IB Business Management SL Operations Management Question Bank

RDM is a family-owned healthcare-device manufacturer in Lobjanec, Czech Republic. It formerly employed about 500 unionized workers, mass-produced stoves and sold through wholesalers. Because of globalization and fierce competition from Asian manufacturers with lower cost structures, Jan introduced a highly automated manufacturing process in 2006, operational by 2009. Customers enter product specifications into an online template; an engineer reviews the request, may contact the customer and improve the design, and then sends the approved specifications to accounting and marketing, which determine the price. Robots configure tooling, load raw materials and manufacture the order, while highly trained engineers monitor the process. Automation lowers long-run costs, improves responsiveness and allows customized products, including new products such as aluminium water bottles. The change also affected human resources: in 2019 RDM employed 117 people, mainly engineers and computer experts recruited from universities across Europe rather than the local vocational school. The organization changed from hierarchical management to cross-functional teams composed of individuals from all business functions. These changes altered the relationship between operations and human resources, marketing, and accounting and finance, and changed the interests of employees, managers and the family shareholders.

With reference to RDM, describe how changes in operations management altered its relationship with two other business functions.

Ace Industries (AI)
Ace Industries ( A I ) manufactures plastic containers, mostly for the soft and fruit juice industries. The operations management department uses flow production for its standard-sized products and batch production for its customized products.
Al's sales are growing rapidly. It currently has a 6 % share of the plastic container market. However, it has recently struggled to meet customized orders on time. Some customers have complained about product quality. Currently, A I is organized by region, which allows the company to have strong relationships with customers, who feel that A I knows them and cares about their interests. The human resource department is proposing restructuring the organization by function. Not everyone at A I agrees with this change. Many think that the problems of late delivery and poor quality could be solved through greater delegation.
Lloyd Rinnegrat, Chief Financial Officer, has suggested that Al's management think more deeply about their rapid growth. Except Lloyd, most people at A I believe that rapidly growing sales are good - that by increasing its market share A I will, in the long run, benefit by being a large organization. However, Lloyd argues that being a small organization has many merits, as shown by the changes in Al's recent gross profit margins and net profit margins.

The marketing department has predicted that the soft and fruit juice industries are moving away from major mass-produced drinks and toward niche products, such as exotic fruit drinks and speciality beverages for very particular markets.

Outline two features of batch production.

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, F A 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 F A, 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.

Alfombras Horizonte (AH)


Alfombras Horizonte (AH) produces natural henequen* rugs in Yucatán, Mexico, and sells them online. AH rugs are very popular among young people because of their eco-friendly materials and AH's mission statement: "We are responsible with Mother Earth for our environment and ourselves."
In 2022, A H 's costs increased, but it kept prices unchanged. For 2023, A H decided to change its pricing

strategy and pass on all cost increases to customers.

* henequen: a fibre plant from Mexico and Guatemala. Fabrics made from henequen fibre are used to make a wide variety of products, including bags, rugs and hammocks.