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Operations Management – Chapter 2

An example of a strategic operations management decision is the choice of where to locate.
True
Location decisions are strategic in nature.
An example of an operational operations management decision is inventory level management.
True
Inventory management is an operational decision.
Government statistics are a good source of data about productivity trends in the service sector.
False
The service sector is often omitted in government statistics.
An example of a tactical operations management decision is determining employment levels.
TRUE
Staffing is an ongoing, tactical decision.
Productivity is defined as the ratio of output to input.
TRUE
Divide outputs by inputs to get productivity.
Productivity is defined as the ratio of input to output.
FALSE
Productivity is the ratio of outputs to inputs.
Competitiveness relates to the profitability of an organization in the marketplace.
FALSE
Competitiveness relates to how effectively an organization meets the wants and needs of customers relative to other organizations that offer similar goods or services.
If people would only work harder, productivity would increase.
FALSE
Working harder can actually reduce productivity in some cases.
Tracking productivity measures over time enables managers to judge organizational performance and decide where improvements are needed.
TRUE
Productivity trends direct attention toward problems and opportunities.
Productivity is directly related to the ability of an organization to compete.
TRUE
A more productive organization is a more competitive organization.
A characteristic that was once an order winner may become an order qualifier, and vice versa.
TRUE
Order qualifiers and order winners are shaped by the environment.
Outsourcing tends to improve quality but at the cost of lowered productivity.
FALSE
Outsourcing can lead to both quality and productivity improvements.
Productivity tends to be only a very minor factor in an organization’s ability to compete.
FALSE
An organization’s ability to compete is directly affected by its productivity.
An organization that is twice as productive as its competitor will be twice as profitable.
FALSE
Productivity advantages don’t necessarily translate into profitability advantages.
National productivity is determined by averaging the productivity measures of various companies or industries.
FALSE
National productivity is determined by dividing inputs by outputs across a national economy; averaging industry measures would lead to a distorted estimate.
Wage and salary increases that are not accompanied by productivity increases tend to exert inflationary pressures on a nation’s economy.
TRUE
True increases in standards of living come about through productivity improvements.
Global competition really only applies to multinational organizations.
FALSE
Domestic-only organizations experience competition from organizations in other countries.
A business that is rated highly by its customers for service quality will tend to be more profitable than a business that is rated poorly.
TRUE
Service quality is a powerful tool for improving profitability.
Services often don’t fit simple yield measurements.
TRUE
Comparing one service output to another is difficult to do accurately.
A mission statement should provide a guide for the formulation of strategies for the organization.
TRUE
Strategy-making is constrained by the mission statement.
The hierarchy and sequence of planning and decision making is: mission, organizational strategy, tactics, and operational decisions.
TRUE
Mission is at the highest level of the hierarchy, while operational decisions are at the lowest.
Strategy includes both organizational and functional strategies.
TRUE
Organizational strategies shape functional strategies.
Organizational strategy should be determined without considering the realities of functional area strengths and weaknesses since they can be changed to meet our strategy.
FALSE
Functional strengths and weaknesses serve as the building blocks of organizational strategy.
Mission statements should be as specific as possible regarding exactly how they will be accomplished.
FALSE
Mission statements are very long-term and should provide enough room to accommodate major changes in direction.
Improving efficiency will guarantee a similar improvement in productivity.
FALSE
Efficiency is narrower than productivity.
As long as we match a competitor on quality and price we will gain market share.
FALSE
We usually have to better a competitor to win market share.
Environmental scanning is a search for events or trends that present either threats or opportunities to the organization.
TRUE
These events or trends should be taken into account when strategy is being formulated.
Standardization has the advantage of reducing variability.
TRUE
Standardization leads to reduced variability.
Traditional strategies of business organizations have tended to emphasize cost minimization or product differentiation.
TRUE
Time- and quality-based strategies are more recent developments.
The majority of our textbook deals with tactical operations that support established functional strategies.
TRUE
This represents the majority of ongoing decision making in operations.
Which of the following is least likely to affect the cost an organization incurs in producing its products or services?
A. price
Relative to the other choices, price is least likely to affect cost.
Where a firm locates would typically not affect that firm’s:
D. strategy.
Typically, strategy dictates where firms will locate, rather than location dictating strategy.
Which of the following is not among the chief reasons organizations fail?
B. emphasizing labor productivity in labor-intensive environments
In labor-intensive environments, emphasizing labor productivity is a good idea.
The key to successfully competing is understanding what customers want and then __________ satisfy those wants.
C. finding the best way to
To successfully compete, two basic issues must be addressed: What do the customers want? What is the best way to satisfy those wants?
An organization’s mission statement serves as the basis for:
E. organizational goals.
Organizations’ missions serve as the broad underpinning for their goals.
Which of the following would be least important in the pursuit of a time-based strategy?
A. cost minimization
Many means for minimizing cost would have the effect of making a time-based strategy less feasible.
Competitiveness doesn’t include:
C. profitability.
A company can be competitive relative to similar companies and still be unprofitable if the competitive environment is inherently unprofitable.
Product design and choice of location are examples of _______ decisions.
A. strategic
These decisions are made high in the hierarchy.
Scheduling personnel is an example of an operations management:
B. operational decision.
Staffing-level decisions are made low in the hierarchy.
