STRATEGIC BUSINESS ANALYSIS Eunice Mareth Q. Areola, Ph.D. HSG Ramoncito P. Javier, DBA Fernando V. Trini idad, DBA First EditionCHAPTER 1 BUSINESS MANAGEMENT REVIEW: APPRECIATING THE GROUNDWORK IN STRATEGIC BUSINESS ANALYSIS Chapter Learning Outcomes At the end of the chapter, students are expected to: describe major theories, background work, and concepts in the economic discipline and in the four basic business management areas; + demonstrate effective application of economic concepts, tools, and techniques to practical day-to-day situations; + demonstrate foundational knowledge in human resource management, production and operations management, marketing management, and financial management; + demonstrate effective application of concepts, tools, and techniques in human resource management, production and operations management, marketing management, and financial management in managing a business organization; and “+ demonstrate an ability to integrate the core concepts of business management to develop a sound analysis and ‘strategic plan for a business organization.Chapter Introduction Strategic business analysis involves the thorough evaluation of all facets of enterprise operations that starts with a good foothold in the knowledge and pplication of basic principles of economics, human resource management, production and operations management, marketing management, as well as financial management to aid in decision-making. Economic analysis allows business managers to compare the different types of needs, goods, resources, and the outcomes from combining those resources in the larger view of local and global economic activities. Human resource management underscores the process of developing a job analysis as a requisite for the creation of a human resource management plan. Meanwhile, knowledge of production and operations management will clarify the processes involved in answering the questions of what, how, and for whom to produce. The production and operations management areas of planning and control, materials management, inventory management, and project and supply chain management are important to appreciate to ably apply them when one conducts strategic business analysis. Economic activities are further fueled by Marketing initiatives. Marketing management allows for the Movement of goods from Production to consumption side, and creates other economic activities in between. Finally, financial management Puts the valuation of economic activities in place. ics is the area where costs are accounted for, and where receipts are reconciled expenses to determine the financial viability and ‘Sustainability of a business enterprise. This chapter explains the important ideas, theories, and concepts in ae ‘management to aid any business manager to craft a strategic businessLesson 1 Economic Principles Lesson Outcomes Identify various concepts in economics as they are used in business planning. Describe how ecdnomic trade-offs and social values impact business policies. Discuss economic concepts, in an articulate manner, inside the classroom. Lesson Introduction Economics is the study of how to manage money and the financial status of an individual, an enterprise, an organization, or a country. Managing a household or an organization requires different skills that will come handy in regular day-to-day transactions one may have. At the core of economics studies are concepts such as scarcity, unlimited needs and wants, alternatives, choice, and foregone benefits. In a more business-like scenario, is the economic aspect of budgeting and financial management. Learning how to invest, how to spend, and how to save money are other critical aspects of economic understanding. Classified into two branches, microeconomics and macroeconomics, the principles and concepts apply similarly but different in scope. The former only deals with individuals, households, and specific companies. The latter deals with the society as whole and its dynamic relationship with the rest of the world. This lesson will provide the perspective of integrating economic knowhow in business analysis approach and in the strategy development of a business organization. ai CHAPTER 1: BUSINESS MANAGEMENT REVIEW a- the various types of resources, land, labor entrepreneurship, and how those resources eventual; CApital ang aire fo scarce from abundant, renewable from lassity ag from man-made, and free from economic; and Pe natural . secess how everyday .humen: activites erb. Iniertwined ‘wi economic concepts and principles. Lesson Presentation Economic issues permeate society in various ways. Economic Principles and concepts can be found in everyday dynamics, from large scale activities such as movements in the stock market, government directives on Poverty and health care, and multi-nation involvement in trade, to as simple as fluctuations in the market price of basic commodities. Critical and complex economic issues impact the lives of ordinary people in the same way that they affect businesses. To better understand the interplay of economic factors in both household and business situations, it is best to first appreciate some basic economic ideas. Economics seeks to answer the question of what, how, and for whom a good or service is produced. Economic realities and situations are in fact closer to us than we imagine them to be. Economic activities begin with an individual, progressing to the small unit of Society, which is the household, on to the larger entities such as companies, and the international communities. At the core of any economic concern is an individual's wants and needs. Understanding economics is a futile exercise if Scarcity is not discussed and if People need not choose among existing alternatives and practice trade-offs. If existing resources can address every individual's needs and wants, there is no need to study economics. However, just as these needs and wants are infinite, most resources are finite and scarce. Scarcity of resources leads one to explore the economics of things. Scarcity should not be confused with shortage. It refers to the existence of limited resources that are not enough 1° dress unlimited human needs or demands. On the other hand, shortage refers {0 a market Occurrence whereby the demand is more than the supply available i 8 given time. Therefore, properly allocating these resources according to @ "Oe" vision and direction of individuals, households, companies, and intemational ‘communities becomes more critical. Satisfying the needs and wants of various s are the driving force of all economic activities and eventually defines the Prospective prosperity of individuals, companies, and communities.Ifthe cause of understanding economics is the persistence of resource scarcity, the lessons of economics allow one to optimize the utilization of these scarce and limited resources. Rationalization allows one to evaluate the value of the goods being obtained based on the cost that must be expended for its exchange. When an individual finally makes a purchase, it comes because of carefully