CHAPTER 10

Operations Management
and

Quality Control

Copyright 2012 Pearson Canada Inc.

Learning Objectives
1. Explain the meaning of the term production (or
operations) and describe the four kinds of utility it
provides.
2. Identify the characteristics that distinguish service
operations from goods production and explain the
main differences in the service focus.
3. Describe two different types of operations
processes.
4. Describe the factors involved in operations planning
and operations control.

Copyright 2012 Pearson Canada Inc.

10-2

Learning Objectives contd

5. Explain the connection between
productivity and quality.
6. Understand the concept of total quality
management and describe nine tools that
companies can use to achieve it.
7. Explain how a supply chain strategy
differs from traditional strategies for
coordinating operations among
businesses.
Copyright 2012 Pearson Canada Inc.

10-3

Production Challenges
Toyota and CTS Corp.
Mattel
Maple Leaf Foods Listeria - 22 people
died and there were 57 total confirmed
cases
Cronut Burger, CNE, Toronto, August,
2013: hamburger-croissant-doughnut
hybrid.
Copyright 2012 Pearson Canada Inc.

10-4

Production
Services Operations
production activities that yield tangible and
intangible service products

entertainment
transportation
education
food preparation

Goods Production (goods produced)

production activities that yield tangible products
things you can see and touch

Copyright 2012 Pearson Canada Inc.

10-5

Utility: Adding Value

Creating value through production:
Time Utility
Satisfying because of when the product is available

Place Utility
Satisfying because of where the product is available

Ownership (Possession) Utility

Satisfying during its consumption or use

Form Utility
Satisfying because of the products form (the transformation
of raw materials into a finished product)
Copyright 2012 Pearson Canada Inc.

10-6

Operations/Production Management
Systematic direction and control
of the processes that
transform resources
into finished goods
Production Managers are responsible for
creating value and benefits for consumers
regardless of industry

Copyright 2012 Pearson Canada Inc.

10-7

The Transformation System

- What kind of production system occurs at:

- Chicken farm near Southey?
- IPSCO?
Copyright 2012 Pearson Canada Inc.

10-8

Differences Between Goods

and Services
Goods are produced, services are performed
Services operations more complicated:
interaction with customers
need interpersonal skills

intangible and unstorable

customers presence in the process
a virtual presence in ecommerce

service quality considerations

judgement of intangibles
Copyright 2012 Pearson Canada Inc.

10-9

CHAPTER 12

Understanding
Marketing Processes and
Consumer Behaviour

Copyright 2012 Pearson Canada Inc.

Learning Objectives
1. Explain the concept of marketing.
2. Explain the purpose of a marketing plan and
identify the four components of the marketing mix.
3. Explain market segmentation and show how it is
used in target marketing.
4. Explain the purpose and value of market
research.
5. Describe the key factors that influence the
consumer buying process.
6. Describe the international and small business
marketing mixes.
Copyright 2012 Pearson Canada Inc.

12-11

What is Marketing?
planning and executing the
conception, pricing, promotion and distribution of
ideas, goods, services to
create exchanges that
satisfy both buyers and sellers objectives

Providing Value and Satisfaction

value = comparison of benefits
versus costs
utility = ability of a product to satisfy
a need
Copyright 2012 Pearson Canada Inc.

marketing concept:
The idea that the
whole firm is
directed toward
serving present
and potential
customers at a
profit.

12-12

Goods, Services and Ideas

Marketing can be directed to
Consumer goods: tangible products purchased by
individuals for their use
food, clothing

Industrial goods: Products purchased by companies to use

directly or indirectly to produce other products
components, raw materials, equipment

Services: intangible products to serve users needs

insurance, health care

Ideas: thoughts or philosophies

Participation as a symbol for healthy living

Copyright 2012 Pearson Canada Inc.

12-13

Relationship Marketing
A type of marketing that emphasizes
lasting relationships with customers and
suppliers
Stronger relationships can result in
greater long-term customer satisfaction
and client retention

Copyright 2012 Pearson Canada Inc.

12-14

Marketing Plan
A detailed, focused strategy for gearing the marketing
mix to meet consumer needs and wants
Product
Price
Place
Promotion

Copyright 2012 Pearson Canada Inc.

Marketing
Mix
12-15

Choosing the Marketing Mix

Copyright 2012 Pearson Canada Inc.

12-16

Product Strategy
Offering a good, service, or idea that satisfies
the buyers needs is the goal of the firm
Product differentiation
creating a product that has a different image than
existing products on the market to attract consumers
may involve changing existing products by
responding
to trends or adding new products

Mass Customization
providing products that satisfy specific needs
Copyright 2012 Pearson Canada Inc.