Productivity is expressed as:
D. output divided by input.
Productivity is the ratio of outputs to inputs.
In the 1970s and early 1980s in the United States, organizations concentrated on:
C. marketing and financial strategies.
This led to U.S. firms being not very competitive with regard to their operations.
Which of the following is not a factor that affects productivity?
E. product price
These don’t lead to fundamental changes in operations.
Which of these factors would be least likely to affect productivity?
E. advertising
Advertising could increase the value of the outputs, but it is less likely to affect productivity than these other factors.
Which of the following is not a key step toward improving productivity?
E. converting bond debt to stock ownership
A firm’s productivity is independent of its capital structure.
For an organization to grow its market share, it must:
C. exceed minimum standards of acceptability for its products or services.
Only by exceeding standards can an organization grow its market share.
The ratio of good output to quantity of raw material input is called
B. process yield.
This is sometimes a useful productivity measure in service industries.
The fundamental purpose for the existence of any organization is described by its:
D. mission statement.
A mission statement is the organization’s attempt to justify its existence.
A productivity increase in one operation that does not improve overall productivity of the business is not
A. worthwhile.
Only system-wide productivity improvement makes the organization more productive.
Value added can be calculated by:
E. outputs minus inputs.
Value added represents the change in value of the original inputs.
Which of the following is true?
C. Functional strategies are shaped by corporate strategy.
Corporate strategy shapes strategies at lower levels.
Core competencies in organizations generally do not relate to:
E. sales price.
What a firm charges for its outputs is not a core competency. What it can charge, however, is potentially related to a core competency.
With regard to operations strategy, organization strategy should, ideally, take into account:
A. operations’ strengths and weaknesses.
Formulation of organization strategy should take into account the realities of operations’ strengths and weaknesses, capitalizing on strengths and dealing with weaknesses.
Which of the following is not typically considered a cure for poor competitiveness?
B. Minimize attention to the operations function.
Operations is a prime area for improving competitiveness.
Time-based approaches of business organizations focus on reducing the time to accomplish certain necessary activities. Time reductions seldom apply to:
E. internal audits.
Internal audits have little to do with core value-adding efforts.
The external elements of SWOT analysis are:
C. opportunities and threats.
Opportunities and threats relate to the organization and its external environment.
In an assembly operation at a furniture factory, six employees assembled an average of 450 standard dining chairs per five-day week. What is the labor productivity of this operation?
C. 15 chairs/worker/day
Divide the output of 450 chairs by the inputs of 30 worker-days.
Which of the following is not a reason for poor performance of our organization in the marketplace?
D. taking advantage of strengths/opportunities, and recognizing competitive threats
Taking advantage of strengths/opportunities and recognizing competitive threats would enable good performance.
The manager of a carpet store is trying to determine the best installation crew size. He has tried various crew sizes with the results shown below. Based on productivity, what crew size do you recommend?
A. 2
Crews of two workers are most productive.
Which of the following is not a key factor of competitiveness?
E. size of organization
Competitiveness often has nothing to do with organization size.
Gourmet Pretzels bakes soft pretzels on an assembly line. It currently bakes 800 pretzels each eight-hour shift. If the production is increased to 1,200 pretzels each shift, then productivity will have increased by:
A. 50 percent.
Divide the difference in productivity by the original productivity.
The weekly output of a fabrication process is shown below, together with data for labor and material inputs. Standard selling price is $125 per unit. Overhead is charged weekly at the rate of $1,500 plus .5 times direct labor cost. Assume a 40-hour week and an hourly wage of $16. Material cost is $10 per foot. What is the average multifactor productivity?
B. 1.457
Calculate multifactor productivity for each week, then average the two.
The Balanced Scorecard is a useful tool for helping managers translate their strategy into action in the following areas:
B. Customers; Financial; Internal Business Processes; Learning and Growth
These are the four core areas addressed by the Balanced Scorecard.
A firm pursuing a strategy based on customization and variety will tend to structure and manage its supply chain to accommodate more _____________ than a firm pursuing a strategy based on low cost and high volume.
A. variation
Customization and variety lead to variation that must be accommodated.
Unique attributes of firms that give them a competitive edge are called:
D. core competencies.
Core competencies can be translated into competitive advantage.
Years ago in the overnight delivery business, providing package tracking capability gave some firms a competitive advantage. Now, all firms must offer this capability simply to be in this line of business. This is an example of ______________ becoming ____________ over time.
C. order winners; order qualifiers
What is an order qualifier and what is an order winner changes over time.
For firms competing in worldwide markets, conducting ______________ is more complex, since what works in one country or region might not work in another.
B. environmental analysis
Environmental analysis takes into account the relevant factors in the environment; there are more of these if there are more markets to consider.
Increasing the service offered to the customer makes it more difficult to compete on the basis of:
D. price.
More extensive service can be more costly, and more costly outputs make price-based strategies more difficult.
__________ is generally used to facilitate an organization strategy that emphasizes low cost.
E. Standardization
Standardization is a powerful means of achieving low-cost production.
Which of the following factors would tend to reduce productivity?
C. more inexperienced workers
More inexperienced workers tend to be less productive.
Suppose a country’s productivity last year was 84. If this country’s productivity growth rate of 5% is to be maintained, this means that this year’s productivity will have to be _______.
A. 88.2
Multiply 84 by 1.05 and then subtract 84 from this product

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