evaluating the intrinsic and extrinsic value of the good in question, and only pays for it if it is worth its price. Scarcity of resources evolves into the identification of alternatives and a decision for trade-off. The rational mind allows one to end up with a right decision after a review of all available possibilities. When money is spent on a particular product over other possible and equally valuable alternatives, a choice is made. The loss from setting aside the value of pursuing other alternatives with the same amount is referred to as the opportunity cost. It is normal for individuals to compare varying alternatives, looking at their quantifiable and nonquantifiable values, assessing possible losses and gains, and evaluating available options before a choice is made. As there are no perfect choices, just as information is not one hundred percent obtained, every choice has positive and negative consequences. ‘As one studies economics, it is important to point out that there are terminologies that are commonly encountered that may have a different meaning from its usual purpose. For instance, free resources are not actually resources that can be obtained and used without costs. On the other hand, costs in economics can be either intrinsic or extrinsic, that is, a cost with no actual cash outlay or a cost with identified cash effect. Oftentimes, there is a need to identify assumptions in order to simplify the complexity of economic issues. However, details and big pictures will continue to re-emerge all throughout one's study of economic issues and activities and it is important to critically appreciate them as they affect models and assumptions differently. Human needs and wants, when not satisfied, results to a feeling of inadequacy or distress. Generally, human needs and wants involve other noneconomic factors such as political, emotional, social, technological, emotional, and even legal. Consider how each person needs both food and shelter, although both are essential, the first one, is a requirement to survive while the other is something necessary for protection against unpredictable natural elements. Using this example, it is also safe to say that human beings have needs and wants that are either primary or secondary. Primary needs are those that are essential for one’s survival, these are resources that an individual cannot live without. Meanwhile, secondary needs are those that are directly associated with one's happiness, or a person's elevated CHAPTER |: BUSINESS MANAGEMENT RE"tatus in society. These secondary needs are what we refer to as wants. Foog i; olear an example of a need, just as shelter that is at the barest of minimum is. aera under normal circumstances, condominium living in a posh development area is already considered as a want. Goods and services are created with fixed and variable inputs. Fixed inputs are present in short-un production. However, all inputs can be made variable in a long-run production period. Utility is the degree of satisfaction derived from the consumption of a good or service. When satisfaction is gained from any of the economic activities, other principles come into play. The principle of reduced usefulness or diminishing marginal utility in economics comes from the continued use of the same amount of product over a period of time. It is no longer rational to continue the use and spending for a product when its degree of usefulness or utility has been maximized, or saturation point has been reached. On the economic activity of production, a fixed input can only be useful until its maximum output. Hence producers should be aware of the principle of diminishing ‘marginal returns. When the consumption of a product is lower than the amount of energy spent on it, diminishing returns happen. In the same way, while buying something, you evaluate the utility derived from it with each unit and the cost you are paying for it. In the beginning, the benefits are higher than the value, but gradually, they decrease with continuous consumption. This law is very useful in our daily life. Economic activities refer to production, distribution, and consumption of goods and services. The goods that go around these economic activities are classified as {o either tangible or intangible. The former are goods with physical identity, while the latter refers to services. Using this definition, economic activity would refer to the movement of both goods and services in a production, consumption, and distribution process to satisfy human needs and wants. The magnitude, type, and extent of resource involvement differ in every economic activity. All economic activities are motivated by either directly or indirectly satisfying human needs and motivations. This is the reason why human needs and wants are identified as the fundamental cause of any economic activity. However, the way an economic activity is chosen to satisfy,the same type of need or want differs from one individual to another. Varying individual resources, priorities, situations, motivations, Preferences, and level of satisfaction dictate the multiple ways by which needs and wants are met. An economic resource is a means by which an individual's needs and wants may be directly or indirectly satisfied. For example, a cup of rice is an economic resource as it provides the food requirement of an individual, just as a rice plantation 6 “STRATEGIC BUS‘San economic resource because it provides the rice requirement of a community or a company. A teacher is an economic resource for those with teaching and learning needs, just as a lawyer is an economic resource for those requiring legal services. There are many different examples of economic resources that can be found in everyday settings, and these resources differ in category depending on the nature or level of scarcity, form, or renewability Various types of goods become the object of multiple economic activities that aim to satisfy different needs and wants. The question is whether these goods satisfy needs and wants in a direct or indirect manner. Goods that directly satisfy human needs and wants are classified as consumption goods. Example would be a cup of rice in a restaurant menu. Meanwhile, capital goods are those goods that indirectly satisfy human needs and wants. Example would be gasoline, which is needed to fuel a car to be able to provide a means of transport. Depending on how it was used, the same resource can be classified both as consumption and capital goods. The distinction lies on how the good was used and not on its inherent character. A cup of tice can be categorized as consumption good when it is purchased and consumed as it is. It becomes a capital good when it is used as an ingredient to create another food product or obtained for a different purpose such as producing a rice wine. Based on nature or level of scarcity, economic resources are either scarce or free. Further note that scarcity is relative to areas or situations such that a resource is only considered scarce if the need for it exceeds the available quantity. Whereas, free