12-17

Pricing Strategy
Choosing the right price to attract consumers
and meet the firms profit goals
Price = total value consumers willing to give
May be low price strategy (salt) or high price strategy
(mink coat)
Price must consider all costs
operation and administration
marketing research
advertising
Copyright 2012 Pearson Canada Inc.

12-18

Place (Distribution Strategy)

The part of the marketing mix
concerned with
Getting the product from producer to
buyer
Choice of sales outlets
Physical transportation
Channels of distribution
Copyright 2012 Pearson Canada Inc.

12-19

Promotion Strategy
Choosing the right method of
communicating information about the
product
advertising
personal selling
sales promotions
public relations
Copyright 2012 Pearson Canada Inc.

12-20

Target Market and

Segmentation

Target market

a group of potential customers

who have similar wants and needs

Market segmentation
dividing a consumer market into categories
selecting specific market segment(s) to pursue
must be done carefully as members of one category may still
have different spending habits

Positioning
process of fixing, adapting and communicating the product to
specific segments
Copyright 2012 Pearson Canada Inc.

12-21

Identifying Market Segments

" Search for common traits between consumers
" Focus on traits that affect product need or
purchase behaviour
" Geographic region
" Customer demographics
" Multi-cultural marketing
" Customer psychographics
" Product-use variables
Copyright 2012 Pearson Canada Inc.

12-22

Geographic Variables
Area of residence affects product
consumption
rainfall and umbrellas
snowfall and snowmobiles or snow
blowers
hot summers and backyard pools

Copyright 2012 Pearson Canada Inc.

12-23

Demographic Variables
Age

Gender
Marital Status
Income

Religion

Language

Education

Family Size
Ethnicity
Copyright 2012 Pearson Canada Inc.

Occupations
12-24

Psychographic Variables
Psychological traits a group has in
common
Attitudes
Interests and hobbies
Opinions
Lifestyles
Activities

Copyright 2012 Pearson Canada Inc.

12-25

Product-Use Variables

Occasion for use

Benefits Sought
Reasons for Purchasing
Loyalty Level

Copyright 2012 Pearson Canada Inc.

12-26

Market Research
A systematic study of consumer
needs
Focuses on the marketing mix elements
Leads to more effective marketing
Increases the accuracy and
effectiveness of market segmentation

Copyright 2012 Pearson Canada Inc.

12-27

The Research Process

The Research
Process

Study the
Current
Situation

Select a
Research
Method

Collect Data

Analyze Data

Focus Group

Use
Secondary
Data

Prepare
Report

Survey

Use
Primary
Data

Make
Recommendations

Observation

Experimentation

Copyright 2012 Pearson Canada Inc.

12-28

Observation
Viewing or monitoring human
behaviour
relatively low in cost

May be human observation or

technological
supermarket scanners
video mining

Copyright 2012 Pearson Canada Inc.

12-29

Survey
Questioning consumers about
purchasing attitudes and practices
can be expensive and accuracy varies
in person, via phone, mail, or the Internet
choosing appropriate questions and
ensuring honest answers

Copyright 2012 Pearson Canada Inc.

12-30

Focus Group
A small discussion group of prospective
customers or product users
in-depth discussion of issues
usually group does not know who is the
sponsor
search for common themes in participants
feedback

Copyright 2012 Pearson Canada Inc.

12-31

Experimentation
reactions of similar people are compared
under different circumstances
The situations can be manipulated to compare
responses to such things as:
shelf placement of products,
package colours and design,
advertising strategy

Very costly

Copyright 2012 Pearson Canada Inc.

12-32

Consumer Behaviour
The study of the process by which
customers come to purchase and
consume a product or service

Influenced by
psychological factors
personal factors
social factors
cultural factors
Copyright 2012 Pearson Canada Inc.

12-33

The Consumer Buying Process

Copyright 2012 Pearson Canada Inc.

12-34

The Consumer Buying Process

Problem Recognition
Consumer becomes aware of a problem or
need
May be automatic (the need for food or sleep)
Due to a lifestyle change (new parents, retirement)

Information Seeking
The information search may be long and
detailed, or short and limited
buying a car versus buying a candy bar

Copyright 2012 Pearson Canada Inc.

12-35

The Consumer Buying Process

Evaluation of Alternatives
Products are compared to identify the best
choice

Purchase Decision
choice may be made based upon
rational or emotional motivations
Rational motives include cost, quality,
usefulness
Emotional motives include fear, sociability,
aesthetics, imitation of others
Copyright 2012 Pearson Canada Inc.

12-36

Post-Purchase Evaluation
Marketers must market after the sale
to ensure satisfaction & repeat purchases
negative word-of-mouth can be harmful

dissatisfied consumers may

file a lawsuit
publicly criticize (www.complaints.com)

word-of-mouth marketing (buzz marketing) is

powerful, but cant be controlled

Copyright 2012 Pearson Canada Inc.

12-37