Business
A system which is designed to buy inputs, work on them in some way, and sell the
resulting products for more than the cost of the inputs plus the whole cost of working
on them. If this happens, the business earns a net income, termed operating profit. If
this is large enough the business will survive and, perhaps prosper.
o Product price is what the purchaser pays for the product.
o To the business, product value is less than product price. But the purchaser
who buys the product its value is greater than its price.
o Product cost is the cost of the inputs consumed in the process which makes
the product plus the cost of doing that processing.
Classifying businesses by size
o Very small: Less than five people required to operate a business.
o Small and medium-sized enterprises (SMME): make up over 90% of the
number of businesses in most countries.
o Very large: multinational corporations employing thousands and operating in
several different countries.
Classifying businesses by product
o Tangible products – physical products (computers, cars, etc.)
Manufacturing businesses create tangible products.
Tangible products can be produce and stored in anticipation of
demand.
o Intangible products – non-physical products (transport, consulting, education)
Service businesses create intangible products.
Intangible products cannot be stored in anticipation of future demand.
Classifying businesses by Ownership
o Sole-traders – Owned by one person who also manages the business. That
person is responsible for any debt the business may incur.
o Partnership – Multiple sole-traders.
o Limited Liability Company Business – Business is legally distinct from its
owner(s). The business is split into shares. Shareholders are entitled to
benefits of ownership in proportion to the issued shares they hold (paid as
dividends).
Organisational Structures
o Functional
o Flat
o Divisional
o Hierarchical
o Matrix
People are categorised based on their functional departments
, Project based structures ae strong matrix structures that grant project
managers the highest level of power.
Departmentalisation
Individuals within an organisation are grouped based on jobs or roles. Forms of
departmentalisation are:
o Geographic
o Functional
o Customers
o Product
o Process
SIPOC
Suppliers Input Process Output Customers
Flow charts are typically used to display the order of activities in a supply chain
(SIPOC process).
Responsibilities of an Operations manager
o Production Planning – Determine how goods will be produced, where
production will take place and how manufacturing facilities will be laid out.
o Production Control – Continually schedule and monitor the activities that
make up the process, solicit and respond to feedback and make adjustments
where needed, oversee purchasing of raw materials and the handling of
inventories.
o Quality Control – Ensure that goods are produced according to specifications
and that quality standards are maintained.
Planning the Production Process
o Production Method – What kind of product am I making? (Custom, mass-
production, precise, etc.)
o Site Selection – Try locate plants close to suppliers, customers, or both.
o Facilities Layout
Process Layout – Groups workers or departments that perform similar
tasks together. At each position, workers use specialised equipment to
perform a particular step in the production process.
Product Layout – High-volume goods are produced in assembly-line
fashion.
Cellular Layout – Small teams of workers handle all aspects of building
a component, or even a finished product.
Fixed-position Layout – Used to make large items (ships, buildings)
that stay in one place while workers and equipment go to and around
the product.
Managing the Production Process
Purchasing and Supplier Selection
o Purchasing – The acquisition of material sand services to be used
A system which is designed to buy inputs, work on them in some way, and sell the
resulting products for more than the cost of the inputs plus the whole cost of working
on them. If this happens, the business earns a net income, termed operating profit. If
this is large enough the business will survive and, perhaps prosper.
o Product price is what the purchaser pays for the product.
o To the business, product value is less than product price. But the purchaser
who buys the product its value is greater than its price.
o Product cost is the cost of the inputs consumed in the process which makes
the product plus the cost of doing that processing.
Classifying businesses by size
o Very small: Less than five people required to operate a business.
o Small and medium-sized enterprises (SMME): make up over 90% of the
number of businesses in most countries.
o Very large: multinational corporations employing thousands and operating in
several different countries.
Classifying businesses by product
o Tangible products – physical products (computers, cars, etc.)
Manufacturing businesses create tangible products.
Tangible products can be produce and stored in anticipation of
demand.
o Intangible products – non-physical products (transport, consulting, education)
Service businesses create intangible products.
Intangible products cannot be stored in anticipation of future demand.
Classifying businesses by Ownership
o Sole-traders – Owned by one person who also manages the business. That
person is responsible for any debt the business may incur.
o Partnership – Multiple sole-traders.
o Limited Liability Company Business – Business is legally distinct from its
owner(s). The business is split into shares. Shareholders are entitled to
benefits of ownership in proportion to the issued shares they hold (paid as
dividends).
Organisational Structures
o Functional
o Flat
o Divisional
o Hierarchical
o Matrix
People are categorised based on their functional departments
, Project based structures ae strong matrix structures that grant project
managers the highest level of power.
Departmentalisation
Individuals within an organisation are grouped based on jobs or roles. Forms of
departmentalisation are:
o Geographic
o Functional
o Customers
o Product
o Process
SIPOC
Suppliers Input Process Output Customers
Flow charts are typically used to display the order of activities in a supply chain
(SIPOC process).
Responsibilities of an Operations manager
o Production Planning – Determine how goods will be produced, where
production will take place and how manufacturing facilities will be laid out.
o Production Control – Continually schedule and monitor the activities that
make up the process, solicit and respond to feedback and make adjustments
where needed, oversee purchasing of raw materials and the handling of
inventories.
o Quality Control – Ensure that goods are produced according to specifications
and that quality standards are maintained.
Planning the Production Process
o Production Method – What kind of product am I making? (Custom, mass-
production, precise, etc.)
o Site Selection – Try locate plants close to suppliers, customers, or both.
o Facilities Layout
Process Layout – Groups workers or departments that perform similar
tasks together. At each position, workers use specialised equipment to
perform a particular step in the production process.
Product Layout – High-volume goods are produced in assembly-line
fashion.
Cellular Layout – Small teams of workers handle all aspects of building
a component, or even a finished product.
Fixed-position Layout – Used to make large items (ships, buildings)
that stay in one place while workers and equipment go to and around
the product.
Managing the Production Process
Purchasing and Supplier Selection
o Purchasing – The acquisition of material sand services to be used
