Lesson aims

• To understand the importance of operations management within a business.
• To describe the links between the operations department and other business functions.
• To explain how businesses turn their factors of production into goods and services.
• To examine the principles of sustainability and evaluate how business practices can improve sustainability.

U5.1.2 Operations and their link to other business functions

• Marketing Implications
• HRM Implications
• Finance Implications

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Concepts

1. How has operations management changed over time to reflect various ethical considerations?
2. How are changes in operations management influenced by the strategic plans of the business organisation?
3. What is the influence of technological developments on the role of operations management?

U5.1.3 Operations and production of goods and services

The factors of production

Resources are sometimes called factors of production and cover four areas:

• Land – the actual piece of land or forest, or even the sea, together with all natural resources found on or in it, such as minerals, oil, trees and fish.
• Labour – human effort. The people who produce the product or provide the service: workers, employees, management.
• Capital – can be discussed in two ways: the money needed to open a business; or the tools, machinery and equipment used by a business.
• Entrepreneurship – an entrepreneur is the person who organises the factors of production to create goods and services. This risk-taking activity creates the enterprise or business.

The role of the operations department is to turn the factors of production into goods and services that consumers want to buy.

Task

The process of managing each of those steps in order to obtain the best end-product is what we call 'operations management'.

1. Identify 10 businesses, covering both goods and service providers and each of the 4 main industry sectors (primary, secondary, tertiary and quaternary).
2. For each, identify the various steps/operations involved in producing the good or service.
3. Review the input-output model and try to apply this to this business you studied for your IA.

U5.1.4 Operations management and sustainability

Sustainability is the ability to continue a behaviour indefinitely. A business should organise its operations in such a way as to ensure that actions today do not have a negative impact on future generations. There are three areas of sustainability that businesses should consider:

• Ecological sustainability - the use of the Earth's natural resources and the effect their current consumption will have on future generations.
• Social sustainability - the ability of a business not only to meet the needs of its current stakeholders, but also to support the needs of future generations of stakeholders.
• Economic sustainability - focuses on businesses making the most efficient use of their resources so that the future of the company and its stakeholders is not adversely affected by decisions made today.

Task

1. Analyse the consequences of a business choosing to pay the Living Wage for two different stakeholders.
2. Evaluate the long-term effect on the profits of a business that chooses to pay the Living Wage. \

Concepts

1. How can technological developments ensure sustainability in agriculture?
2. How can agricultural businesses in Africa improve with suitable skills in operations management?
3. How can a change in government policies towards building suitable infrastructure and providing suitable financial help contribute to the sustainability of small agricultural businesses?