resources happen when the available resources exceed the current need for it. As to renewability, resources are either renewable or nonrenewable. Renewable resources such as watersheds and forests are regenerative and sustainable although this can usually happen only over a long period of time. On the other hand, nonrenewable economic resources such as coal, minerals, and gas are exhaustive and only exist in limited quantities. Meanwhile, consumption of these resources grows exponentially leading to more insufficiency of its quantity to satisfy the long- term requirements of the society. Resources can also be classified according to their physical form, and are either natural, man-made capital or human. What exists in nature such as land and bodies of water are natural resources. Man-made or capital resources are those goods that were produced by men from combining natural resources and were created for an identified purpose. Human resources come in the form of labor services such as a doctor, a writer, or a fisherman. From the simplest way of performing household budgeting to altering a nation’s trade direction, knowledge of economics provides a huge leverage for an individual, or fora company that he wishes to manage. After becoming familiar with the concepts of scarcity, choices among alternatives and of trade-off, distinguishing between the CHAPTER I: BUSINESS MANAGEMENT REVIEW MitLesson Exercise Multiple Choice: Choose the correct answer. 1. Which of the following is not true of human needs and wants? A. B. c. D. Satisfying human needs and wants diminishes the feeling of distress. Human needs and wants vary depending on individuals. When an individual's needs and wants are already satisfied, the individual will no longer encounter the same needs and wants in the future. The quantity of a person's needs and wants increases over time. Which of the following is not an example of basic human needs and wants? moomp> food clothing shelter gold and silver water ; Which of the following is not an example of nonrenewable resources? moom> power from the sun coal liquefied natural gas petroleum silver and gold Which of the following correctly describes the relationship between human needs or wants, and economic activities? A. B. c. D. Every economic activity directly satisfies a human need. Every human need or want motivates an economic activity. The end goal of any economic activity is to satisfy a human need or want. ‘An economic activity produces a human need and want. Which of the following is not a type of scarce resources? A. B. renewable resources natural resources10. Cc. D. manufactured resources human resources Which of the following is not an example of scarce resources? A B. c. D. wood gold water petroleum Which of the following is an example of capital resources? A B. Cc. Dd. watershed lawyer petroleum computer Every choice results in a foregone alternative, which economists refer to as: A B. c. D. accounting cost changing cost ‘opportunity cost alternative cost Why do people need to make choices in the use of resources? A 8. Cc Scarcity of resources exists, Greed is evident ‘among owners of resources. irrationality exemplifies resource owners, D. Choices are available. What is the fundamental Problem of economics as a discipline? A ° The allocation of resources amongst the competing needs and wants because there are unlimited wants while there are limited resources. How to ensure continuous economic growth in the face of uncertainty. How to maximize profits for companies and consumer value for citizens. How to balance the needs of the economy with society and the environment.Lesson Review Le E When an individual goes to a physical market, makes a purchase, and obtains a product, economics is exercised. Imagine the number of times this process is performed by an individual on a day-to-day basis. However, obtaining the product after making a payment is not the only economic activity that happens during a single transaction. In fact, a chain of operations exists before a customer is able to obtain a product and the seller is able to produce a good. Economics involves the presence of decision-making among various alternatives in the process of consumption, production, and distribution. Answering the questions of what, how, and for whom to produce is basic in the study of economics. Studying economics allows individuals and entities to make informed decisions to efficiently use scarce resources while satisfying unlimited needs and wants. In a micro Perspective, companies can develop systems for human resource management, Production and operations management, marketing management, and financial management. Taking it to the macro perspective, knowledge of economics allows nations and states to realize the existence of problems such as poverty, inflation, high interest rates, high currency exchange rates, deficits in budget, and deficits in trade, and be able to address them using economic tools and related legislations. Studying economics allows a student to see things that are not ordinarily fecognized such as debit and credit situations, how loans can be efficiently used, or how interest is predicted. It also meant having the ability to understand and analyze consumption, production and distribution processes, and the way that money is made. This knowledge of economics can be valuable whether one is inclined to start acompany or manage an existing business, or even in one’s daily activity. Economics is not at all a bundle of principles and theories. It is all about implementing practical concepts in the real world. iLesson 2 Human Resource Management Basics Lesson Outcomes + Demonstrate an understanding of key terms, theories, and Concepts in the area of human resource management (HRM). + Demonstrate competence in the use of HRM practices in business analysis. * Provide innovative business strategies to problems in the fields of HRM, Lesson Introduction Human resources management involves the monitoring of the culture of the organization, and is responsible for the recruitment of appropriate workforce, in the recommendation of market-based compensation and benefits that are in accordance with the company’s current and potential resources and in the crafting of an overall strategic employee development plan. It is also the management function that conducts research and makes policies and recommendations, which are implemented to benefit, attract, and retain the best employees, HRM Covers five functional areas: organizational design; staffing; rewards, benefits, and compensation system; training and development; and performance management and appraisal system. Organizational design is about ensuring that there is an employee-job fit for all the positions in an organization to fulfil its mission. This is done through the Corollary functions of planning and job analysis. Staffing deals with the recruitment oF individuals whose skills, abilities, knowledge, and experiences are deemed appropriate forthe jobs in the organization that needs to be filed. Corollary functions to staffing are recruitment and selection, inclu net? Is the design of rewards, benefits, and compensation system that indudes compliance, rewards based on job evaluation, and direct and indirect se mvee benefits and compensation. Its compliance component includes the legal abpects of human resource management. Employee and organizational training and Gevelopment seek to ensure that employees have the necessary knowledge and ae twill allow them to satisfactorily perform their jobs and steer the company ae so advancement in its sector. Performance management and appraisal help iden mance evaluation tools developed or adopted by the organization to tify interventions to enhance work efficiency. This lesson will help students STRATEGIC Bi INESS ANALYSISbetter understand the role of human resources and their vital functions in business operations. Lesson Objectives After this lesson, students are expected to: * present the value that human resource management play in the general business analysis and strategy formulation; + _ demonstrate an understanding of the traditional functions of human fesource management; + integrate the major activities associated with human resource management; + review the proper steps for strategic planning in human resources; and + reflect in their thinking process on business analysis the valuable areas of visioning and valuing, environmental analysis, internal analysis strategy formulation, strategy implerientation, and evaluation and assessment Lesson Presentation The dynamic demands and expectations of consumers in both public and private entities, profit, and not-for-profit organizations across the globe necessitate the finding of more value in creating strategically designed human resource units. Acritical and careful assessment of how a company operates to best align with its overall mission and goals results in more positive outcomes for people, systems, as well as technology in the context of human resource management. At the core of human resource management is the attraction, placing, rewarding, training, and retention of the right people according to the objectives of the organization. ‘A job analysis outlines the human resource management plan. Job analysis is the process of collecting and studying various factors that are related to the operation and responsibilities of a specific job. Its immediate products are job description and job specification. Job description contains the job title, location, summary of duties, machines, tools, equipment needed to perform the job, and materials and forms that will be used to perform the job, including the ‘supervision that is expected to be given or received, as well as working conditions and possible risks. Job specification, on the CHAPTER 1: BUSINESS MANAGEMENT REVIEW 1e statement of manpower qualification for a specific job, This inimum education, experience, training, judgment, initiative, physical effort, skils, responsiilties, communication level, and emotional and soci characteristics. Job analysis is required a human ee planning, recruitment and selection, training and development, job evaluation and Performance appraisal, the creation of a compensation and rewards system, and the establishment of health and safety policies. Designing organizational structures also considers efficient work process and dynamics. This being said, due consideration is given not only to the daily processes but more so to the organization's priority areas that are more often accomplished ‘over a longer period. Understanding the efficiency of all systems and programs marks the beginning of the analysis on how to better improve results and outcomes. Additionally, human resource management emphasizes accountability in the design of structures and systems that involves people and resources. As such, a level of independence and clear standards must be established at the onset, to ensure that processes will run smoothly and with the least disturbance or delays. other hand, contains the a includes the required mi Ensuring the efficient managerial function of planning, organizing, directing, and controlling are within the context of designing organizational structures. Planning pertains to formulating strategies of personnel programs ahead of use and will contribute to overall organizational goals. On the other hand, organizing is an essential process of allocation of tasks amongst members of a specific structure, with identified relationships, responsibilities, and accountabilities within an integrated activity toward the achievement of a common goal. Meanwhile, directing is a function that allows for the activation of people at various levels of skills and tasks, and ensures that each one is able to maximize his or her contribution to organizational goals. Given appropriate motivation and reward, directing employees at different levels becomes possible even with the slightest exercise of authority. Controlling comes after planning, organizing, and directing, and necessitates the review of the employees’ actual performance. It also includes verifying deviations and comparing results from identified plans, and offering corrective actions for improvement. Business experts suggest that to be able to predict organizational success is to ensure that the right people are placed in the right position in the company’s functional Process, The continuous development and evaluation of existing organizational Structure play a key role in the initial design, and subsequent re-design of company Structures and groupings. This process of structural assessment and re-design involves the referencing of existing employees and carefully examining if they Perform roles that are based on their ability and expertise. SW SiRATEGIC BUSEvery employee has the strength and skill set that can be useful for leading a company or organization to a level of success. Most often, these strengths, when left unrecognized, may cause disillusionment and in some cases shifting roles. It may also lead to re-formatting in the reporting structure of an organization, as every individual is evaluated for strengths and weaknesses that would maximize potentials and would fit in the organization's current goals and larger direction Staffing comes after job analysis and human resource planning. It includes recruitment, selection, placement, and orientation. Recruitment is the process of searching for prospective employees and providing an encouraging environment for them to pursue their job application in the organization. Recruitment may be both internal and external to the organization. Internal recruitment can be in any of the following forms: promotion, transfer, job posting, or employee referrals. External recruitment can be in the form of advertisement, through direct recruitment, via employment exchanges, using employment agencies, networking with professional associations, campus recruitment, or even word of mouth announcements. Selection is the process of determining the qualifications, knowledge, skills, attitude, experiences, and values of an applicant with the