Global competition

● has caused fundamental changes in the competitive

environment of manufacturing industries.
● Firms must develop strategic objectives which, upon
achievement, result in a competitive advantage in the
SCOPE OF OPERATIONS
marketplace MANAGEMENT
Most Important Goals For Almost All Manufacturing Industries: ● Extends across the organization.
● increased productivity and
● better overall efficiency of the production line OPERATIONS FUNCTION INCLUDES MANY
Most industries would like to find the formula for the ultimate
INTERRELATED ACTIVITIES:
productivity improvement strategy.
● Forecasting
● Capacity Planning
Industries often suffer from the lack of a systematic and ● Scheduling
consistent methodology ● Managing Inventories
● Assuring Quality
Innovation ● Motivating Employees
● a necessary process for the continuous changes in ● Deciding where to locate facilities
order to contribute to the economic growth in the
manufacturing industry, especially to compete in the
global market
● innovation as a mode for continued growth and
change, there are many other vehicles for growth in
the manufacturing industry
BASIC FUNCTIONS OF A BUSINESS
ORGANIZATION
Operations Management
● recognized as an important factor in a country’s economic
growth Organization Structure:

Traditional View Of Manufacturing Management Marketing | Operations | Finance

● concept of Production Management with the focus on
economic efficiency in manufacturing Marketing
Operations Management ● Activities promoting buying or selling of products/services.
● service sector became more prominent ● Includes advertising, selling, and delivery.
● key element in the improvement and productivity in ● Some marketing is done by affiliates on behalf of a
business around the world company.
● leads the way for the organizations to achieve its goals
with minimum effort
Financial Management
● Planning, organizing, directing, and controlling financial
Here's your reviewer, structured for clarity while maintaining the activities.
original order and terminology: ● Applying management principles to financial resources.

OPERATIONS HISTORICAL DEVELOPMENT

MANAGEMENT Scientific Management

● Led by Frederick W. Taylor.
Operation ● Emphasized a "Science of Management" using
observation, measurement, analysis, and improvement.
● Management responsible for planning, training workers,
● Concerned with transforming inputs into outputs (services)
and maximizing output.
at a required quality level.
● Responsible for producing goods or services.
Scientific Management Contributors:
Management ● Frank Gilbreth – Father of motion studies.
● Henry Gantt – Developed Gantt chart, promoted non-
● Process that combines and transforms resources into monetary employee motivation.
value-added outputs, following organizational policies. ● Harrington Emerson – Applied Taylor’s ideas to
organization structures.
Production Management ● Henry Ford – Used scientific management in factories
(moving assembly line, mass production).
● Set of interrelated management activities involved in
manufacturing products. Human Relations Movement

Operations Management ● Emphasized the human element in job design.

● Lilian Gilbreth
● Equivalent set of management activities for services. ● Elton Mayo – Hawthorne Studies on Worker Motivation
● Managing systems or processes that create goods and (1930).
provide services.
 ● Abraham Maslow – Motivation Theory (1940), Hierarchy Finance Function
of Needs (1954).
● Frederick Herzberg – Two-Factor Theory (1959).
● Obtains and manages funds.
● Douglas McGregor – Theory X and Theory Y (1960s).
● Handles investment decisions and pricing strategies.
● William Ouchi – Theory Z (1981).

Decision Models & Management Science Personnel Function

● Recruitment and labor relations.
● F.W. Harris – Mathematical Model for Inventory
Management (1915).
● Dodge, Romig, and Shewart – Statistical Sampling and Research and Development Function
Quality Control (1930s).
● Tippett – Statistical Sampling Theory (1935). ● Generates and evaluates new ideas.
● Operations Research (OR) Groups – OR applications in ● Information technology supports organization-wide
warfare. computing needs.
● George Dantzig – Linear Programming (1947).

SYSTEMS VIEW OF OPERATIONS OPERATIONS STRATEGY

MANAGEMENT Strategic Decisions

System ● Long-term resource changes in response to external

factors (markets, customers, competitors).
● External Evaluation – Identifies market opportunities or
● A group of interrelated items where changes affect the
threats.
entire system.
● Internal Evaluation – Assesses organizational capabilities.
● Divided into subsystems, each part of a larger system.

