IB Business Management HL Unit 5 Operations Management Questions

Lucas implemented a rapid modernization programme of Zeat’s batch production manufacturing method. New machinery was purchased and cellular manufacturing was introduced. Within two years, the Zeat division became more profitable. ELE’s marketing department conducted market research using stratified sampling, confirming a gap in the market for a low-cost electric air compressor for home use. In 2010, ELE set up a car rental business financed by retained profits and external finance. Giselle wanted to grow the division. Car rentals could be booked online, over the telephone and face to face at counters in gasoline stations or airports. ELE was considering launching a smartphone booking app. The gasoline station compressor market is saturated but consistently profitable. The Zeat factory will not require additional investment for another five years. Sales of the MiniC were consistent despite increased competition from cheap imports. Gasoline station revenues face the challenge of declining gasoline sales as governments and car companies move away from gasoline and diesel cars.

Outline one advantage and one disadvantage for ELE of changing to cellular manufacturing in the Zeat factory.

Emma, a marketing graduate at a public relations office, has always wanted to have a more creative and independent role. Falit works in the production planning department of a large multinational oil company. He likes his job but hates the bureaucracy. Ahmed is a charismatic, self-confident project manager at a construction company. The group decided that Ahmed was the right person to manage the project and the group because of his management and leadership skills. They decided to call the app "IBAT" (insect bite analysis test). Regular online meetings would take place to develop the idea. By September 2015, the group agreed that they would go ahead with the business idea in their spare time. They had all talked to friends, relatives and anyone they knew working in healthcare. All of these people liked the idea. The six friends decided to call the business Medimatters. IBAT would consist of a paid-for app that, with a smartphone, would: - take a good quality photograph of the insect bite - send the photograph to IBAT's online automated database. The automated database would then: - compare the photo with the online library of scanned images - produce a report on the findings of the comparison for the IBAT user as well as, if possible, medical professionals such as doctors. After consultation with some doctors, Carlo discovered a technical problem. The image quality of smartphones varies. To obtain the necessary detail of the insect bite, a separate magnifying lens attachment which would convert the smartphone's lens into a microscope would be required. A different design of lens for each make of smartphone would be required. The need for a lens means that IBAT would not be a conventional app that is purchased from an online app store. Customers, who could be members of the public or people in the healthcare profession, would purchase a physical product (the lens) and a password for downloading the app. IBAT would therefore be a service and a product/good that has implications for both marketing and operations management. Ahmed acted decisively. He assigned to each group member tasks to complete within three months. In January 2016, they met face to face and reported their findings and progress (Appendix 1). Emma considered who to target. She told the group during a further online meeting that the best approach to marketing was to concentrate on particular market segments. It would be easier to focus on healthcare professionals, such as doctors. Emma suggested that the best approach to contact these potential customers was through conferences and relevant medical magazines and journals. She was also investigating other potential market segments and distribution channels. Identifying these potential customers was going to be a major challenge and required market research. Could the general public be targeted through large chains of shops that sell health-related products? Ahmed thinks that they should concentrate on launching the product in Brazil before going global, but this might result in competitors copying the idea in other countries. In many areas the project was going smoothly, but frustrations were beginning to show. Bella was keen to make a lot of progress quickly. She thought that the project should be launched as soon as possible and then refined later based on customers' experiences. Didi was clear that they had to get the product absolutely right before it was launched. He also stated that Medimatters would need finance in order to start trading. Carlo was worried about where the lenses should be produced. Ahmed has a lot of work to do to sort out these frustrations. \begin{tabular}{|l|l|}
\hline Group member & Findings and progress \\
\hline Ahmed
Project manager & \begin{tabular}{l}
- Draft business plan: complete \\
- Potential investors: identified \\
- Application for copyright/patents: in progress \\
- Size of market: unclear, believes that there is huge national and global potential
\end{tabular} \\
\hline Bella
IT & \begin{tabular}{l}
- Prototype of image-taking software: written and tested \\
- Medical diagnosis software development: in progress
\end{tabular} \\
\hline Carlo
Medical expert & \begin{tabular}{l}
- Insect bite images: $75 \%$ collected and catalogued on database \\
- Communication channels with healthcare professionals: no progress \\
- Reporting format for medical diagnosis: some progress \\
- Approval for the use of the app for medical purposes: cannot be granted by health authorities until lens design finalized
\end{tabular} \\
\hline Didi
Accountant & \begin{tabular}{l}
- Production costs for app and lens: to be determined \\
- Further financial information for business plan: in progress \\
- Set-up cost: $\$ 60000$
\end{tabular} \\
\hline Emma
Marketing & \begin{tabular}{l}
- Market research: no progress, except for discovering a device/app that measures skin colour to help choose cosmetics and another that helps identify skin cancer \\
- List of potential market segments and target markets: complete \\
- Promotion strategies targeting medical profession: ongoing \\
- Marketing plan: in progress
\end{tabular} \\
\hline Falit
Production & \begin{tabular}{l}
- Lens production: investigate where to produce the lenses, possible manufacturer identified \\
- Production method: investigate batch or flow
\end{tabular} \\
\hline All of them & - Ahmed, Bella and Carlo could each invest $\$ 2000$, the others could
invest $\$ 1000$. $\$ 51000$ extra would need to be found. The list of
problems is getting longer! \\
\hline
\end{tabular} Additional terms not in the guide Copyright/patents Companies, products, or individuals named in this case study are fictitious and any similarities with actual entities are purely coincidental.

FrioAire Appliances (FA)


FrioAire Appliances (FA) manufactures medium-priced and medium-quality refrigerators. It is a multinational public limited company. Its factory is located in a less economically developed country that has high unemployment, a tradition of autocratic leadership and labour costs lower than FA's home country. The factory is profitable, and FA pays consistently good dividends. Market growth for medium-priced and medium-quality refrigerators is limited.
As part of a strategic objective to increase productivity and to enter a fast-growing market for high-priced and high-quality refrigerators, FA is considering building a new factory in and relocating production to Germany. This would require closing the factory in the less economically developed country. The new factory will:
- use innovative technologies, including advanced robotics and 3D processes
- require fewer employees, but those it does require will need to have better skills and qualifications.
Germany has a highly skilled, qualified and productive workforce. The new factory would allow FA to reposition its products. However, FA would need to raise significant finance to build and equip the new factory.
FA's leadership style at the factory in the less economically developed country is autocratic. Members of FA's board wonder whether this style would be suitable for the new factory in Germany, where workers have more bargaining power because of their high skill level and the labour-friendly cultural traditions. In Germany, FA would have to follow more regulations regarding the environment, health and safety, and employee rights.
FA workers in the less economically developed country are very loyal to FA, which has continued operation through a civil war at significant cost to itself (for security). If FA were to close in the less economically developed country, the workers would not find such good jobs.

Evaluate the option of building a factory in, and relocating to, Germany.

Jill Anderson


Jill Anderson operates a restaurant. Although Jill's meals are viewed as being excellent quality, sales are slowing. Jill is considering replacing existing meals with gluten-free meals. The following financial and forecast information is for the month of May 2018. Jill's restaurant can only produce either existing or gluten-free meals.

A local gluten-free manufacturer, which is not part of Jill's existing supply chain, has offered to supply already prepared gluten-free meals at $\$ 8$ per meal. Jill is unsure whether to make or buy the gluten-free meals.