purpose of ascertaining job suitability. Selection involves screening of applicants, having applicants take tests or other methods of screening and shortlisting such as interviews, reference and background verification, medical job candidates include aptitude test, psychomotor test, job knowledge test, vocational or interest test, personality test and group discussion participation test. Interview types, on the other hand, can be informal, formal, planned, patterned, nondirective, in-depth, stress, group, or panel. It is normal that the applicant's fit to the company culture is considered at this point. Placement is the process of giving the selected candidate the most suitable job in terms of the organizational requirement and the prospective employees’ qualifications after the formalities of screening. This phase of matching then leads to eventual orientation. Varied techniques are adopted to ensure employee orientation and to introduce a new hire to his new work environment, introducing him to people, practices, purposes, and policies of the organization. A good orientation program is critical in improving employee morale in reducing employee turnover, in curtailing absences, in lessening work accidents, and in avoiding industrial strife. ee a TTSINESS MANAGEMENT REVIEW TeWork Performance Flow Human resource management is valuable to the organization as it helps attract and retain the right people. Valuable to human resource management efficiency ig having a good reward, benefits, and compensation system. This process involves wage and salary administration, providing incentive and fringe benefits schemes, ‘as well as social security insurance and creation of retirement funds. While compensation is a direct reward for the work done, benefits emanate from a defined company incentive program. Benefits are indirect payments for working beyond what a job requires. As one motivational tool, rewards, benefits, and incentives may be financial or nonfinancial in nature. Employers are encouraged to exercise their creativity in developing other types of rewards and benefits, beyond what is government-mandated. Corporate discounts, office perks, childcare facilities, wellness programs, ‘and education fees reimbursement were added to the usual disability and health insurance, stock options, profit sharing, paid parental leaves, and performance bonus. Training and development are the process of creating avenues for employee improvement, reskilling and up-skilling for managerial development, career planning, and transfer or promotion. Training is the imparting of technical and operational skills that are needed for the current job. Meanwhile, development is the process of conducting suitable programs to improve one’s human and managerial capability to handle a more expansive role in the organization. Provisions for training and development of employees should be embedded in corporate policies as a way of cementing information on how the company puts a premium on professional development. In a similar note, policies on training and development provide the needed direction for the creation of employee development plans as well as performance improvement mechanisms. Training and development differ in periods, focus, orientation, motivation, objectives, number of beneficiaries, and purpose. Placement to Having the right organizational climate is an emphasis in the task of human resource management, a climate that celebrates and rewards the advancement of people in their education, exposure, and training because these steps ultimately contribute to a happier work force and a more efficient organization. Training and development exercises make for effective human resource management as they solidify teamwork and promote team spirit among organizational members. In the same way, training and development programs provide excellent growth portunities for people who have the big potential to move up in the organizational ladder through diligence and commitment. Ultimately, having a good training and development program improves organizational productivity, affects society and economy, reduces costs, maximizes scarce resources, and improves profits and overall work conditions of people.Performance management and appraisal defines the direction and movements of the careers of people in the organization. This systematic assessment of an individual's job performance and their potential for advancement results in further training, coaching, or correction as needed. The result of performance appraisal may be promotion, transfer, or retention. An extreme case would be demotion, or separation, other than retirement or resignation. Performance management and appraisal include setting performance standards, communicating these standards to the employees, measuring the performance, and comparing this to what is identified as standard, providing a venue for the discussion of results as feedback, provision of corrective action when necessary and implementation and regular review. Methods for performance appraisal vary from the traditional checklist type that is based on Job analysis, to conducting confidential reports, defining critical incidents, ranking, Paired comparison, narrative, graphic rating, grading, forced distribution, testing of work sample, nominations, or a combination of types. Other organizations utilize the service of professional assessment centers that conduct assessment using curated evaluation models. Examples of curated evaluation models would include Management by Objectives by Drucker, the Behavioral Anchored Rating Scale or BARS, the trait-based appraisal, human resource audit, and the 360-degree performance appraisal. Caution must be exercised in the use of performance appraisals that continue to exhibit inherent limitations of central tendency, halo effect, horn effect, leniency or strictness, spillover effect, the fear of losing subordinates, the fear of losing relationships, as well as the loss of goodwill or the wrong use of the methods, Human resource management of late has included new ideas such as artificial intelligence, big data, hybrid work models, healthy organizations instead of mere employee wellbeing, diversity, equity and inclusion, the onboarding of people with power skills, reskilling as much as up-skilling, gig economy concept, and cyber security. As technology continues in its essential role in many organizational functions, the capability of a workforce to integrate and incorporate new and emerging technologies in the performance of work will prove valuable. Asuccessful organizational design is one that maximizes profits, reduces costs, increases employee and consumer satisfaction, and provides workflow efficiency. After the evaluation, analysis, and development of every area in an organization, @ completed structure should be implemented using the new policies that were identified in the process. Working through an enterprise's structure, usually from the bottom up, will result in identifying problem areas that are ripe for improvement, make appropriate recommendations, and craft implementation steps within the organizational design. ‘CHAPTER |: BUSINESS MANAGEMENT REVIEWLesson Exercise_ Sampling an activity on group dynamics will allow the students to simulate 3 common organization undertaking that aims to promote creativity, working in teams and objective evaluation. The students will be facilitated to have their team activity with the following instructions: 1. Divide the students into groups of six. 2. Each team will be given the following materials: construction paper, a pair of scissors, glue, thread, and stapler. 