Key System Components: Strategy Considerations

● Complex due to uncertainty in consequences.
● System’s Boundary – Defines what is inside vs. outside the
● Requires integration across business functions.
system.
● Major changes may result from strategic choices.
● System’s Environment – External factors influencing
system behavior.
● System Input – Objects or information entering the Operations Strategy
system.
● Transformation Process – Converts inputs into outputs. ● Addresses current and future operational challenges.
● Output – Goods and services delivered. ● Develops long-term operations resources for competitive
advantage.
Types of Transformed Resources
1. Materials – Physically transformed (manufacturing), by
location (transportation), by ownership (retail), or by
storage (warehousing). LEVELS OF STRATEGY
2. Information – Transformed by property (accountants),
possession (market research), storage (libraries), or 1. Corporate-Level Strategy – General long-range guidance
location (telecommunications). for the organization.
3. Customers – Transformed physically (hairdresser), by ○ Mission Statement – Defines company goals and
storage (hotels), by location (airlines), by physiological competitive focus.
state (hospitals), or by psychological state (entertainment). 2. Business Strategy – Determines market offerings and
competitive positioning.
Types of Transforming Resources 3. Operational/Functional Strategy – Aligns operations with
business strategy.
● Facilities (e.g., buildings, equipment).
● Staff (all people involved in operations). Role of Operations in Strategy Development
● Operations impact competitive positioning.
● Must adapt to market conditions emphasizing quality,
speed, and cost.
FUNCTIONAL AREAS OF A
BUSINESS Operations System and Market Environment
● Traditionally seen as isolated from the market.
Main Functional Areas: ● Physical buffers (inventory) stabilize operations.
● Slower response times to external changes can be a
● Operations drawback.
● Marketing
● Finance

Marketing Function
PROCESS VIEW OF
●
●
Creates demand for goods/services.
Works with operations to ensure timely delivery.
ORGANIZATIONS
Processes
● Can be function-specific or cross-functional.
● Customer value depends on effective process integration. TYPES OF FORECASTING METHODS
Value-Added Concept 1. Qualitative Forecasting Method
● Value Chain – Series of processes creating customer value.
(Judgmental Methods)
● Includes Primary (direct value creation) and Support
(assisting primary processes). ● Based on human judgment, opinions; subjective
and nonmathematical.
Traditional Strategy Development Approach ● Educated guesses by forecasters or experts
based on intuition, knowledge, and experience.
● Senior managers set objectives and allocate resources.
● Relies on market forecasting to identify opportunities.
2. Quantitative Forecasting Method
● Based on mathematical modeling.
● Consistent and objective; the same model will
OPERATIONS COMPETITIVE generate the exact same forecast from the
same set of data every time.
PRIORITIES
Competitive Priorities in Operations:
1. Cost CHARACTERISTICS, STRENGTHS,
○
○
Competitive edge through low-cost production.
Cost proximity to market average maximizes AND WEAKNESSES OF
○
profit and deters competition.
Major cost categories: Staff, facilities, materials.
FORECASTING METHODS
2. Time
○ Speed of operations affects customer choices. Qualitative Methods
○ Measured from customer request to delivery.
○ P:D Ratio – Compares demand time (D) to total
process time (P). ● Characteristics: Based on human judgment,
3. Quality opinions; subjective and nonmathematical.
○ Includes product/service quality and process ● Strengths:
efficiency. ○ Can incorporate the latest changes in
○ Measured by cost of quality: Assurance costs vs.
non-conformance costs.
the environment and inside
○ Benefits: Dependability, cost reduction, information.
customer satisfaction. ● Weaknesses:
4. Flexibility ○ Can bias the forecast and reduce
○ Ability to quickly adapt to customer needs and
forecast accuracy.
market changes.
○ Types of Flexibility:
■ Product Flexibility – Quick response to Quantitative Methods
new customer needs.
■ Volume Flexibility – Adjusting
● Characteristics: Based on mathematics;
production based on demand changes.
quantitative in nature.
● Strengths:
○ Consistent and objective.
This structured reviewer maintains your terms and order while ○ Able to consider much information and
making it easier to study. Let me know if you need further data at one time.
adjustments!
● Weaknesses:
○ Often, quantifiable data are not
available.
○ Only as good as the data on which they
WHAT IS FORECASTING? are based.

● A forecast is an attempt to try and predict what

will occur in the future by taking into
consideration the events from the past and
present. FEATURES OF FORECASTING
● Forecasting Assumptions

○ Forecasting techniques generally

WHAT IS THE PURPOSE OF assume that the same underlying casual
FORECASTING? system that existed in the past will
continue to exist in the future.
● The purpose of forecasting is to be prepared ● The Imperfection of Forecasts
based on the possible future.
 ○ Forecasts are rarely perfect; actual ○ The method should align with the
results usually differ from predicted objectives and provide accurate results.
values. 4. Generate the Forecast
○ No one can predict precisely how a
large number of related factors will ○ Apply the selected method to the
affect the variable in question. analyzed data to produce a prediction.
○ The presence of randomness prevents a ○ The forecast can be a single point
perfect forecast. estimate or a range of possible values.
○ Allowances should be made for ○ The output serves as the basis for
inaccuracies. planning and decision-making.
● Accurate Group Forecasts 5. Validate and Monitor Forecast Accuracy

