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The Evolution Of The Operations Management Commerce Essay

Paper Type: Free Essay Subject: Commerce
Wordcount: 3590 words Published: 1st Jan 2015

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Life would be much easier if the world would stand still, but of course it doesn’t. As the world evolves, so must the disciplines whose mission includes helping managers deal with it? Operations Management is no exception. Operations Management is the function of managing the operating core of an organisation: the activities associated with creation, production, distribution and delivery of the organization’s goods and services. (HAYES, R.) The operations function comprises a significant percentage of the employees and physical assets in most organizations. Operations managers are concerned with each step in providing a service or product. They determine what should go into an operating system such as equipment, labor, tools, facilities, materials, energy, and information and how these inputs can best be obtained and used to satisfy the requirements of the market place. Managers are also responsible for critical activities such as quality management and control, capacity planning, materials management, purchasing, and scheduling. (Russell, Roberta S. and Bernard W. Taylor III, 2000) This essay is going to discuss about the relationship between strategy and operation management and further explaining about how the capacity, location, TQM, flexibility and process can add value to the delivery of goods and services.

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There are many definitions put forward for the business processes. Business processes can be defined as structured measured set of activities designed to produce a specified output for a particular customer or market (Davenport 1993, P 5). “Rosemann (2001, P 18) defines business processes as self-contained, temporal and logical order (parallel and/or serial) of those activities, that are executed for the transformation of a business object with a goal of accomplishing a given task”. Business processes is a collection of interrelated work tasks, initiated in response to an event that achieve a specific result for the customer of the process (Portugal and Sundaram, 2005). Processes in the business under taken to achieve particular task that for example producing a particular goods or service for the customer. The result must be countable and identifiable. “The business processes is a set of clearly identifiable tasks, executed by one or more actors (person, or organisation, or machine, or department (Portugal and Sundaram, 2005). The business processes helps us to identify various tasks involved in delivering results by the organisation. Business process may be generic or particular to given industry or organisation. Processes are the methods used to convert raw materials and components into products (Hall, 2004). Processes may include, designing, cutting, bending, soldering and polishing. These types of processes are mainly performed using machines and tools

Business today is set in a global environment. This global environment is forcing companies, regardless to their location or primary market base, to consider the rest of the world in their competitive strategy analysis. Firms cannot ignore external factors such as economic trends, competitive situations or technology innovation in other countries if some of their competitors are competing or are located in these countries. Nowadays, it is uncommon for a company to develop a new product in the United States, manufacture it in Asia and sell it in Europe. (Gourdin, 2006 P 140)

Argos offers its customers with wide range of products at reasonable prices so thatmore and more people can afford them. Argos is the number one retailer for toys and small electric appliances, and a leading player in many other markets including D.I.Y, gardening, consumer electronics and furniture. Argos also have a significant market share in jewellery, sports equipment, D.I.Y products and furniture and it is popular organisation with approximately 60 employees in each branch

Argos is successfully doing so, as its branches have gone up from 500 stores into 800 stores in the past year. Argos aims to offer best service to its costumers. They hope their costumers gain maximum choice in their shopping, and have maximum access to Argos. Offering Internet shopping as an option does this. Another of their objective is to expand enough and become market leader with a good reputation.

They have a service where you can phone up and reserve your chosen item and find out if they have it in stock, you can even find what day they will be getting it in the store. Argos is to grow capacity and improve customer service in Argos direct, the delivery to home operation. Sales via Argos grew by 50% compared to last year. It accounted for 16% of Argos sales – up from 12% last year. Preparation for the construction of new Argos direct warehouse has started, with completion planned before the end of the current financial year.

They serve over 130 million customers a year though their stores and take 26% of sales through the internet channel alone and 4 million customer orders either online or over the phone. On average’18 million UK households or around two thirds of the population, have Argos catalogue at home at any time. They intend to open approximately 20 stores this financial year.


Operations strategy is related with matching the characteristics of the operations function with the requirements of the market in order to carry out the needs of the business. A proper understanding of this process requires not just an understanding of the beliefs and methods used to develop an operations strategy but also knowledge of the techniques and principles involved in its implementation. Implementation requires knowledge of operations systems and polices including those that relate to resource planning and activity control, quality, plant management, motivation and organization of people, performance metrics and continuous improvement.

The decision taken as part of a company’s operation strategy are considered strategic because they are widespread in their effect and so are significant in the part of the organization to which the strategy refers and define the position of the organization relative to its environment.

