An organization has several departments which contribute in their own capacity to run the business. Each department and area of business of very important but one of the most important departments is Operations which is responsible to manage the operations of the business. Operations management is mainly responsible for the production of quality goods and services with the optimum use of available resources. Its responsibility is to ensure that the business processes and procedures are efficient enough to produce the full quality product and the resources are not being wasted or underutilized. In other words we can say that its main function is to take the input in the form of labor, material, energy and convert it in to finished output in the form of product or service. (Wikipedia.com)
Traditionally, the operations of goods and services manufacturing were treated separately but with the growing business needs and changing attitudes, behaviors and demands of the consumer, both the operations are treated together as in modern era the operations also tends towards the innovation and offering of value added activities with the coordination of the marketing department for having the better results.
Small business usually does not treat the operations management separately, but to run the business these businesses performs the activities which are considered under the operations management (Carter McNamara). Mainly, operations managements involve the activities like product development, product creation, and its distribution etc. The related activities to the product creation and production include the purchase of raw material, machinery, developing the processes, maintaining the inventory, quality control and evaluation of processes. The major focus of operations management is to evaluate the developed processes and its effectiveness and change the processes if required for having better results.
There is a misconception that operation managements involve all those activities which are being performed within an organization. If this is considered true then we can say that all the departments are managing the operations and all the managers are operational managers as all are contributing towards the production and delivery of product or service to the consumer directly or indirectly. However, in real sense operations managements is all about producing the required amount of products and delivering them to customers smoothly at appropriate cost to the business. So, operational managers are mainly concerned with each and every step that is involved in the product creation and delivery. It is the responsibility and decision of the operational managers that what kind of material, machinery, facilities, and energies should be used for an operating system and how the inventory and labor should be managed to produce a product or service that satisfies the market need.
In the past one decade as the local and domestic market requirement changed, the importance of operations management has increased in a dramatic way. Traditionally, the companies were used to produce the goods in the same way, but know the competition is so intense that the product delivery is required at right time in right quantity and of best quality. If this is not the case then the business may lose a regular customer in flick of eyes. This intense competition has put a great pressure on operational managers and that made the operations management a very important factor in an organization's success.
Impressive Burger's Approach For Business Expansion
The issue of expanding the business after its startup is faced by every business during its life. The business expansion is a very complicated process as it contains many pros and cons. The business expansion sometimes can be deadly for the business of the strategies and policies for expansions and predictions go wrong. So, this process has to be very measureable and objectives should be very clear and the direction set for expansion should be forecasted with the business needs. If the expansion is successful then it brings the dramatically change in the financials of the business and its growth rate increases.
Generally there are two categories or approaches in which business can expand. The first if organic growth and the other one is Inorganic growth. Impressive burger used the organic growth approach. Though it was not successful, but it will be discussed later that why this approach was not successful for Impressive Burger. Below is a brief description of the both approaches that are used by the organizations to further expand their businesses.
Inorganic Growth
Inorganic growth refers to the expansion of the business and expanding its sales. This is done by increasing output. This is done by expanding the business by several ways that includes acquiring new businesses by way of mergers, acquisitions and take-over. This way is quiet fast and it allows immediate utilization of acquired assets. This method is less risky as well as company has to start and manage the operations as all is already set so no need to establish the plant or machinery etc. Acquisition or takeover strategies can be adapted for Inorganic Growth.
A Merger is the term which refers to the absorption of one firm by another, that means the firm that is acquiring the other one will retain its name and its identity, and it will acquire all of the assets and liabilities of the other firm that is acquired. The acquired firm then eliminates its existence as a separate business entity. So a new firm is created and both the firm will start working with the new name and the old entities will terminate their legal existence. Following are some types of Mergers.
Horizontal: Horizontal Merger takes place between two firms which are engaged in the same line of business.
(For example: Daimler-Benz and Chrysler, Hewlett-Packard and Compaq)
Vertical: Vertical Merger involves companies which are at different stages of production
(For Example: America Online and Time Warner)
Conglomerate: Conglomerate Merger involves those companies that are in unrelated lines of businesses
(For Example: AT&T and NCR)
Acquisition of stock means to purchase the voting stock of any firm in exchange for cash, shares, or other securities. A private offer is made by the management of one firm to the other firm. A tender offer is a public offer to buy shares of a target firm directly from its shareholders. Tender offers are usually unfriendly; these are used in an effort to evade the target firm's management, which usually resists the acquisition.
Assets Acquisition refers to a method of acquisition in which a firm acquires another firm by buying all the assets it possesses. Generally, a formal vote of the shareholders of the selling firm is required. Assets acquisition avoids the potential problem of having resisting minority shareholders, which can occur in an acquisition of stock.
Proxy Contest means that a shareholders group tries to get the controlling seats on the board of directors. This is usually done by voting in new directors. Proxy holder is authorized to vote on all matters in a shareholder meeting.