○ Forecasts for groups of items are more ○ Compare forecasted values with actual
accurate than individual forecasts due outcomes.
to the canceling effect of errors. ○ Use statistical measures and visual
○ Aggregating forecasts reduces comparisons to assess accuracy.
variations and provides a more stable ○ Regular monitoring and adjustments
and reliable prediction. are essential to maintain reliability and
○ Useful in inventory management and improve the forecasting process.
production planning to reduce the risk
of stockouts or overproduction.
● Forecasting Time Horizons

○ Forecast accuracy decreases as the time ELEMENTS OF A FORECAST

horizon increases.
○ Short-term forecasts are more accurate ● Timely: Must be available when needed for
due to recent and relevant data. decision-making.
○ Long-term forecasts are less accurate ● Reliable: Consistent and based on sound
due to unforeseen events and methods and data.
environmental changes. ● Accurate: Should minimize errors and closely
○ Different forecasting techniques are match actual outcomes.
used for different time scales: ● Meaningful: Provides relevant and
■ Short-term forecasts: Detailed understandable information for users.
data and sophisticated models. ● Written: Documented to record assumptions
■ Long-term forecasts: Broader and methods for future reference.
trends and scenario planning. ● Easy to Use: Presented in a user-friendly format
for better understanding.
● Flexible: Adaptable to changing conditions and
new data.

STEPS IN THE FORECASTING

PROCESS
FORECASTS BASED ON JUDGMENT
1. Determine the Purpose of the Forecast
AND OPINION
○ Define the objective, variable to be
predicted, time horizon, and intended ● Relies on human expertise, intuition, and
use of the forecast results. subjective inputs rather than historical data or
○ Ensures the forecast provides relevant mathematical models.
and actionable information. ● Useful when data is limited or unreliable, or
2. Gather and Analyze the Data when external factors like policy changes or
market shifts need consideration.
○ Collect historical data and identify ● Incorporates expert insights for more informed
factors that influence the variable. decision-making in complex environments.
○ Use statistical techniques and data ● Less precise than quantitative methods but
visualization tools to find patterns and valuable for handling uncertainty
trends.
○ Serves as the foundation for an
accurate forecast.
3. Select an Appropriate Forecasting Method
TYPES OF JUDGMENTAL FORECAST
○ Choose the method based on the
purpose, data characteristics, and ● Executive Opinions
resources available.
○ Common methods include time series ○ Forecasts based on the collective
analysis, regression analysis, and judgment of top executives.
qualitative techniques.
 ● Sales Force Opinions ● Uses the arithmetic mean of closing prices over
a predetermined number of periods.
○ Forecasts derived from insights and ● Provides a smoothed representation of price
experiences of sales personnel who trends by updating the average as new data
directly interact with customers. comes in.
● Consumer Surveys
Formula:
○ Predictions based on feedback and
preferences from consumers. SMA = (A1 + A2 + ... + An) /n
● Outside Opinion
● An= Data points
○ Involves consulting experts or industry ● n= Number of periods
analysts outside the organization.
● Delphi Method

○ A structured communication process

where experts provide forecasts FORECAST ERROR
anonymously to avoid bias and reach a
consensus. ● The difference between the forecasted value
and the actual value for a given period of time.

Other Common Error Measures:

FORECASTS BASED ON TIME SERIES 1. Mean Absolute Deviation (MAD)
2. Mean Squared Error (MSE)
(HISTORICAL) DATA
● Involves collecting and analyzing past data to
predict future values.
● Relies on identifying patterns, trends, MEAN ABSOLUTE DEVIATION
seasonality, and other factors from historical
data. (MAD)
● Algorithms are used to learn from data and
generate accurate predictions. ● Measures the average magnitude of forecasting
● Effective for predicting phenomena with errors, regardless of direction.
consistent historical patterns. ● Helps assess the accuracy of forecasting models.
● Useful in inventory management by
understanding typical error sizes.
● Simple and easy to interpret.

TYPES OF TIME SERIES FORECAST Formula:

1. Trend

○ Long-term movement in data.

