1.Why have the service sectors of most national economies continued to grow in importance and how must operations management change in response to this growth?
2. What aspects of operations management are most affected by the increasing globalisation (internationalisation) of business?
3. Is it inevitable that in the future nearly all manufacturing operations will be performed in low labour cost countries?
4. What could be the possible impacts of Great Britain’s exit from the European Union and the implementation of the USA’s isolationist policies on global operations management?
Factors driving the growth of the service sector
1. The service industry deals with service delivery to the businesses and the customers. The services are intangible products. Globalization and technological advancement have made the service sector grow very fast. Also, environmental factors have made the industry be at the forefront of the economy in the world. The service sector has therefore been popular in the globe attracting many entrepreneurs as it is lucrative with high returns. However, the industry needs a lot of innovation and creativity for firms to get competitive in the market as buyers are many and also the sellers who offer the services (Luthans, and Doh, 2009).
Companies have outsourced services from another firm in areas where the production of the commodity or doing the activity incurs more costs than outsourcing. These makes the firm have time to concentrate on its core business. The outsourced functions must be provided well by the service provider making the company achieve the set targets of high-quality assurance to the customers. Several factors make the service sector grow rapidly, and they include; trends, change, ability to differentiate services, offering samples, and marketing (Gobble, 2013, pp.64-67).
Current trends in the environment have added to the growth of the sector in the economy. People nowadays do not concentrate more on material needs put emphases on service from service providers such as education, healthcare services, entertainment, etc. these trends are motivating the service sector to grow as its services have high demand in the market. The order makes businesses design unique ways of offering the service to the customers. The ability of the services to be changed to meet the needs of the customers has contributed significantly in the sector as it increases demand (Yee, Yeung, and Cheng, 2010, pp.109-120).
Change in the way of doing businesses by firms has contributed to the growth of service sectors. Companies offering services have got work from firms which outsource services from them. Companies outsource services when they see they cannot produce them due to resources and staff. When the cost of production is high the companies, many choose to outsource if it is the cheap method to acquire the services. Services have the ability to be differentiated by companies easily, and this reduces competition and satisfaction of different needs of customers (Nai-hua, 2008, p.011).
Services attract the customers as they have the ability to be customized to meet their needs. Service providers can also offer samples to the customers and hence motivate them to acquire the products. Samples can be like helping customers know how to use televisions, fridges, install solar panels, etc. Marketing by the service sector has been done well than the other areas, and this has contributed to its growth in the market (Bodet, 2008, pp.156-162).
The operation management deals with designing and controlling the production process. In any firm, the operational manager has the duty of overseeing these functions. The managers should evaluate and see if the company needs to produce a product or outsource it. He must check which method is cheap to avoid making the firm incur unnecessary expenses which could be prevented. The business aim is to make the highest profits but by satisfying the needs of its customers.
The role of innovation and creativity in the service industry
2. Technological advancement in the world has brought many changes to businesses. A better transport and communication network has led to companies engaging in foreign trade with ease (Davenport, T.H., 2013). Globalization is the ability of a company engages in international business. The main reason for foreign commerce for enterprises is to search for markets for their products. The level of competition in markets is high, and firms are looking for ways to avoid competition. Avoiding competition is impossible, and managers find new ways to minimize it by engaging in foreign trade. These involve engaging in international markets with high demands of goods and products but will low numbers of suppliers. The firms use blue ocean strategy to find ‘blue oceans'' which are markets with no competition thus increase its sales. A high level of sales means huge profits to the firms (Strategy, B.O., 2015).
However, the globalization has affected operation management of many businesses. In markets process management aims in designing and controlling the production activities of any products (Wiersema, and Bowen, 2008, pp.115-132). The process management department is headed by a transaction manager who carries various oversee duties. The managers set up quality assurance programs which ensure the products produced meet the standards of the customers. He hires and trains employees to enable them to have the relevant knowledge and skills in job execution. The manager also monitors and controls all production activities to ensure conformity to the standard. Through better supervision, he can know what strategies are needed to improve productivity and increase efficiency in the manufacturing process (Mintzberg, H., 2009).
The aspects affected by globalization in operation management include; acquisition of raw materials, employees and machinery, transportation and communication and the methods of supervision by the managers. Raw materials are used to be converted into finished products which meet the customer needs. Globalization has made company use the global sourcing strategy to get raw materials from countries which they are cheap and thus reducing production costs. Global sourcing has also enabled firms to have the continuous supply of raw materials making business activities continue with no delay thus timely satisfaction of customers' needs.
Employees acquisition have been influenced greatly by international trade as managers can import the most qualified employees to aid in the execution of duties without restrictions. The managers can also introduce workers at lower costs thus cutting down the expenses that would be incurred by the company. Businesses can also buy right machinery at reduced prices from others costs thus ensuring high-quality products and more profits.
Globalization has been aided by technological changes which have made transport and communication mean ease for the companies. These means businesses can get raw materials, employees' and also sell their products in the international markets. Good transport and communication networks have opened the world to be easily accessed by the firm. The management methods have been changed tremendously as managers have the opportunity to benchmark the firms doing well in the industry. These makes them creative and innovative in coming up with unique products which attract high markets.
How outsourcing affects operations management
International business has changed the way businesses are done, but managers must be very careful to enable their organization to remain competitive in the markets. However, the changes can lead to success or failure of firms. Success can be achieved by companies adopting the new ways of doing business and managers being cautious in the strategic plans they make (Moran, T., 2014).
3. Yes. The aim of businesses is to improve their profits margins as they reduce the operating expenses. Fees reduce the benefits of the firms. Management of all enterprises has the responsibilities of choosing the methods of job execution and also the people to help in carrying out activities (Wirtz, 2011). The employees represent the laborers of the organization. They do the firms work to enable the achievement of the set targets. Employees are the internal business stakeholders, and they are composed of skilled and non-skilled persons help the business in the realization of its objectives and goals. Both competent and non-skilled employees are imperative to the success of the organization. Managers, therefore, must respect and treat all the staff fairly without any discrimination and favoritism. Discrimination and favoring some employees leads to conflicts and disagreements among the workers which eliminate their morale towards the job. These make them lower their productivity in the organizations' (CHUANG, and Liao, 2010, pp.153-196).
Manufacturing activities help conversion of raw materials into finished products which are ready for usage by the potential customers. These activities require a lot of employees both skilled and non-skilled to be successful. The management must, therefore, employ the adequate workers will skill to enable better execution of business and creation of products which will satisfy the needs of the customers. Firms will be willing to do manufacturing activities in countries which the cost of paying employees is small as these reduces the expense of the company and increases its profits. Countries will low labor costs will in future attract more manufacturing industries (Wang, and Yang, 2010, pp.803-815).
The reasons for a country having low labor costs may be because of its growth and development. Less developed countries and developing countries have lower labor costs as their economy is depressed. Labor costs are very high in developed countries, and business located in such areas may do their manufacturing activities in less developed or developing countries to cut down the costs. Countries with weak economy growth have many advantages to manufacturing companies. The cost of labor is low and also the cost of the raw materials may be small. The raw materials are the inputs converted to products (Helpman, 2009).
Technological changes in businesses have brought new ways of activities executions with the aim of increasing the profits of the companies. Competition is high in the markets, and it makes firms use various means to ensure they compete effectively to survive (Martin, 2009). Managers, therefore, have the obligation to choose ways to maximizing profits and minimizing costs. The rewards for any business are profits and losses. Firms need to make profits to ensure continuity in the market, but losses will lead to its success. Management should find ways always to make profits in their activities. Engagement in manufacturing activities in low labor cost areas is one of the strategies to reduce cost, and in the future, all business will strive to achieve this plan. The rewards of employees are wages and salaries, but they should be regulated not to consume all the profits that the company generates in its operations. Businesses must have a competitive edge in the markets for survival (Shields, et al., 2015).
The impact of globalization on operations management
4. The European Union is an economic bloc for the countries in the Western Europe. It was started after the world wars as the leaders saw the need to unify and enhance prosperity and peace among the member countries (Nugent, 2010). It is a bloc that champions for the right of its members in world trade. The members get trade benefits carrying business in the member countries. The aim of EU is to facilitate peace among the members as they depend on each other for the satisfaction of their needs thus this reduces the chances of conflicts. The goal of EU is to unify markets by use of one currency by member countries during the trade. The currency accepted is the Euro. It sets legal standards for doing business among the member countries and thus ensures free trade. The member countries contribute resources to enable EU to be able to do its activities and ensure fair trade(Gabel, 2009).
Britain is the 4th largest contributor of resources to the European Union, and its exit will bring many problems. These would deprive the organization resources to run its activities, and it would bring a crisis. Britain exit from EU will mean it will no longer contribute to its budget. Also, Britain has the largest number of employees who work in EU as skilled and unskilled. The total is 1,828 people who male 4% of the total number of staff in the economic bloc. The exit of Britain will mean the withdrawal of its population who work as staff, and this would lead to the problem of workers in the bloc. The activities of EU would, therefore, be distorted by Britain exit and to some extent may result in failure of the EU to meet its set goals and objectives (Geddes, 2013).
USA's isolationist policies are aimed at making US self-reliant economically but be at peace with other nations. These aim at self-advancement of the country. To achieve the policies put up policies to protect the domestic industries and the workers from foreign competitions. It is obtained by trade barriers implementation like tariffs and quotas. The policies if implemented make it hard for foreign employees and company to work in the US. These will eliminate foreign trade in the country. It comes to a time governments realize that international trade threatens the domestic workers and companies and there is need to protect them (Bodvarsson, and Van den Berg, 2013, pp. 375-405). The policy will, however, bring more problems to the US as it will reduce competition to domestic countries and workers. The productivity will lower and the living standards of the citizens. Competition of businesses is inevitable but at the same time is an imperative ass it ensures high-quality productions (Guadalupe, and Pérez-González, 2010).
The government should advocate for the domestic companies to be more creative and innovative to have a competitive advantage over the foreign firms. Employees' problems can be alleviated by them getting the necessary education and training which will make them more prepared for the job markets. The global operation should be free and fair with no limitations to favor one party. The competition will make the customers get goods and services of high quality which will satisfy customers need (Wang, Hong, Kafouros and Wright, 2012, pp.655-676).
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