Organic Growth
Impressive burger used organic growth model for the expansion of their business. Organic Growth means the rate at which the business is expanding through its own activities. Organic Growth can be done by the following means.
Increasing the Number of Customers Impressive burger increased its chain of restaurant and the number of set meal options available on the menu was increased to offer more options to the customer and to attract customers seeking healthier options.
Increasing the Frequency of purchase Another path for that impressive burger chooses for expansion was to increases the frequency of purchases. This is done by making the easiest possible ways for the customers, so by this business is done repeatedly by the clients. Another way to look at this is that Impressive burger provides additional value to the customer. Means the client perceive the value of money that he is paying to the company. This is done by offering the option of changing the chips option on the set meals for either a Side Salad or for Potato Wedges.
The above two strategies were adapted by Impressive burger for the expansion of their operations. However, organic growth model includes more strategies to expand the operations of the business which are mentioned as under:
Adapting/Introducing New Technology Company should always look for the new technologies introduced in the market. By adapting or Introducing the new technology in the business is another and effective ways to grow the existing business. Adapting new technology increases the productivity of the company and helps in the growth of the business. It also helps to attract the new clients and to serve the existing clients even better.
Searching and expanding in the New Market New markets should also be in the eyes of the company. Every market has its own potential and at some point the sales of the company gradually decreases and the company run its business with the existing customer base because the market is saturated at that point of time. So looking for new market is an important path to grow the business and to increase the customer base.
Better Customer Service A better way to grow is the customer service. In this era people are more quality conscious rather than quantity. So the companies who are serving their customers better wins the battle.
Problems Faced by Impressive Burger
As mentioned in the case study impressive burger was pretty much impressive in terms of quality and customer services since its launch before 10 years. They were able to serve their customer within 4 minutes and the each of its restaurant was in direct contact with the supplier who used to supply them the stock bi-weekly. Moreover, the set menu of meals was very simple and impressive as well and the customers were well aware of the menu of impressive burger. The case also mentioned that 12 months before Impressive burger decided to expand the business activities and formulated an expansion plan. They increased the meal menu and also offered different add-ons in the meal like changing the chips in to salad or potato wedges.
This expansion turned out to be very useful for the organization in the first few months when the turnover reached double and the number of customers also increased. On the other hand there were lot of other problems that occurred during expansion and there were several issues which were not dealt properly and the result is that in next few months it is feared that Impressive Burger will announce its first loss in the history of the company. Following are some of the operational issues that occurred after the expansion and Impressive Burger needs to focus on to save the organization from loss.
Issues in Record Keeping
Whenever the businesses grow there is a problem of recordkeeping which needs to be tackled in the expansion plans. The Impressive burger has changed its menus and are going for further expansion, which will result in increased customers, that means they need to have an updated system to record the transactions which can also keep track of cash flows. Moreover, they need to have an updated system of inventory management which can manage the supplies and deliveries, manage the financial transactions, and track the human resource information. It is observed that if the business is grown then the existing bills increase by the factor of six so, these needs to be managed and for going towards further expansion Impressive Burger needs to have a proper record keeping system which can handle the daily operational activities.
Low Staff Members
The business expansion always require new staff members to meet the growing demand of production, marketing, recordkeeping and other administrative issues. The hiring of new personnel is a very important matter, but when the business is going through a phase of expansion then this become even more sensitive. Sometimes companies spend too much energy on production and marketing plans, but have very little focus on hiring good human resource which ultimately results in to failure. Impressive burger has the same issue of personnel. After the expansion of the business Impressive burger should have been planned for the increased number of customers and they should have hired more staff members to meet the customer demand, handle administrative issues, record keeping etc. But the major problem occurred when the same number of staff members were overloaded by intense pressure of increased customers and increased production. If Impressive burger is growing further then they need to address this problem very seriously as the existing staff members will not be able to perform well according to the expanding business.
Lack of Staff Training
The staff training is one of the important factors that affects the success or failure of any business. These are the employees who will implement the decided strategies by the management of the organization. If the staffs members are not well prepared or well trained then no matter how well prepared the strategy is, it will fail. Impressive Burger's one of the major problem is the training of their staff members. Before expanding the range of their products the staff members were not trained and guided properly about the new menu and were not told about the strategies of the business. Especially the customer services staff members were not told how to deal the customers and how to avoid the delays that can be caused due to excessive customers. This was the reason that the average serving time of a customer was increased from 4 minutes to 9 minutes. Moreover, due to lack of training and excessive workload on the staff members several misbehaviors were also reported to the management which definitely left a very bad impact on company's image.
Supply on Manager's Prediction
The in time supply of the material is very important for proper delivery of the product to the customer. If the supply of raw material is not received on time then it will not be possible for the company to give on time delivery. Impressive Burger was serving the customer on an average of 4 minutes and the case mentioned that the supply was ordered on the prediction of manager. In the current business situation where the competition is so intense, the forecasting should be systematic which should be followed by the previous sales trend. There is always a chance of human error in predicting so, it is suggested that there should be a online system that align the supplier with the Impressive Burger's branches and at defined minimum inventory level the order should be automated to the supplier and the required delivery should be received. This will help to reduce the wastage as well which is currently increased by 20%. Moreover, the delivery time to the customer will also be minimized.