2. Seasonality

○ Short-term, regular variations in data

(e.g., seasonal demand spikes).
3. Cycle

○ Wavelike variations that occur over

more than one year.
4. Irregular Variations
FORECAST BIAS
○Caused by unusual circumstances (e.g.,
natural disasters or strikes). ● Refers to the persistent tendency for a forecast
5. Random Variations to be consistently higher or lower than the
actual value.
○ Caused by unpredictable and chance ● Can be corrected, unlike random variations.
events.
Formula:

SIMPLE MOVING AVERAGE (SMA)

● Calculates the average price of an asset over a
specified period.
Interpretation: C. THE FIVE DIMENSIONS OF
● MBE = 0: No bias (forecasts are accurate on ENVIRONMENTAL SCANNING
average).
● MBE > 0: Positive bias (forecasts are higher than ● Refers to the key external factors that
actual values). businesses analyze to identify opportunities and
● MBE < 0: Negative bias (forecasts are lower threats.
than actual values).
The Five Dimensions:
1. Economic

A. INTRODUCTION TO ○ Market conditions, inflation rates, and

ENVIRONMENTAL SCANNING AND economic trends affecting business
performance.
CAPACITY PLANNING 2. Technological

● Organizations must respond proactively to ○ Innovations, advancements, and

internal and external factors affecting emerging technologies impacting
operations. operations.
● Success is not only about profit but also 3. Legal
adapting to changes in globalization,
technological development, and market ○ Government regulations, labor laws,
conditions. and legal compliance requirements.
● Environmental Scanning and Capacity Planning 4. Ecological (Geographical)
are strategic tools for long-term stability and
growth. ○ Environmental factors, climate change,
● These tools help in making effective, efficient, and geographic influences on business
and adaptable decisions for businesses. activities.
5. Socio-Cultural

○ Customer preferences, cultural norms,

B. UNLOCKING OF WORDS and social behavior that affect
consumer demand.
1. Environment

○ The circumstances, objects, or

conditions that surround an individual 1. Socio-Cultural Environment
or organization (Merriam-Webster
Dictionary). ● Understanding the social behavior, traditions,
2. Scanning and mindset of the local community.

○ The systematic study of an object,

Key Factors to Consider:
environment, or data source to gather
and analyze information. ● The values and beliefs practiced by the
3. Planning community
● The influence of religion in the area
○ The process of setting goals, ● The history of the area
determining activities, and outlining ● The traditions celebrated by the locals
strategies to achieve objectives ● The mentality of the locals
(Cambridge Dictionary).
4. Environmental Scanning

○ The process of monitoring internal and

external environments to make future 2. Economic Environment
business decisions.
5. Capacity Planning ● Analyzing the financial stability and market
condition of the area.
○ Determining how much production
capacity is needed to meet changing Key Factors to Consider:
product demand while balancing
available resources. ● Popular commodities in the area
● Commodities that failed in the area
● Commodities yet to be offered
● Commodities requested by locals but not yet
available
 ● Presence of competitors and substitute
products
● Standard of living of the average citizen
● Population size D. LOCATION AND LAYOUT
● Purchasing power and spending habits DECISIONS
● Influence of middlemen in trade
● The process of selecting the best site for a
business establishment, which directly affects
short-term operations and long-term growth.
3. Legal-Political Environment
Main Objectives of Choosing a Business
● Evaluating the impact of government rules and Location:
regulations on business operations.
● Minimize operational costs
Key Factors to Consider: ● Ensure good customer service
● Maximize potential revenues
● Local government requirements for building
and operating businesses Evolution of Location Strategy:
● Minimum wage rates in the locality
● Tariffs and taxes on different business types ● Initially focused on minimizing transportation
● Local and national laws governing the business costs.
● Zoning laws (industrial, residential, and ● Now considers trade-offs between
commercial zones) transportation costs, labor wages, energy
availability, and local regulations.

4. Technological Environment D.1. (3) Important Factors in Location and

● Assessing the availability of technology and
Layout Decisions:
resources needed for smooth business
1. Proximity to Suppliers:
operations.
○ Reduces transportation costs and
Key Factors to Consider: delivery time.
○ Improves supply chain efficiency.
● Availability of sufficient water 2. Labor Availability and Skills:
● Availability of adequate electricity
● Modes of communication ○ Access to skilled labor directly impacts
● Modes of transportation productivity and product quality.
● Availability of equipment and parts when 3. Infrastructure and Transportation Access:
needed
● Availability of raw materials ○ Good transportation systems (roads,
● Access to 4G+ or advanced internet connectivity railways, ports, and airports) enhance
● Availability of suitable manpower logistics and overall operational
efficiency.

