Lecture 1

Introduction to
Operation management
An organisation...
• Has a Distinct Purpose
• Is Composed of
People
• Has a Deliberate
Structure
Organisational levels
Figure 1.2
Efficiency and effectiveness in
management
Figure 1.3
What do managers do?
Functional Approach
• Planning
Defining goals, establishing strategies to achieve goals,
developing plans to integrate and coordinate activities.
• Organising
Arranging work to accomplish organisational goals.
• Leading
Working with and through people to accomplish goals.
• Controlling
Monitoring, comparing, and correcting the work.
Mintzberg’s management roles
Interpersonal roles
Figurehead Leader Liaison
Informational roles
Monitor Disseminator Spokesperson
Decisional roles
Entrepreneur Handler Allocator Negotiator
Table 1.2
Skills needed at different
management levels
© Copyright 2003 Pearson Education Australia Figure 1.5 7

0
The specific environment of the

business organisation
The Suppliers
Specific
Environment Customers
of the
Business Competitors
organisation
Pressure
Groups
0
The general environment of the
business organisation
Economic
The Political/Legal
General
Environment Sociocultural
of the Global
Business
Organisation Demographic
Technological
The external environment 0
General
Environment
Suppliers Customers
The
organisation
Pressure Competitors
Groups
Specific
Environment
Environmental uncertainty 0
matrix
Degree of change
Stable Dynamic
Degree of complexity
Stable and predictable Dynamic and unpredictable

Complex Simple
environment with few environment with few

components and minimal components and minimal
need for knowledge need for knowledge
Stable and predictable Dynamic and unpredictable

environment with many environment with many
components and high components and high need
need for knowledge for knowledge
Figure 3.3
0
Organisational stakeholders
Figure 3.4
Management’s connection to other
academic fields
Academic Disciplines that Impacted Management:
Anthropology - study of societies, cultures and social
environments
Economics - concern about the allocation and distribution of
scarce resources
Philosophy - examines the nature of things, especially values
and ethics
Political science - study of behaviour of individuals and groups
within a political environment
Psychology - seeks to measure, explain, and change human
behaviour
Sociology - studies people in relation to their fellow human
beings
Historical background of
management
• Ancient Management
– Egypt (pyramids) and China (Great Wall)
– Venetians (floating warship assembly lines)
• Adam Smith
– Published “The Wealth of Nations” in 1776
• Advocated the division of labor (job specialization) to
increase the productivity of workers
• Industrial Revolution
– Substituted machine power for human labor
– Created large organisations in need of
management
Weber’s Ideal Bureaucracy
Figure 2.4
The organisation as an open
system
Figure 2.6
0
The organisation’s culture

• Organisational culture
– A system of shared meanings and common beliefs held by
organisational members that determines, in a large
degree, how they act towards each other.
– “The way we do things around here.”
• Values, symbols, rituals, myths, and practices
– Implications:
• Culture is a perception.
• Culture is shared.
• Culture is descriptive.
0
Source of culture: usually reflects
the vision or mission of the founder
Stories
How Do
Employees Rituals
Learn About
Material
the Culture of Symbols
an organisation?
Language
Dimensions of organisational 0
Culture
Figure 3.6
0
Strong versus weak cultures

• Strong Cultures
– Are cultures in which key values are deeply held and
widely held.
– Have a strong influence on organisational members.
• Factors Influencing the Strength of Culture
– Size of the organisation
– Age of the organisation
– Rate of employee turnover
– Strength of the original culture
– Clarity of cultural values and beliefs
0
Benefits of a strong culture

• Creates a stronger employee commitment
to the organisation.
• Aids in the recruitment and socialisation of
new employees.
• Fosters higher organisational
performance by instilling and
promoting employee initiative.
0
Decisions affected by culture

Examples of managerial decisions affected by culture:
• Planning- degree of risk; amount of environmental
scanning
• Organising- degree of employee autonomy; extent of
interdepartmental interaction
• Leading- degree of concern for job satisfaction;
which leadership styles are appropriate
• Controlling- reliance on external or internal controls;
what performance criteria to use
Purposes of shared values
Shared
Organisational
Values
Guide Managers’ Build Team Influence Shape Employee

