Production and Operations Management
1. Service sector
Any economy consists mainly of three sector of economy namely: primary, secondary, and service sectors.
Service sector is the arm of the economy majorly charged with marketing, dissemination, and selling of intangible products (services), unlike the other two arms which deal in tangible goods. Services have distinct characteristics which include; intangibility, variability, and inseparability.
Examples of services include; hairdressing, air travel services, shipping, insurance, mail delivery, media services, waste management and disposal, cleaning, and banking. (Kuschter R., 2002)
2. Productivity variables.
Productivity can be defined as output produced in relation to an amount of an input variable measurable in units, for example for every 10 tons of potash used, 5 tons of fertilizer are produced. This can be translated as a production of 1unit of fertilizer per 2 units of potash.
Productivity variables are the necessary mix of various inputs for successful production to be accomplished. The major productivity variables are labor, capital, and management. These variables are a times referred to as factors of production
Labor is the human resource required in the production process. For example, in the fertilizer production firm, people are needed to do appropriate mix composition of various chemicals used, some to regulate the machines, and others to move the finished products to the stores to await market. Labor can either be skilled (resulting from a training), semiskilled (which involves partial training), or unskilled (which requires no training). Labor can either be reduced or increased accordingly to facilitate efficient and lucrative production (Hakim, 2008)
Capital includes investments in fixed assets such as production machinery, and finances needed to run the production process appropriately. In the fertilizer firm for example, machines such as mixers and heaters might be needed to aid in the process. Such assets should be well maintained, and kept technologically up-to-date to give the entity a competitive advantage.
Management is a very important variable for any production. It’s the entrepreneurship which is charged with planning, organizing, controlling, coordinating, and directing the other factors of production. Effective and skilled management leads to very positive results to any firm. (Hakim, 2008)
3. Competitive advantage
Competitive is a gain enjoyed by a firm over and above what the rest of the companies in the industry (its competitors) enjoy. It can be either absolute or comparative advantage
Absolute advantage is when for example a company X which is closer to the raw materials used in the production of a product they deal in, produces the product cheaper, hence selling it at a lower price than that of company Y which is in the same industry but can’t sell it cheaper because its located far from the raw material and obtains it expensively. It will be said that company X has an Absolute advantage over company Y (Landsberg L., 2007).
Comparative advantage is when for example, a firm has the ability to produce two products A and B, but can produce B more cheaply and efficiently than A. The firm may therefore decide to produce product B and cease production of product A, or produce more of B because it fetches more contribution than A. The firm therefore has a comparative advantage of product B over product A.
The aspect of comparative advantage is also applicable in international trade where a country will specialize in what it can produce the most efficiently and cheaply, and leave the rest for other countries so that it will import what it can’t produce. (Landsberg L., 2007)
4. Multinational Corporations
Multinational Corporations (MNCs) are organizations which have the operations of their undertakings being run in more than one country. MNCs normally choose one of the countries they operate in as its headquarters and the rest as either sales points or production points depending on the choice of strategy undertaken.
MNCs normally come about due to mergers of more companies, acquisitions, and takeovers. They normally enjoy a number of benefits due to their diversification, e.g. monopoly, and tax exemptions from some countries. Examples of multinationals are Wal-Mart, McDonalds, and Microsoft (Tatum, 2008)
5. World Trade Organization (WTO)
World Trade Organization is a body formed to deal with rules governing international trade, and liberalize the trade. It was established from January 1995, and it took over from the de facto General Agreement on Tariffs and Trade (GATT). WTO has its headquarters situated in Geneva Switzerland, and enjoys a membership of 153 countries.
Every member country nominates its representative to the WTO. The body has a Secretariat which is headed by director general and more than 620 staff. The Secretariat assists with technical support to the body, legal assistance in the case of trade disputes, help with technical advisories to the Least Developed countries, and help new members who want to join it on procedures.