UGBA 10 Lecture Notes - Lecture 13: Capital Intensity, Ebay, American Express
23 May 2018
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Course
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Managing Process II February 29
I. Operations
• Look at firms as a series of processes, and to find the best method that would serve
attributes that customers want
II. Process strategy decisions
1. Customer involvement: how involved the customer is with the company and the extent
of their participation (ie: one-to-one). It is particularly important for service processes
(ie: depositing checks at the bank).
o Advantages: increased net value to customers, better quality/faster
delivery/lower cost, may help coordinate across the supply chain
o Disadvantages: can be disruptive, managing time/volume can be challenging,
layouts may have been revised to accommodate to the customer (ie: layout for
waiting in lines at Starbucks are revised to accommodate for customer
involvement)
o Example: Starbucks has high customer involvement because they allow for high
customization. The different combinations of drinks are noted on the cup that is
then communicated to the employee.
o Example: EBay is designed so that customers perform virtually all the selling and
buying processes through the eBay site. Their jobs is to design the website and
manage safe transactions. The customer does the rest.
o Ikea: customer is in charge of final assembly.
2. Resource flexibility: how a firm specializes their resources (employees and equipment)
to produce one or more products.
o Flexible employees with more training have higher chances to adapt to the
market needs.
o Two types of equipment: general and special purpose.
▪ General purpose: produce at low volumes, low investment cost
▪ Special purpose: produce at high volumes, high investment and fixed cost
o Calculate the break even point: Quantity = fixed costs/costs for product
o Example: American Express has good customer service and can take a lot of calls
at once. They have people that have the ability to do more than one job (not just
someone that can take calls only).
3. Capital intensity: mix of equipment and human skills in a process; degree of automation
for a product is a big decision in capital intensity.
o Automation in manufacturing: used for line processes with high volumes and low
customization.
o Automation in services: online courses to make banking better.
o Automation: replacing human operations and control of machinery and
equipment with some form of programmed control.
o Robot: programmable machine capable of manipulating materials in order to
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Document Summary
Managing process ii february 29: operations, look at firms as a series of processes, and to find the best method that would serve attributes that customers want. Process strategy decisions: customer involvement: how involved the customer is with the company and the extent of their participation (ie: one-to-one). The different combinations of drinks are noted on the cup that is then communicated to the employee: example: ebay is designed so that customers perform virtually all the selling and buying processes through the ebay site. Their jobs is to design the website and manage safe transactions. Strategic fit: strategic fit: degree to which a company matches its resources and capabilities with the opportunities of the external environment. More strategic fit = more effective process: link of competitive priorities to manufacturing strategies, links with process choice, links with production and inventory strategy:
