Question

Describe the how operational efficiency is calculated. Discuss how operational effectiveness and efficiency shapes and supports a business strategy. Provide one or more specific examples.

Answer 1

Operational efficiency is that operations evaluation parameter that focuses on doing things right. It involves ensuring that work flow is error free and hence enables prevention of delays and unnecessary cost increases that might have been caused by delays and by reworks. Operational efficiency can be measured as the output to input ratio. Inputs will include operational and capital resources as well as resource expenditures. Outputs will include revenue, quality level, and customer satisfaction.

Operational effectiveness and efficiency shapes and supports a business strategy. Operational effectiveness is about doing the right things and ensuring that the core work being done by an organization creates and adds value for the end customer. It is in this context we can say that operational effectiveness and efficiency shapes and supports a business strategy. Business strategy aims at achieving the goals and objectives of a business like growth, stabilization or retrenchment. So we can say that operational effectiveness and efficiency are sub-set of business strategy and supports the strategy by ensuring that goals and objectives are achieved in a systematic and tangible manner.

For example take the case of Apple Inc. The company has operational effectiveness in assimilating, attaining and extending best practices. This along with the company’s focus on operation efficiency to ensure high quality of its products enables it to create a unique value proposition. Hence Apple has been able to do things in a different manner and deliver higher amount of value to its customers when compared to its rivals.