5. Geographical Environment
D.2. Examples of Location and Layout
● Understanding the physical environment and its Decisions:
impact on business operations.
● Facility Location
Key Factors to Consider: ● Layout Design
● Service Facility Location
● Climate conditions
● Earthquake potential
● Distance between the establishment and
customers D.3. Importance in Environmental Scanning
● Distance between the establishment and and Capacity Planning:
personnel
● Distance between the establishment and raw ● Helps businesses adapt to changing
material sources/suppliers environments and market demands.
● Difficulty in transporting resources ● Ensures the capacity to meet future growth and
● Distance of the establishment from significant customer needs.
landmarks
 ● Regulations and legal barriers: Licensing and
E. PORTER'S FIVE FORCES MODEL compliance requirements restrict entry.
● Switching costs: High customer switching costs
● A strategic analysis model used to assess
discourage new competitors.
industry competition and market dynamics.
● Developed by Michael Porter in 1979.

The Five Forces that Shape Industry C. Bargaining Power of Suppliers

Competition:
Factors that give suppliers power:
1. Internal Competition (Rivalry Among Existing
Competitors): ● Number of suppliers: Fewer suppliers hold
more power.
○ Intensity of competition between ● Uniqueness of product: Unique or non-
current market players. substitutable products increase supplier power.
2. Threat of New Entrants: ● Switching costs: High costs of changing
suppliers increase supplier control.
○ The likelihood of new competitors ● Forward integration: Suppliers expanding into
entering the market and affecting the buyer's market strengthen their power.
market share. ● Industry importance: When buyers rely heavily
3. Bargaining Power of Suppliers: on suppliers, power is balanced.

○ The influence suppliers have over

pricing and product quality.
4. Bargaining Power of Customers (Buyers): D. Bargaining Power of Buyers (Customers'
Influence on Price and Quality)
○ The ability of customers to demand
lower prices or higher quality. Factors that strengthen buyer power:
5. Threat of Substitutes:
● Number of buyers: Fewer buyers exert more
○ The potential for customers to switch to control.
alternative products or services. ● Purchase size: Bulk buyers negotiate better
deals.
● Switching costs: Easy switching between brands
gives customers power.
A. Competitive Rivalry (Intensity of ● Price sensitivity: Customers who are sensitive
Competition Among Existing Competitors) to price changes demand lower prices.
● Informed buyers: Knowledgeable customers
Factors that increase competition: can negotiate better prices and quality.

● Number of competitors: More competitors lead

to intense rivalry.
● Industry growth rate: Slow growth increases E. Threat of Substitutes (Availability of
competition as firms fight for market share.
Alternative Products/Services)
● Similarities in offerings: Identical products or
services make switching easier for customers. Factors that increase the threat:
● Exit barriers: High costs or difficulties in leaving
the industry force firms to compete ● Relative price performance: Lower-cost
aggressively. substitutes with similar or better quality
● High fixed costs: Companies may lower prices increase the threat.
to maintain production during low demand. ● Customer willingness to switch: If switching is
easy and convenient, the threat rises.
● Perceived similarity: When customers see
minimal differences between products, they are
B. Potential for New Entrants (Threat of New more likely to switch.
Competitors) ● Availability of close substitutes: The more
alternatives available, the higher the threat.
Factors affecting the ease of entry:
Conclusion:
● Economies of scale: Large-scale production Porter's Five Forces Model helps businesses assess their
lowers costs, making it hard for small entrants. competitive environment. By understanding these
● Product differentiation: Strong brand identity forces, businesses can improve environmental scanning,
and customer loyalty create entry barriers. capacity planning, and overall strategic decision-making.
● Capital requirements: High start-up costs deter
new entrants.
● Access to distribution channels: Existing firms
controlling distribution make entry difficult. F. Forward-Looking Location Decisions
A strategic approach that considers future trends and ● Provides a competitive edge and offsets losses
opportunities when selecting a business location. from other branches.

Key Aspects Affected: Challenges:

1. Operational Efficiency ● Double the managerial decisions.

● Temporary market demand increase.
○
Optimizes resources and reduces waste. ● High building and operational expenses.
○
Streamlines processes and improves
workflow.
○ Adopts new technologies to enhance
productivity. 3. Moving to a New Location
2. Market Access
● Necessary when the target market shifts or
○
Minimizes downtime and operational expenses increase.
disruptions. ● Needed for a larger or smaller facility depending
○ Identifies emerging customer needs and on demand.
market trends.
Challenges:
○ Adapts to regulatory changes and
market demands.
● Laying off current employees.
○ Expands reach through partnerships
● Losses during transition and relocation costs.
and digital transformation.
● Uncertainty about the new location's
○ Strengthens competitiveness locally and
performance.
globally.
● Professional and personal adjustments.
3. Growth Potential

