Operational Objectives

Aims and ObjectivesAim: • Understand operational objectives

Objectives:• Define operational objectives• Explain why firms set operational objectives• Analyse different operational objectives• Evaluate whether firms should set operational

objective.

Starter

• Define operational objectives

Definition

• Targets set by a business concerning it’s production processes or the providing of it’s service.

Why set them?

Task: In groups brainstorm reasons as to why businesses may set operational objectives.

Why set Operational Objectives?

Competitiveness

EfficiencyIMPROVES

Quality Targets• Performance: function of product

• Advanced performance: actual function of the product including aesthetics

• Predicted life of product: reliability, resistance

• Conformance with standards: EU safety

• Perceived quality: often a USP achieved through reputation and brand loyalty.

Mercedes Benz• ‘Exhaustive quality checks, such as those carried out on carrier systems,

can take as long as four months. All parts and components are thoroughly

tested using saltwater spray systems, road tests on poor surfaces, handling

checks and vibration tests. All Genuine Accessories are exposed to

significantly higher stress loads than they will ever encounter in actual

driving situations.’

‘No product is approved for production

unless it has successfully completed

these tests’

Cost & Efficiency Targets

• Focus on minimising costs.

• What benefits would exist for a business of minimising costs?

• Can price products competitively without affecting quality

• Can benefit from high profit margins

• Often achieved through lean production techniques (JIT, Kaizen, Time Based management) http://www.youtube.com/watch?v=e7yJSHa3hIc

Volume Targets• Number of units a firm can produce,

but also how flexible is the business to changes in demand?

• Economies of scale exist if volume is high.

• Av Cost per unit falls, the more units are produced.

Innovation• How can innovation create competitive

advantage?

• Innovate new different products, and patent them. Firm is only producer/seller of product.

• Dyson Air Amplifier – Bladeless Fan which draws in and amplifies air.

• http://www.youtube.com/watch?v=4WNcjkZ6d0w

Environmental Targets• Environmental targets are set

by businesses to reduce the effects of the businesses operations on the environment.

• Coca Cola

• Why should firms set environmental targets?