3. Each team will build a tower with the items provided. The tower will be judged based on three criteria: appearance, stability, and height. 4. The students will be given 15 minutes to complete the task. 5. After the completion of the task, the professor will judge the towers of each team based on the three criteria. 6. Asking the students how they went about completing their task will serve as the processing of the activity. 7. Each team will be asked to rate themselves on a scale of 1 to 10. The rating will be on the effectiveness of the team as an organization, with an organizational purpose/mission of “building a tower.” Lesson Review Human resource management, also referred to as personnel management, is a largely overlooked area in an enterprise, and which mainly functions as record keeper and repository of personnel policies and directives that affect the workforce. It consists of all the activities undertaken by an organization that aims to ensure the effective utilization of employees’ skills and talents to attain individual, group, and enterprise goals. In broader terms, all decisions that affect the workforce of the organization are subsumed under the human resource management function. Human resource management should increase employees’ job satisfaction and meet their ultimate purpose of self-actualization within a stimulating work environment where they perform their specific roles. Human resource management should be able to assist the organizational workforce in achieving their personal goals even as they contribute to the bigger mission of the company where they work. In this function of the organization, employees must be led to develop and maintain a quality work life, that should redound to a desirable professional and personal situation. Company performance is only ensured when there is an efficient and quality human resource management system. GRY STRATEGIC BUSINESS ANALYSISLesson 3 Production and Operations Management Basics Lesson Outcomes + Identify the production and operations framework of a business organization. + Examine the transformation process in a business operation and how they relate to business analysis. + Understand the role of production and operations managers in formulating business strategies. Lesson Introduction A product or service is the primary object of consumer interest in a market. The need- and want-satisfying capacity of an item determines its value as a product or service. While most products are created for an identified need or want, some products are developed for a need or want that is yet to exist. The process and systems that convert raw materials to another product are the core of production and operations management. Production and operations management involves the major areas of production planning and control, project management, supply chain management, and inventory management. Production and operations management finds its value in connecting consumer demands and the capacity of business enterprises to provide such demands through the use and combination of various economic resources. Production and operations management identifies the process that transforms raw materials to finished products, and the series of processes that convert to a service. During production and operation, other types of utilities are formed. These are place, time, form, service, and knowledge utilities. Place utility happens when there is a change from the place of availability to the place of use through transportation. For example, transporting harvested rice to the brewery for rice wine production. Time utility happens when the input or the output is stored as part of the utilization process of the consumers. An example would be imported meat products in cold storage. Form utility happens when inputs change in size, weight, color, shape, or all at the same time as it converts into a consumer product. An example would be converting the fiber of a pineapple fruit to fabric and then to a ready- to-wear dress. Service utility happens when service is rendered to a client either CHAPTER 1: BUSINESS MANAGEMENT REVIEW a9!directly or indirectly. An example would be healthcare professionals to COVID-1g patients, or computer graphic designers to online buyers. Knowledge utlity happens when information is imparted to customers through presentations in the form of advertisements. An example would be giving information about a vitamin's ingredients and health benefits through the product's television advertisement. Production management encompasses production planning and development, production administration, implementation function and other allied activities such as standardization, simplification, specialization, quality control, and research and development. Production system on the other hand deals with the functions of converting inputs to output using processes, on demand forecasting, and on manufacturing control. , students are expected to: z hat goes in the creation of a product or service; Lesson Presentation Production process refers to manufacturing activities that result in either semi- finished product, finished product, or a by-product. Operations process refers to activities that result in the availability of a complete service or an allied service. Production and operations management is the application of the management functions of planning, organizing, directing, and controlling in the process of ‘manufacturing goods or in the provision of a service. Regardless of the type of Product or service, the activities that happen in the creation of goods are in many ways similar. A set of inputs would undergo a process to create outputs. This process is in the form of manufacturing operation, assembly of parts, finishing of parts, and inspection of quality and quantity. In between these processes is the movement and storage of raw materials, unfinished goods, and finished products. (i SiRATEGIC BUSINESS ANALYSISOrganizations are designed mainly to produce products or services. If these organizations must survive and grow, the operations function must be undertaken in the most economical manner possible. As most companies are expected to make profits, any activity, including those for operations, must be managed to contribute to the accomplishment of such objectives. Production is about the creation of all goods and services, regardless of type or kind. Meanwhile, operations refer to any process that accepts inputs and uses resources to change those inputs in useful ways. Both production