plan of operation if they have been consulted during its construction. When using CPA for a completely new project, there may be considerable guesswork involved in estimating the durations for each activity. There will be no previous experience to go on. Although the drawing of the network and addition of duration and oat times are likely to be aided by computer, it can take skilled labour hours to put a complex project onto a computer. Finance and Accounting Strategy Use of accounting data in strategic decision-making The use of nancial s