○
Seizes new business opportunities and
innovations.
○ Allocates resources for sustainable
4. Doing Nothing
expansion.
● A strategic decision when:
○ Diversifies operations to reduce risks.
○ Growth or losses are temporary.
4. Employee Retention
○ Issues might resolve themselves.
○ Other options are too costly or risky.
○ Builds resilience against economic and
industry changes.
○ Creates a stable and progressive work
Leasing:
environment.
Leasing is a legal agreement where one party (the
○ Provides career development and skill-
lessee) rents a property owned by another party (the
building opportunities.
lessor) in exchange for regular payments over a
○ Ensures job security and workplace
satisfaction. specified period.
○ Encourages loyalty through long-term
investment in talent. Advantages of Leasing Commercial Space:
1. No Down Payment:

Main Options for Business Expansion: ○

Requires a smaller deposit compared to
the large down payment for purchasing
1. Expanding on the Same Site property.
○ Improves cash flow and allows better
● Suitable when the business owns a large plot of use of company funds.
land with underutilized space. 2. Tax Deduction:
● Allows for easy addition of facilities.
○
Lease payments are considered
Challenges: business expenses, which reduces
taxable income and lowers tax
● Limited if the site is already at full capacity. payments.
● May disrupt current operations during 3. No Repair and Maintenance Costs:
expansion.
○
Depending on the lease terms, the
property owner is responsible for
repairs and maintenance, saving time
2. Expanding by Adding Branches and money.
4. Easier Qualification:
● Opens new markets and increases customer
reach. ○ Leasing often doesn’t require a credit
report, making it more accessible for
businesses.
 5. More Choices and Quicker Process: 2. Tax Deductions:

○ More leasing options are available ○ Owners can deduct depreciation,

compared to properties for sale. mortgage interest, repair costs, and
○ Leasing is faster than purchasing, maintenance expenses.
allowing quicker business operation. ○ Reduces overall tax liability.
3. More Space and Additional Income:

○ Provides more space for business

Disadvantages of Leasing Commercial Space: expansion.
○ Additional space can be leased to other
1. Lease Increases: businesses, generating extra income
that may cover the mortgage.
○ Rent may increase annually or upon 4. Investment and Capital Gain:
lease renewal, affecting expenses.
2. Lease Renewal Issues: ○The value of the property can increase
over time.
○ The property owner may refuse to ○ Potential profit when selling the
renew the lease, forcing relocation and property in the future.
additional costs. 5. Complete Control:
3. No Equity or Ownership:
○ Freedom to modify, expand, and
○ The lessee doesn’t gain ownership or improve the building as needed.
benefit from the building's increasing ○ Enhances customer experience and
value. business reputation.
4. Limited Control:

○ The tenant relies on the landlord for

repairs, improvements, and Disadvantages of Buying Commercial Space:
maintenance.
5. Limited Space for Growth: 1. High Initial Costs:

○ The leased space is fixed, and expansion ○Requires a large down payment and
may not be possible due to other property appraisal fees.
tenants in the building. ○ May affect the company's cash flow.
2. More Responsibility:
Buying:
○ Owner is responsible for repairs,
Buying refers to the act of acquiring an asset (such as maintenance, and financial
land or property) either through full payment or management.
financing. The buyer gains complete ownership and ○ Can consume time and reduce focus on
legal control over the property and can use, modify, or business operations.
sell it as desired. 3. Cost Increases:

○ Property taxes and insurance costs tend

to rise annually.
Example: ○ Affects business expenses and cash
flow.
Celes Shoe Company, after five successful years of 4. Location Downgrade Risk:
operation, decided to purchase land and a larger
building to meet the increasing demand from resellers ○ The value of the property may decline if
and buyers. By owning the property, they no longer the area loses popularity or experiences
need to pay monthly rent and have full control over decreased customer traffic.
their business space. 5. Difficulty in Finding the Right Property:

○ Finding a building that fits the business

needs and future plans can be
Advantages of Buying Commercial Space: challenging.
○ May cause delays in business
1. More Fixed Costs and No Rent: expansion.

○ Eliminates increasing rent expenses.