management and operations management play an important role in an organization in increasing efficiency and productivity. While operations management is focused upon administration, planning, and execution of operations involved in production of goods and services and trying to minimize the resources, at the same time increasing output, operations, management is more concerned with input/output and churning ‘out products in the shape of desired finished product. Production Management deals with planning, control, and decision making necessary for carrying out the production process. Defined as the design, operation, and improvement of the systems that create and deliver the firm’s primary products and services. Foremost in production and operations management, is the twin issue of effectiveness and efficiency. Effectiveness refers to goal achievement, whereas efficiency is related to the cost resource utilization involved in the production and operation activity. System provides an efficient and effective framework of activities necessary to attain an objective. It is a dynamic arrangement of elements, each designed to interact with the other, and thus it is more than just a static combination. Element consists of men, materials, machines, process, and information network designed and located to interact harmoniously. In production and operations management, emphasis is also given to the attainment of right quality, which is based upon the customer's needs. The right quality is not necessarily the best quality. It is determined by the cost of the product and the technical characteristics as suited to the specific requirements. Likewise, having the right quantity is also important, emphasizing that the manufacturing organization should produce the products in the right number. If they are produced more than demand, the capital will block up in the form of inventory and if the quantity is produced in short of demand, leads to shortage of products. Ina similar vein, producing within the right time is also an important parameter to judge the effectiveness of a production department, which must aim to make the optimal utilization of input resources to achieve its objective. Finally, the right ‘CHAPTER 1: BUSINESS MANAGEMENT REVIEW 12is manufactured, Henc tablished before the product : manufacturing cost must De BS Ae eg the products at pre-established cost, g made to pr + e cata ca mows actual and the standard pre-established cost, reduce the val t that the location of facilities is tion and operations managemen' Sasi a onetderon Location of facilities for operations is a long-term mec aa Which involves a long-term commitment about geographically factors that affect a business organization. The purpose of the manufacturing ea study is to find the optimal location that will result in the greatest advantage n to the organization. Layout decisions include the capacity of the organization to Msc cetera investment in money and effort, its commitment to maintain the facility, and 2 ful evaluation of cost efficiency to the operations. Some of the more practical reasons behind modifications in an organization's decision for its operations layout are shown in the diagram below: | Productivity is the aim in production and operations management. The efficient combination of land, labor, capital, and management to optimally produce goods and services determines the level of operational productivity. Before an enterprise is organized, product design is decided Having a single product creates a more focused posture on production and operations management, and the single product success can be the springboard for developing a whole product line in the future. The design of the product remains to be @ critical decision for @ business owner. The uniqueness of a product or | STRATEGIC BUSINESS ANALYSIS:service determines its market success. Similarly, product design is dynamic in the context of changes in consumer preferences, economic situation, sociological and demographic factors, as well as political and legal challenges. Product design deals with conversion of ideas into reality, and every business organization must design, develop, and introduce new products as a survival and growth strategy. Developing the new products and launching them in the market is the biggest challenge faced by the organizations. Process design is a macroscopic decision-making of an overall process route for converting the raw material into finished goods. These decisions encompass the selection of a process, choice of technology, process flow analysis and layout of the facilities. Hence, the important decisions in process design are to analyze the workflow for converting raw material into finished product and to select the workstation for each included in the workflow. Production processes can be classified in three categories, flow production, batch production, or unit production. Flow production, which is also referred to as mass production, denotes a production process that runs in sequence. This type of production process is suitable for high demand goods, where a steady flow of operation is necessary. Quality control can be ensured in the type of raw materials used in the manufacturing system before the final product is brought out of the manufacturing facility. Batch production divides production output in component parts. In this category, the whole production process is divided in parts, with the unfinished product in the form of various finished parts. Batch production is applicable for a product that uses different machines and tools depending on the parts to create. Quality can be checked at every batch production, and production parts can be made available at another functional area. Unit production happens when production is made according to when the customer specifically requires it. Production processes of this nature follow a standard, quality, and specification in size, weight, form, color, and packaging. This type of production process is best used for products that do not require repetitive steps, nor has high demand. Its cost concems also limit its use. Production planning and control is about implementing plans in terms of job schedule, machine appropriation, and actual workflow. As production requires the successful conversion of raw materials to finished products whether in parts or as a whole, the role of a production manager becomes critical. The production manager ‘ensures that the process is rolled out as planned in accordance to earlier decisions on what, how, and when to produce. Similarly, plans are to be carried out with the optimum cost efficiency and utmost quality standard, The control functionality can be seen in producing better quality products at the best reasonable price within the most systematic manner. Planning in production is in foreseeing probable glitchesin the production process and finding remedies for their early solution. A well-cle production planning and contro! system ensures that production schedules are met, that materials, men, and machines are efficiently maintained