Decisions and Actions Spirit Marketing Efforts Behaviour

Purposes of shared values
Figure 5.4
Managerial ethics: four views
Utilitarian view Decisions are made solely on the basis
of their outcomes or consequences.
Decisions are concerned with
Rights view respecting and protecting individual
liberties and privileges.
Decision makers seek to impose and
Theory of justice enforce rules fairly and impartially
view and do so by following legal rules and
regulations.
Integrative social Decisions should be made on the basis
contracts view of empirical (what is) and normative
(what should be) factors.
Stages of moral development
Figure 5.6
Factors that affect ethical and unethical
behaviour
Figure 5.5
What is Operations Management?
Management of the conversion process which
transforms inputs such as raw material and
labor into outputs in the form of finished goods
and services.
Inputs Outputs
(customers Transformation
TransformationProcess
Process (goods
and/or (components)
(components) and
materials) services)
Processes and Operations
Any activity or group of activities that takes
one or more inputs, transforms and adds
value to them, and provides one or more
outputs for its customers.
The Process Breakdown
• Inputs
– Workers, managers, equipment, facilities, materials,
services, land energy
• Process
– Operations through which services, products, or
customers pass and where processes are performed
• Outputs
– Finished goods, and services (including information)
to customers
An Operational-Level OM Perspective
• OM’s function focuses on adding value through the
transformation process (technical core) of converting
inputs into outputs.
– Physical: manufacturing
– Locational: transportation
– Exchange: retailing
– Storage: warehousing
– Physiological: health care
– Informational: telecommunications
Customers
• External – end users or intermediaries

(such as manufacturers, wholesalers, or
retailers) buying the firm’s finished
products and services.
• Internal – one or more other employees
who rely on inputs from earlier processes
in order to perform processes in the next
office, shop or department.
Factors responsible for transformation of the
service economy
International- Government Social Business Advances in
isation regulation changes trends technology
• ‘Hollowing • Deregulation/ • Increased • Relaxation of • Convergence
out’ effect privatisation consumer professional assn. of computers
expectations standards and
• Increased • New trade • Increased • Marketing telecommuni-
affluence emphasis by non- cations
services agreements in profit
trade services and leisure • Miniaturisatio
time organisations
• Manufacturers n
• Global • More adding value • Digitalisation
customers women in through service
the Quality movement • Enhanced
workforce • Franchising software
Increased demand and competition
Facilitated by information
technology
Growth and focus on services marketing and management

Contemporary OM Issues
• Shift in balance of power to consumers

– Globalization of business and markets
– E-commerce
• Achieving higher levels of productivity
(Productivity changes Productivity = Output
Input
Labour, machine, multifactor (sum of various inputs)

– Creating higher quality products
– Delivering better customer service
– Achieving shorter delivery times
– Reducing labor and material costs
Contemporary OM Issues cont.
• Service sector growth
• Ethical, workforce diversity and
environmental issues.
Ford’s Global Network to Support the Manufacturing of the Escort
Differences Between Goods and Services
• Goods
– Tangible
– Can be inventoried
– No interaction between customer and process
• Services
– Intangible
– Cannot be inventoried
– Direct interaction between customer and
process
Most Products Are a “Bundle”
of Goods and Services
Tangible vs Intangible elements in
goods and services.

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Introduction to

• Has a Distinct Purpose

Figurehead Leader Liaison

Monitor Disseminator Spokesperson

Entrepreneur Handler Allocator Negotiator

© Copyright 2003 Pearson Education Australia Figure 1.5 7

The specific environment of the

Stable and predictable Dynamic and unpredictable

environment with few environment with few

Stable and predictable Dynamic and unpredictable

The organisation’s culture

Strong versus weak cultures

Benefits of a strong culture

Decisions affected by culture

Guide Managers’ Build Team Influence Shape Employee

© Copyright 2003 Pearson Education Australia Figure 5.4 23

• External – end users or intermediaries

Increased demand and competition

Growth and focus on services marketing and management

• Shift in balance of power to consumers

Labour, machine, multifactor (sum of various inputs)

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