○ Fixed mortgage rates allow better
financial planning.
○ Once the mortgage is paid off, monthly SUMMARY AND CONCLUSION
payments are eliminated.
Summary: can develop innovative, user-friendly, and efficient
products and services that align with environmental and
This paper emphasizes the significance of social responsibilities.
Environmental Scanning and Capacity Planning as vital
strategic tools for achieving business stability and
growth. By analyzing external factors and internal
capabilities, businesses can make informed decisions II. Generating Ideas
that align with market demands and future trends.
Idea generation is the foundation of product and service
Key Points: innovation. It involves brainstorming, market research,
and strategic analysis to identify new opportunities or
1. Porter's Five Forces Model: enhance existing offerings. This process fosters
A strategic framework that helps businesses creativity and collaboration to develop solutions that
assess the competitive landscape, understand provide value to customers and help businesses stay
market dynamics, and adapt to industry competitive.
changes for effective decision-making.
Definition of Product and Service Design:
2. Location and Layout Decisions:
Crucial for adapting to environmental shifts and ● Product Design: The process of creating and
meeting future growth demands. These developing physical or digital products that
decisions impact operational costs, customer fulfill customer needs and business goals. It
service, and revenue potential. involves concept development, usability testing,
and manufacturing considerations, focusing on
3. Forward-Looking Location Decisions: aesthetics, functionality, and user experience.
Considering future trends and opportunities in ● Service Design: The process of planning and
choosing a business location enhances organizing a service's infrastructure,
operational efficiency, market access, growth communication, and customer interaction. It
potential, and employee satisfaction. aims to improve service quality and enhance
customer satisfaction through efficient and
4. Leasing vs. Buying Commercial Space: user-friendly experiences.
The choice between leasing and owning
depends on a business's financial capacity and Key Functions:
growth strategy. Leasing offers flexibility and
lower upfront costs, while buying provides long- ● Product Design: Focuses on the physical
term control and potential capital gains. features, functionality, and manufacturability of
a product.
● Service Design: Concentrates on optimizing
customer interactions and service delivery for a
seamless experience.
Conclusion:
Environmental scanning and capacity planning are
essential for businesses to stay competitive and III. Reasons to Design or Redesign Products
adaptable in a dynamic market. By utilizing strategic and Services
models like Porter's Five Forces and making informed
location and layout decisions, businesses can achieve 1. Changing Market Needs: Adapting to evolving
sustainable growth. Additionally, weighing the pros and customer preferences and industry trends.
cons of leasing and owning commercial space allows 2. Technological Advancements: Leveraging new
businesses to make the best financial decision for their technologies to enhance product features or
long-term success. improve service delivery.
3. Competitive Pressure: Differentiating from
competitors to gain a market advantage.
4. Sustainability and Efficiency: Reducing costs,
minimizing waste, and improving operational
PRODUCT AND SERVICE DESIGN efficiency.
5. Regulatory Compliance: Adhering to legal and
industry standards for product safety and
functionality.
I. Introduction
Product and service design is a critical process in
operations management that focuses on creating
solutions that meet customer needs, market demands,
IV. Legal and Ethical Considerations
and business objectives. It goes beyond aesthetics and
In product and service design, legal and ethical
functionality, incorporating ethical considerations,
considerations are crucial to ensure compliance with
sustainability, and technological feasibility. Through
laws and maintain customer trust. These include:
rigorous research, prototyping, and testing, businesses
 1. User Privacy and Data Protection: Safeguarding III. Human Factors in Product and Service
customer information and complying with data Design
privacy regulations.
2. Accessibility and Inclusivity: Designing products Human factors refer to the study of how people interact
and services that are accessible to all users, with systems, equipment, and their environment. It
including those with disabilities. aims to reduce errors, improve usability, and enhance
3. Avoiding Bias and Discrimination: Ensuring work efficiency.
fairness and equality in service delivery and
product functionality.
Three Key Components:
4. Transparency in Product Information: Providing
accurate details on product features, pricing, 1. Work Tasks:
and potential risks.
5. Compliance with Safety Standards: Meeting ○ Tasks should match the user's abilities.
legal requirements for product safety, Complex processes increase the risk of
durability, and environmental impact. errors and accidents.
2. People:

○ A person’s skills, knowledge, and

I. Legal Considerations attitude impact performance. Proper
training and a positive mindset improve
1. Product Liability efficiency and reduce mistakes.
3. Organization:
○ Manufacturers are legally accountable
for any injuries or damages caused by ○ A company’s management style,
faulty products due to poor design or communication, and work culture affect
workmanship. This includes adhering to employee safety and productivity. A
safety standards and regulations. disorganized work environment leads to
Associated Costs: errors and inefficiency.
○ Litigation expenses
○ Legal and insurance costs
○ Settlement fees
Importance of Human Factors:
○ Product recall expenses
● Reduces the risk of accidents
2. Intellectual Property
● Enhances product usability
● Improves work efficiency
○ Designers must ensure their products
● Creates a safer and more productive
do not infringe on existing patents,
environment
trademarks, or copyrights. Additionally,
protecting their own innovations Human factors are applied in various industries,
through patents or trademarks is including aviation, healthcare, and engineering, to
essential to avoid intellectual property ensure the safety and effectiveness of systems and
theft. products.