and optimally functioning, that the production process is well integrated for efficiency and economy, and that workload is regulated. A production planning and control system is created with the aim of maximizing the use of economic inputs, determining the requirements of production in men, machines, and materials, and ensuring that production is done at the right time with the right quantity and quality. The availability of products in accordance with the requirements of the marketing department of an organization is also ensured in production planning and control, in as much as adequacy of stocks is monitored for contingencies and information is gathered to guide in policy and future decision- making. ‘The scope of production planning and control encompasses those that concern production materials, manpower, methods, machines and equipment, routing of work, establishment and estimation of work standards, leading and scheduling, dispatching, expediting, inspection, evaluation, and cost control. Challenges in production planning and control would be how to combine functions, how to follow- up on production backlogs, and when to proceed with a re-planning Production planning and control varies depending on products, manufacturing facilities and organizational nuances. The best type of production is one that requires little or no control at all. As a management tool, controls need not be elaborate and complex but simple enough yet able to create an efficient operation of optimal production at the least cost. Project management evolved from Henry Gantt's famous Gantt chart and Henri Fayol's Five Management Functions of planning, organizing, commanding, coordinating, and controlling. A project is an organized initiative that has a concept phase, a project initiation phase, planning, execution, monitoring and control, and @ project closure. While it may appear to be overwhelming to an inexperienced individual, project management systems are meant to simplify and break down milestones for time and resource use efficiency. A good knowledge of project management presupposes an appreciation of work integration, scope, time, cost, quality, procurement, human resource needs, communication and its channels, risk, and stakeholder management. Supply chain management is the management of a network of business activities and processes that includes procurement, manufacturing, transportation of finished goods, warehousing, distribution, and inventory management. With a global business scenario, the expanse of supply chain management is magnified (BE STRATEGIC BUSINESS ANALYSIS:and characterized by geographically distinct markets, by diversely obtained raw materials, by more efficient manufacturing and procurement processes elsewhere, and by cheaper labor markets abroad. Supply chain management involves a broad function that sees planning, design, control, and implementation of processes related to procurement, manufacturing, distribution, and sales functions of an enterprise. The network of service providers of the supply chain process, called vendors, are efficiently coordinated and integrated by supply chain managers to ensure that production and distribution and all other activities in between will not be vulnerable to the risks of distance and time. Not to be confused with simple logistics, supply chain management goes beyond the management of the flow of goods as it also deals with securing and exchanging information, data, and documents between transacting parties. Logistics acts as the post-procurement function of delivering raw-materials from the source to the production plant, and the transportation of finished goods from the production to the various points of distribution. Warehouse management completes the logistics process in ensuring the ‘security and safety of goods, finished or unfinished, at any stage of raw materials Procurement, production, and distribution. Normally outsourced, or performed by a third party, the value of warehousing activities and companies would be in the extent of their reach and multi-location presence, especially when one speaks of global production and distribution. Production and operations management is continuously influenced by an ever- changing global environment and must therefore adjust to the challenges, trends, and developments in this area. Adaptation to the global context, in entering in supply chain partnerships, in just-in-time performance and real-time monitoring, to mass Production and customization, to bespoke trends, and rapid product development and high valued and diverse workforce, production and operations management will remain a dynamic area that is worthy of focus in doing strategic business analysis.Lesson Exercise In groups of five, research and present in class the production and Operations rocess of a product or service of your choice, covering the areas of raw materials identftation, process determination, distribution chain, and inventory management, The following format should be followed: + Raw materials — simple listing and classification method * Process determination — use a process flowchart * Distribution chain — use a distribution chain diagram * Inventory management — use a simple Microsoft Excel tracking sheet The facilitator will provide a rubric for evaluation to measure the group's grasp of their chosen organization's production and operations system. Lesson Review In strategic business analysis and planning, the production and operations management aspect would include plans on Schedule, materials requirement, Purchasing activity and control, capacity management, sales and operations, as well as plans on manufacturing and enterprise resources. Production and operations management outlines the process of product creation and service provision that enterprises provide to the market. The Process flow of producing goods and services varies depending on the nature of the Product. Tangible products are created from combining raw materials as inputs put together by labor using human Capital. Services, on the other hand, are provided through the rendering of transactions in Service entities such as in banks, schools, or hospitals. Often, manufactured products are also Part of some service delivery. In ensuring that products and services reach its final user, Production and operations management enters the picture in the form of creating a system for efficiently utilizing inputs of materials, equipment, labor, money, methods, and management to create outputs of value. lon and operations management where Jement decisions such as changing raw 38” SiRatEcic BUSINESSANALVSISmaterials, changing final product form, increasing or reducing production quantity, using technology, modifying a procurement system, to subcontract or augment production capacity, or whether to shift from being labor to capital intensive in the production process. Ultimately, production and operations management balance the need to provide consumers with the best Product in the most economical way, using an optimal process that maximizes manpower efficiency.