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Chapter 2 Influences

 Short definition - The world is getting smaller
 Globalisation allows for international trade, therefore allowing
transferring of inputs, outputs, labour, idea and technologies across
 Businesses may outsource cheaper labour overseas or import cheaper
materials which may have lower quality
 Since many businesses are following the trend of globalisation, exporting
opportunities may lead to increased competition from both national and
global counterparts
 However, many customers seek global brand, forcing businesses to
shape their operations function accordingly
 Global business can have a global web of supply chains (different
suppliers) in multiple countries, chosen to lower cost and risk and
increase assurance in quality
 Technology could become cheaper and more efficient alternatives to
existing resources, e.g. replacing labour with machines
 Examples of technology include Robotics, Computer Aided Design and
Computer Aided Manufacturing
 Technology also allows for innovation and mass production to create a
competitive advantage
 Competitors may be the same or ahead in technology, which will
become a threat in the market
Quality Expectations
 People have certain standards and beliefs about qualities and their
satisfaction will be dependent on price and quality
 Operations processes must follow particular standards and minimum
levels of excellence
 Business should excel in areas such as quality of design, fitness of
purpose, durability, professionalism of service, reliability and
Cost-Based Competition
 This involves creating strategies that create a cost advantage over
competitors and reducing cost to maximise profit
 The business applies the cost-leadership approach to maintain profitmargin
Government Policies
 Political decisions are constantly changing government policies have a
significant influence on Operations of a business
 Operations need to be fully aware of contemporary government policies
and they can become business opportunities for the business
Legal Regulations
 The range of laws a business must comply is called “compliance”, not
following these compliances bring the business a risk of penalty
 The expenses related to compliance are called “compliance costs”
 To abide to all laws, Operations managers would need to follow OH&S,
Training and Development, Fair Work and Anti-Discrimination,
Environmental Protection and Public Health
Environmental Sustainability
 Awareness of the negative impacts of business operations on the
environment has led to widespread call for environmental sustainability
 This means that businesses must use sustainable resources and reduce
usage of unsustainable resources contributing to pollution and landfill
 The rise of climate change awareness is a modern movement that
influences business operations
Corporate Social Responsibility
 Corporate Social Responsibility (CSR) refers to any accountable business
actions open to society based on respect for people, community and the
 These are expected from a business, though not under legal regulations
or government policies
Legal Compliance and Ethical Responsibility
 Laws and regulations are the minimum requirements for a business to
operate, or a prescribed standard of behaviour the business must follow
 Ethical responsibilities means a business must meet all legal obligations
but taking further action that follows the intentions of various laws
 Businesses may seek guide for their decisions regarding ethical
guidelines from international bodies such as International Labour
 Legal compliance comes with compliance costs, but compliance costs
may be reduced by outsourcing different functions in countries where
less regulations exist of compliance costs are lower
Environmental Sustainability and Social Responsibility
 There needs to be a balance between the economy and the
environment, forcing businesses to re-evaluate their Operations
function to comply with policies of conservation, recycling, etc.
 As a result of growing awareness in Climate Change, communities
increasingly expect businesses to develop environmentally sustainable
 Social responsibility involves the business providing for the greater good
of society and it will have significant impact on brand name and
customer base
 Socially responsible behaviours cost money in the short term but in the
long term it attracts much more customers to purchase more of the
business’s products