II. Ethical Considerations I. Cultural Factors in Product and Service

1. Customer Safety and Well-being Design
In a globalized market, understanding cultural diversity
○ Prioritizing customer safety by
is crucial for creating products and services that
designing products that do not pose any
resonate with consumers. Cultural factors influence
health risks or hazards.
customer behavior, preferences, and perceptions, which
2. Accessibility and Inclusivity
directly impact the success of a product or service.
○ Ensuring products and services are
accessible to all users, regardless of Key Cultural Factors:
physical abilities or backgrounds, to
promote equality and inclusivity. 1. Values and Beliefs:
3. Transparency and Accountability
○ Different cultures prioritize values such
○ Providing clear and honest information as individualism vs. collectivism,
about product features, functionalities, tradition vs. modernity, and
and potential risks. This builds customer materialism. These values shape
trust and prevents misleading preferences for product features,
marketing practices. designs, and marketing strategies.
2. Language and Communication:

○ Language barriers extend beyond

simple translation. Understanding
 idioms, symbols, and cultural ○Recycle: Using recycled materials and
expressions is essential to avoid creating products that are easy to
misinterpretation and build an recycle at the end of their lifespan.
emotional connection with consumers. 4. Energy Efficiency and Carbon Footprint
3. Customs and Traditions: Reduction:

○ Cultural practices and traditions ○ Implementing energy-saving

influence how people use products and technologies and reducing greenhouse
services. For instance, certain colors or gas emissions during production and
symbols may hold cultural significance, distribution.
impacting product packaging or 5. Eco-friendly Packaging and Materials:
branding.
4. Religious Beliefs: ○ Using biodegradable materials, reducing
plastic usage, and adopting minimalistic
○ Religious practices affect consumer packaging designs to reduce waste.
choices, especially in food, clothing, and
lifestyle products. For example, halal or
kosher certifications are vital for certain
demographics.
5. Lifestyle and Habits: The Three Rs: Reduce, Reuse, and
Recycle
○ Understanding the daily routines,
hobbies, and social behaviors of the
1. Reduce
target audience helps in designing
products that seamlessly fit into their
● Definition: Minimizing waste generation by
lives.
using fewer materials and optimizing
6. Aesthetics and Symbolism:
production processes.
○ Colors, shapes, and symbols hold
● Key Approach: Value Analysis
different meanings in various cultures.
For example, white symbolizes purity in
○This method examines materials and
Western cultures but is associated with
product components to reduce costs
mourning in some Asian cultures.
and improve performance.
○ Companies can reduce waste by using
sustainable raw materials, optimizing
packaging, and designing lightweight
II. Environmental Factors in Product and products that require fewer resources
Service Design while maintaining functionality.
● Examples of Reduce Initiatives:
Key Environmental Aspects:
○ Switching to energy-efficient
1. Cradle-to-Grave Assessment (Life Cycle machinery.
Analysis - LCA): ○ Reducing plastic use in packaging.
○ Implementing digital documentation to
○ Evaluates the environmental impact of minimize paper waste.
a product from raw material extraction
to production, distribution, usage, and
disposal.
○ Helps identify areas for improvement, 2. Reuse
such as using renewable materials or
reducing energy consumption during ● Definition: Extending the lifespan of products
manufacturing. through remanufacturing and refurbishment.
2. End-of-Life (EOL) Programs:
● Key Approach: Design for Disassembly (DFD)
○ Focuses on managing products that
have reached the end of their useful ○Ensures that products can be easily
life. taken apart, repaired, and upgraded for
○ Involves recycling initiatives, take-back reuse.
programs, and proper disposal methods ○ This strategy supports a circular
to reduce landfill waste and recover economy, where products and
valuable materials. materials are continuously repurposed.
3. The Three Rs: Reduce, Reuse, Recycle: ● Examples of Reuse Initiatives:

○ Reduce: Minimizing resource usage and ○ Refurbishing electronic devices for

waste during production. resale.
○ Reuse: Designing durable products that ○ Using refillable packaging systems.
can be repaired or repurposed.
 ○ Repairing and upgrading machinery
instead of replacing it.

3. Recycle
● Definition: Recovering and processing materials
for future use in new products.

● Benefits of Recycling:

○
Reduces the need for raw material
extraction.
○ Prevents waste from ending up in
landfills.
○ Lowers energy consumption and
pollution.
● Commonly Recycled Materials:

○ Plastics
○ Metals
○ Glass
○ Paper
● Examples of Recycling Initiatives:

○ Implementing company-wide recycling

programs.
○ Partnering with recycling facilities to
process industrial waste.
○ Using recycled materials in product
manufacturing.