Strategic Operations Performance Objectives

I decided to conduct my study on the company MonsterBeats (X), which specializes in selling audio equipment including headphones, audio players, and audio speakers and operates in the field of electronic commerce. Beats (by Dr. Dre), manufactured by the American firm Beats Electronics, which is today a division of Apple, is the primary brand of the technology the company distributes. The majority of the company's target clients are young, fashionable individuals who are willing to pay more for the product's name and the alleged quality associated with it. That kind of goods, however, is obviously pricey and focuses on status and "cool" attributes. The typical customer makes its purchasing decision fast and emotionally, often following others in its social group. The company X is oriented on Eastern-Europe and taking into account local preferences forming its stock, both in models, colors, price sub-segments, and speed of delivery - goods are coming to warehouses directly from China. The company has many competitors both locally and regionally, they are selling Beats technic as well as any other audio technic, non-direct competitors for the company are even providers of any other media content – concert halls, where people can listen to music on the live show. The fact that Company X sells products online makes the number of competitors much bigger, as not only local companies may distribute the same brands but also the client can by and get them from the other side of the planet. Next, I will discuss some theoretical base for strategic operations performance management in a commercial company that is necessary to overrun that wide range of competitors.

To be competitive and efficient in its market niche the company should understand what its niche is today and to what limits it should and have potential to be expanded tomorrow. As well the company should have strong knowledge about its auditory, their purchasing reasons, preferences, needs, and typical behavior. To meet auditory expectations the company, in addition, have to work on its internal structure, an organization of the processes and their improvement. Knowledge about external and internal attributes together provides enough information for efficient, logical, and conscious operation performance management. Based on this knowledge and limitations the company should set some strategic goals and objectives for both areas (external and internal), and then built a system of its achievement measurement. As soon as that system is assigned to improve companies operations, the process of its building and realization is attributed directly to operations management.

To make the system well balanced and adequate for all involved parties within this process, two positions should be reconciled: the one by stakeholders and another by company’s top management. The result of such coordination is a set of detailed operational objectives that can vary from company to company in dependence on management and stakeholders’ qualification. To add some structure to the objectives set usually it and measurements include parameters in five key directions: quality, flexibility, speed, dependability, and cost. Next, I will discuss the strategic importance of every of them in building a clear and complete system of management performance control.

The parameter of quality represents the customer satisfaction by company’s goods and services’ attributes, such as durability, construction features, tactile sensations, visual satisfaction and so on. Quality of product should be provided only on a regular basis, the product features should be stable and predictable. For this parameter lack of promised by brand attributes totally brakes “quality” perception for the client, so company needs in the serious system of quality control, including a number of stages to keep the initial level and save goodwill. The parameter of quality is strategic for companies in general because it affects its long-term relations with customers and helps to build goodwill, attract new clients just by its brand power, sometimes without additional costs for marketing. Externally quality objective represented by an exact match between services and goods specification, therefore clients get exactly what is promised and expected. Internal perspective for this objective is the minimization of errors in business processes, and with it, reduction of operates cost and growth of dependability parameter.

The flexibility objective represents company’s ability to change operations and its particular qualities with minimal costs and maximum outcomes. Flexibility requires both special structure of operations organization (with changeable modules) and advanced methods of market monitoring for right timing of changes. Around qualities of goods and services that company can vary, there are delivery, volume, product or service type and qualities, and their mix, that part of flexibility will be visible for the customer. In every particular case, it will relate to the ability to modify parameters, such as a period of product delivery, level of production output, or new products and mix variations. Flexibility may be presented in time and in a range, so externally it may be both frequent change of products or a wide range of products. Especially valuable to the modern client is an easy adjustment of services and products to their particular needs and requests. The flexibility objective is strategic as any organization operates in relatively unpredictable external conditions and should take them into account, therefore it should change its operations whenever external conditions change seriously to operate effectively. Internal perspective for flexibility is a maintaining dependability, faster response to changes, and lower time wasting, ability to change effectively.

The speed objective makes company’s operations more preferable for some group of customers, and its good and services more valuable, when it comes, for example, to speed of delivery. In strategic perspective, that is an important factor for brand construction or marketing placement, the speed may be noticed as a competitive advantage focused on a special segment of clients who find it critical. Externally speed as I said before represented mostly by delivery. Internally this objective means a high throughput, what helps to reduce total inventory in every particular moment and costs for its storage, risks on the shorter distance between inventory purchase and product sales is lower.

