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Study notes

Internal and External Influences on Operational Objectives

  • Levels: AS, A Level
  • Exam boards: AQA, Edexcel, OCR, IB

The objectives that are set for the operations function of a business are affected by a variety of internal and external influences, as summarised below:


Internal influences on operational objectives

Corporate objectives

As with all the functional areas, corporate objectives are the most important internal influence. An operations objective (e.g. higher production capacity) should not conflict with a corporate objective (e.g. lowest unit costs)

Finance

Operations decisions often involve significant investment and cost The financial position of the business (profitability, cash flow, liquidity) directly affects the choices available

Human resources

For a services business in particular, the quality and capacity of the workforce is a key factor in affecting operational objectives. Targets for productivity, for example, will be affected by the investment in training and the effectiveness of workforce planning

Marketing issues

The nature of the product determines the operational set-up. Regular changes to the marketing mix – particularly product – may place strains on operations, particularly if production is relatively inflexible


External influences on operational objectives

Economic environment

Crucial for operations. Sudden or short-term changes in demand impact on capacity utilisation, productivity etc. Changes in interest rates impact on the cost of financing capital investment in operations

Competitor efficiency flexibility

Quicker, more efficient or better quality competitors will place pressure on operations to deliver at least comparable performance

Technological change

Also very significant – especially in markets where product life cycles are short, innovation is rife and production processes are costly.

Legal & environmental change

Greater regulation and legislation of the environment places new challenges for operations objectives.

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