Components of the Operations Strategy

Structural decision categories:


·    Growth as needed through additional stores – but capacity added carefully

·    Well-utilized – franchisee’s well-being depends on it being used heavily


·    Distributed facilities, each facility being very similar to the next, all focused around the same menu – although the uniformity is beginning to change

Vertical integration

·    Partnership arrangement

·    Long-term relationship with suppliers to promote innovation and quality improvement


·    High degree of process understanding, emphasis on “fool-proof” processes

·    A leader in the technology of product keeping fresh


decision categories:

Workforce Organization

·    Franchisees: well-trained, carefully selected, entrepreneurs

·    Operators: high-turnover, cheap

·    Guidelines provided by corporation

·    Shareholders

·    shareholders

Information/control systems

·                  Centralized buying

Competitive priorities:


·  pricing is extremely competitive

·  Turnover is now over £4 billion and pre-tax margins are still amongst the best in the industry


High-performance design

·    origins of store sites and the town and locality in which the store was built and how they integrated this into the overall structural design of the site. 

Development speed

·  a leader in retail management information systems.


· Argos did not regard their stores as one stop shops, although with over 27,000 lines in every store they were approaching it


·   It has been estimated that over 50,000 stores strolleys go astray every year in the UK. 

Argos has developed a unique operations strategy which many have tried to follow. The company’s motto is: “”We offer the best customer service through the most convenient shopping experience “The key elements of the Argos operations strategy include design, store layout, distribution network, market segmentation. Argos’s strategy achieves differentiation and cost leadership. The differentiation is in the quality of the design stylish, modern and well-presented in the store and on the website.

Argos strives in offering the best quality products for it customers, at a price up to 30% cheaper than any other UK retailer. Home delivery service and Argos additions (clothes) has improved getting customers into the store and spending their money. The home delivery service has grown for Argos from TV’s being delivered to a whole delivery network and Argos Direct warehouse’s set up thought out the UK. You can get delivery to any were in the UK free on items over 100 pound.


There are seven major competitive dimensions that form the competitive position of a firm, they are as follow:

cost or price,


delivery speed,

delivery reliability,

coping with changes in demand,


new product introduction speed, and

other product-specific criteria.

A strategic position is not sustainable unless there are compromises with other positions. Trade-offs occurs when activities are incompatible so that more of one thing necessitates less of another. Order winners and order qualifiers describe marketing-oriented dimensions that are keys to competitive success. Order winners are the criteria that differentiate the products and services of one firm from another, where as order qualifiers are the criteria that permit the firms products to be considered as candidates for purchase by customers.


Capacity planning is the process of determining the production capacity needed by an organization to meet changing demands for its products. In the context of capacity planning, “capacity” is the maximum amount of work that an organization is capable of completing in a given period of time. A discrepancy between the capacity of an organization and the demands of its customers results in an inefficiency, either in under-utilized resources or unfulfilled customers. The goal of capacity planning is to minimize this discrepancy. Demand for an organization’s capacity varies based on changes in production output, such as increasing or decreasing the production quantity of an existing product, or producing new products. Capacity can be increased through introducing new techniques, equipment and materials, increasing the number of workers or machines, increasing the number of shifts, or acquiring additional production facilities. By definition, design capacity is the maximum output that can possibly be attained (Stevenson 1999).

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Many organizations operate at below their maximum processing capacity, either because there is insufficient demand completely to fill their capacity or as a deliberate policy so that the operation can respond quickly to every new order. It is quite often that organizations find themselves with some parts of their operation operating below their capacity while other parts are at their capacity ceiling. It is the parts of the operation that are operating at their capacity ceiling which are the capacity constraint for whole operation. For example a retail super store offers gift wrap service which at normal times can cope with all requests for its services. (Slack,Chambers&Johnston1995 P 322)

Argos has selected the Retek supply chain planning solution to improve to capacity and sales while reducing total inventory levels in 2003. With sales of over GBP 3 billion, multi-channel giant Argos was named UK’s Retailer of the Year in 2003. With Retek AIP, Argos will optimize its supply chain through improved planning of stock moving into the warehouse and then out to the stores. With supply chain they can take more stock out and achieve better stock turns and improve their buying processes.

Argos also uses Merchandise Planner for its annual sales and stock planning process, as well as for planning its catalogue and promotional activities. The solution, which has been developed for retailers, helps companies plan their product assortments, pricing and store an allocation which sets targets across the retailer’s different seasons. Argos also plans by range for each week over the course of a year’s sales and stock. That data flows through to fulfilments planning, ensuring that Argos does not exceed the available capacity. Argos is also following the 21st century brand concepts and products suitable.

The important characteristic of capacity planning and control, as we are discussing it here, is that it is concerned with setting capacity levels over the medium and short terms in aggregated terms. That is making overall, broad capacity decisions, but not concerned with all of the details of the individual products and the services offered. This is what aggregated means different products and services are bundled together in order to get a broad view of demand and capacity.