The cost objective is strategically important as it provides company competitive advantages in pricing for its products, makes easier forming of financial reserves and more rational sources spending, gives some more freedom in financial questions (ability to invest and reallocate additional sources). Externally it gets a form of low product price for a final customer with a possibly average margin for a company or high margin for the company while the price is just acceptable for a client, is average in its market niche. In some cases, an organization can put both margin and price objectives and get a serious advantage over competitors. Internally the cost objective affects organization through increasing productivity of operations, where by productivity I mean relation output/input.

The last objective, dependability is important for the company in strategic perspective because it requires time to maintain it and makes the highest effect on clients. That factor may be the most important around others, as for company without dependability other ones will work just part or will not work at all. High speed or quality when it is only temporary cannot form the strong brand. Externally dependability presents as reliable products' quality and time of delivery. Internally it affects organization by maintaining the reliability of processes within the company.

Coming to a particular example of MonsterBeats I would describe current situation with five key aspects (quality, flexibility, speed, dependability, and cost) of the company operations. The speed objective in the company is a central problem, the documentation required to cover each business transaction and number of people that should communicate for that along all supply chain makes all procedure long and inefficient. The company does not make big reserves of goods close to the customer location, so to get some relatively rare model they should request it in advance and then wait up to a month to get them from China. For popular models, the speed of delivery is also average due to logistic problems in the region of operation. On the other hand, communication between client and personnel through online channels, marketing with online instruments makes internal processes of customer base building fast.

Quality aspect of the MonsterBeats operations is relatively strong, in the company exists the system of quality standards, the goods pass through quality check on the factory, crossing the border, coming to a warehouse in the region of distribution. All information about that checks and related documents processes electronically, for the convenience of personnel and lower risks it is automated. The user of the system on every quality check stage put a bunch of marks on a list to confirm every supporting document submission, only when full package of relevant document is applied it is possible to go to the next step in an electronic process. Visually the error or problem in submission process represents by “pending” status and flags with a color code, what reminds to the user that the process is on track. With such system, the company has a higher quality of logistic processes and fewer mistakes in related operations. Also, it affects positively the speed of documents circulation (save time for additional documents request and so on).

The situation with dependability in the company is good, partly due to an electronic information system for operations management. In addition to checklists, it contains another automatically corrections and error messages, that helps personnel to control accuracy and completeness of the data within technical communication.

Costs of the company operations are relatively high, that is related to expensive logistic system, using of small consignments transportation, fragile goods requiring special transportation conditions. The other factor affecting costs is returnable logistic that still exists despite quality controls. By regional law, around reasons for goods return may be some subjective for the client. Return of product in this case by the customer to local office provide client himself. However, the company still has some logistic costs what does not make revenue (initial transportation of the product to the customer).

Finally, the flexibility objective in the company is average as it has an electronic informational system, where some non-tangible elements of operations can be adjusted easily, but the flexibility of Chinese factory, that supply product is low, it requires plan demand in some advance.

Comparing objectives of the company operations I can say the most developed areas are quality and dependability, the flexibility objective worse, and a couple of speed and costs is a problem that requires changes in the management system. As the MonsterBeats sells brand audio technic to retail customers of the special profile (trendy, spontaneous, "cool", following crowd or referent star), the most important objectives from the external side are quality and speed, as well as dependability. In case of quality and dependability problems with the Beats brand in general or particularly MonsterBeats product, they will lose a status and most of the customers oriented to that aspect. The speed problems are very important as customers are spontaneous and usually not ready to wait for a particular model, their consumption decision as easy to cancel as to produce. Both cost and flexibility are not important as clients do not have their own product requirements and just want to follow, in addition, they are ready to spend money conspicuously.

By comparison is clear that only one aspect around objectives is at the same time important and not well developed in the company, it is speed objective. Internally the company found required improvement in costs and flexibility as well. I would notice that systematic changes in the company operations management might provide the best result in a direction to higher speed and flexibility and lower costs. First, the company needs in supply chain and procedures correction, it needs in less centralized structure (provides flexibility), fewer people in the chain and clear allocation of responsibility and decision making (higher speed) and better relations with suppliers and between chain participants (both flexibility and speed). To make the effect of returnable logistic softer it also required to build better relations with customers, plus with the higher speed of delivery, the situation with this objective should become better automatically. The challenge with minimizing of returnable logistic by ethical manipulations and marketing is the existence of formal rules that are on the customer side in this case. In building better relations with suppliers the hardest moment is its international nature and different default positions and traditions in business for all participants of the supply chain. The building of decentralized structure is limited by available in the particular region logistic partners.

Thus, the development of strategic operation management system in the company and analysis of the current situation with the application of five key aspects allows getting a clear understanding of problematic zones around business processes fast and to found directions for next improvement quite efficiently.

References

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