Sitting Area/Customer Service
Another reason for the downfall of Impressive Burger is that they have not increased their sitting area, knowing the fact that the response will be good and the customers will be increased after increasing the range of menu. Customers have to wait in queues and as there is no sufficient place to sit in the restaurants so customers need to stand there and wait for their order which is also very late. So a bad word of mouth is created in the market as customers are not satisfied with the service and they do not come again. This is the reason that after a huge hike on the turnover in the initial months the coming months are not very good in terms of sale and it is feared that the loss will be faced by the organization first time in its history.
Use of Old Machinery
Another problem that needs to be focused on by Impressive Burger is the up-gradation of their machinery. It has been observed that despite of the up-gradation in the menu, the old machinery is being used. So, the investment should be made on new and up-graded machinery which will improve the quality as well as the average delivery time.
Recommendations for Operations Improvement & Further Expansion
Impressive Burger needs to focus on different operational issues in parallel as they have already expanded their range of products and moreover, the management is also planning to open more branches at different locations. So, there is a series of improvements that are required by the organization before further expansion, some are mentioned below.
Use of Technology
Use of technology is very necessary to compete in this modern world by any organization. Impressive Burger should use different tools that reduce the manual work and support the employees to perform their daily operation smoothly. It will also speed up the processes and will help the employees to serve the customer in more efficient way.
Outsourcing
Impressive Burger should outsource its some of the operations to the third part. It will help the organization to focus on the core business i.e. fast food. At first, Impressive Burger should outsource the HR function to a third party. It will help the company to manage the human recourse more efficiently as all the HR function will be performed by a specialized organization. Moreover, cleanliness and some administrative function should also be outsourced to some local specialized organization. This will definitely improve the cleaning standard of Impressive Burger and the company image will improve among the customers.
Training/Career Development
Training and development of employee's skills is very important and there should be arrangements in an organization that enhances the employee skills. Impressive Burger should develop the strategies that support a wide range of training programs and different professional courses that help the employees to enhance their knowledge and skills and can apply in the professional environment. This strategy is very helpful for the employees as these trainings and courses are also associated with rewards and compensations so it also helps to increase the motivation level of the employees.
Key Performance Indicators
KPIs are also known as Key Success Indicators are the measurement to judge that whether the organization is achieving its goals and objectives or not. KPIs reflect the company's important and critical factors that lead towards the success of an organization (F. John Reh, 2008). Impressive Burger should set the system of KPIs and the evaluation of the staff members should be done under this system. This will help to evaluate the overall progress of the business towards the objectives. Impressive Burger can have the key performance indicator to evaluate the overall delivery time to a customer. It is very important to define the key performance indicator and should stick with that definition over the years.
Performance Linked Reward System
Employee motivation is one of the important factors behind the success or failure of any organization. Same like a child get happy when he/she is given a chocolate or ice-cream, employee's reward or chocolate is reward or remuneration which he gets from his employer. However, from organizations perspective rewards and compensations involves direct cost, but if the result is analyzed it will definitely be far more than the actual reward amount. Following are some types of the rewards that can be used by Impressive Burger for their staff members; this will help to improve the behavior of staff with the customers.
Bonuses in Cash (At least once in a year)
Issuance of Company's Stock
Rent/vehicle allowances
Paying Parking Cost
Professional Certifications
Benchmarking
Benchmarking is a process in which the organization's business processes and performances are compared with the best practices in the same or other industry (F. John Reh, 2008). Impressive burger should benchmark one of the top organizations in the same business like McDonalds or KFC. After that different business processes should be evaluated and compared with these big giants in fast food industry and should be improved. There are several types of benchmarking which can be followed by the organizations depending upon their nature of operations.
Internal Benchmarking includes the comparison among different units of the same organization. If one unit of the business has very good operations then the other underperforming units can set a benchmark of that well performing business unit. This type of benchmarking is not suitable for Impressive Burger as they need to focus on the whole operations of the business.
Functional Benchmarking refers to the comparison between the similar processes in the same industry. For this type of benchmarking the business is not necessary to be the same but there are some function which is similar in different organizations like inventory maintenance, supply chain management etc. This benchmarking should be done by Impressive Burger as they have some processes which are mentioned above to be improved.
Competitive Benchmarking is highly recommended for Impressive Burger. In this the processes and performance is compared with the competitors. As in fast food industry there are many big names like Pizza Hut, McDonalds, KFC etc, so Impressive Burger can have the benchmark for some processes and operations of these organizations and have improvements in their own operations.
Generic Benchmarking refers to the comparison of processes with the other industries. This benchmarking is not recommended for Impressive Burger at this stage of business as they need immediate ratification of their problems as they have plans to grow further.