Location is a key factor for every business including Argos and many aspects of a location must be analysed before it can be chosen. This includes the competition in the area, the reputation and the population of the area. The major factors affecting location decisions are;

·        Labour

·        Premise costs

·        Financial assist and local government charges

·        Transport links

·        Near Customers

·        History and tradition

·        Sales techniques

·        Business activity

·        Number and location of competitors

·        Reliance on personal visits by customers

·        Reliance on local supplies

·        Reliance on specialised labour skills

·        Methods used to contact customers


Finding an ideal location is a decision that requires a lot of reconsideration and investigation particularly as Argos is such a huge company with such big stores. Firstly all Argos stores require a large area for the stores, as they will be accommodating such a huge variety of products. Secondly they will need a huge car park space for their customers, as the store can have hundreds of customers at any given time as well as providing disabled parking and family car parks. They also require a substantial area for a warehouse to stock their goods as well as loading bays where they receive their deliveries of stock.


In today’s globalized market, with interdependent economies of scale and cross-cultural product initiatives, businesses strive to maintain their profit margins and market shares by providing the best possible products and services to their customers. “Profit is the applause you get for taking care of your customers and creating a motivating environment for your people” (Blanchard, 2007, p. 4). According to John Stark Associates, total quality management (TQM) is a management strategy used today in business, manufacturing, education, government, and the service industries to maximize efficiencies in all organizational processes (John Stark Associates, 1998). Although organizations differ in their operational definitions of TQM, common threads exist which span the breadth of business and private enterprise. Ponzi and Koenig describe total quality as the culture, attitude, and organization of a company that aims to provide, and continue to provide, its customers with products and services that satisfy their needs. In their definition, the organizational culture requires quality in all aspects of the company’s operations, with things done right first time, and defects and waste eradicated from operations (Ponzi & Koenig, 2002).

TQM is an “integrated management system for creating and implementing a continuous improvement process”. Such process will lead to producing results that exceed customer expectations. TQM places the responsibilities related to quality problems with upper management levels rather than on the workers. The objective of TQM is to have a continuous improvement in the processes. TQM achieves its objective through data collection and analysis, flow charts, cause and effect diagrams, and other tools which are used to understand and improve processes of any organization.

Customers entering an Argos for the first time know immediately that something is different. You have to choose your item from catalogue, order and pay to cash till. The different thing is you don’t have to wait too long and if they don’t have that item you can check another Argos stores.

Argos has a Matrix structure. People within the organisation mix with employees from other departments which means there is little possibility of departments becoming very defensive about their territories. This creates a comfortable workforce, which will lead to motivated employees who will achieve their best efforts to produce a satisfying service to costumers. When costumers gain the service they aim to, they will shop more often in Argos, which will result in Argos expanding and becoming more popular.

The management style used in Argos stores is consultative. The manager of the store tends to seek other employees within the company for advice before making decisions. This means the employees get involved more sharing their new ideas and past experiences. This will help Argos make sure that they are pleasing their costumers by using a variety of ideas they share. Costumer satisfaction implies the likeliness of the costumer to shop at Argos. If they are satisfied, which is linked to having a consultative management style, and then they would shop more often at Argos. More costumers result in a higher profit. Argos management sees its role as assisting in this value-creation process, not only by “scripting” the customer’s new role but also by making it easier for the customer to assume the role. Catalogue and in-store assistants carefully detail the assembly process and free car-top racks are available at every Argos location. As a result, customer receives a level of quality that in not available elsewhere



Flexibility is a characteristic of a firm’s process that enables them to react to customers’ needs quickly and efficiently. Some processes require one or more of the following types of flexibility: customization, variety and volume flexibility.


A concept of strategic flexibility in product competition is developed in which flexibility depends jointly on ;

-The resource flexibility of the product creation resources available to a firm and

-The coordination flexibility of the firm in using its available resources in product markets.

Strategic flexibility, then, is the capability of the firm to preach or respond quickly to changing competitive conditions and thereby develop and/or maintain competitive advantage. The rest of this work explains the actions that individually or in combination help firms to achieve strategic flexibility and competitive advantage. There are a number of actions that help firms navigate in the new competitive landscape. In specific, these actions directly or indirectly contribute to the achievement of strategic flexibility and competitive advantage. Among those is exercising strategic leadership which has direct effects on a firm’s strategic flexibility and competitive advantage. Strategic leadership also affects these outcomes indirectly through the other major actions of

– Developing dynamic core competences

– Focusing and building human capital

– Effectively using new technology

– Engaging in valuable strategies

– Building new organization structures and culture.


In conclusion, the operation and strategic management is the process of developing plans, policies and allocating resources to achieve organizational objectives. So in reality operation management is combining the various activities of business to achieve organizational objectives. Therefore it can be said that it is the highest level of managerial activity. In this case it is understood that, Argos had several problems in managing their operational and strategic management, but later they overcame it by realizing the importance of operational management in a business. Now Argos is one of the successful companies in the world in managing their operational management. In order to continue this success the company needs the right people and best tools available to ensure a seamless transition and has to be able to resolve any problems as quickly as possible, especially when it is the world’s leading home furnishing retailer


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