Order Cost


Order cost includes all incremental costs associated with placing or receiving an extra order that are incurred regardless of the size of the order. Components of order cost include:

  • Buyer time: Buyer time is the incremental time of the buyer placing the extra order. This cost should be included only if the buyer is utilized fully. The incremental cost of getting an idle buyer to place an order is zero and does not add to the order cost. Electronic ordering can significantly reduce the buyer time to place an order by making order placement simpler and in some cases automatic.
  • Transportation costs: A fixed transportation cost is often incurred regardless of the size of the order.
  • Receiving costs: Some receiving costs are incurred regardless of the size of order. They include any administration work such as purchase order matching and any effort associated with updating inventory records. Receiving costs that are volume dependent should not be included.
  • Other costs: Each situation can have costs unique to it that should be considered if they are incurred for each order regardless of the quantity of that order.

The order cost is estimated as the sum of all its component costs. The order cost is often a step function; it is zero when the resource is not fully utilized, but takes on a large value when the resource is fully utilized. At that point the order cost is the cost of the additional resource required.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

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Communications: Compliance


Compliance results through a power relationship between the participants in the communications process. That is, a receiver complies with persuasive efforts of the source because the source has the power, legitimate or otherwise, to administrator rewards or punishments.

Because the powerful source controls rewards and punishments, he or she can often induce compliance to his or her advocated position. However, compliance is relatively superficial in the sense that a compliant individual does what he or she is forced to do and does not necessarily adopt the complied-to position as a matter of personal desire or preference.

Sales representatives sometimes possesses a degree of power over buyers, especially in a seller’s market where demand exceeds supply and buyers are dependent on their vendors for supplies of raw materials, parts, or merchandise. Purchasing personnel may feel that if they do not comply with a sales representative’s requests, their orders may be delayed or cut off completely.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Power through Recognition


A manager empowers others by giving them recognition which enhances their self-esteem and motivates them to continue to do their best work. A person’s power to achieve success is dependent upon his belief in himself and his desire to do consistently excellent work. A manager has more power to achieve his own objectives when the people who work for him are confident and motivated to do their best work.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Pricing


Whether or not it is so recognized, pricing is one of the most crucial decision functions of a marketing manager. Pricing is an art, a game played for high stakes; for marketing strategists, it is the moment of truth. All of marketing comes to focus in the pricing decision. To a large extent, pricing decisions determine the types of customers and competitors an organization will attract. Likewise, a single pricing error can effectively nullify all other marketing-mix activities. Despite its importance, price rarely serves as the focus of marketing strategy, in part because it is the easiest marketing-mix activity for the competition to imitate.

It can be easily demonstrated that price is a direct determinant of profit (or loss). This fact is apparent from the fundamental relationship.

Profit = total revenue – total cost

Revenue is a direct result of unit price times quantity sold, and costs are indirectly influenced by quantity sold, which in turn is partially dependent on unit price. Hence, price simultaneously influences both revenues and costs.

Despite its importance, pricing remains on of the least understood marketing-mix activities.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Simultaneous Production and Consumption


Whereas most goods are produced first, then sold and consumed, most services are sold first and then produced and consumed simultaneously. A restaurant services cannot be provided until they have been sold, and the dining experience is essentially produced and consumed at the same time. Frequently this also means that the customer is present while the service is being produced and thus views and may even take part in the production process. This also means that frequently customers will interact with each other during the service production process and thus may affect each others’ experiences. For example, strangers seated next to each other in an airplane may well affect the nature of the service experience for each other. That passengers understand this fact is clearly apparent in the way business travelers will often go to great lengths to be sure they are not seated next to families with small children. Another outcome of simultaneous production and consumption is that service producers find themselves playing a role as part of the product itself and as an essential ingredient in the service experience for the consumer.

Because services often are produced and consumed at the same time, mass production is difficult if not possible. The quality of service and customer satisfaction will be highly dependent on what happens in “real time,” including actions of employees and the interactions between employees and customers. Similarly, it is not usually possible to gain significant economies of scale through centralization. Usually operations need to be relatively decentralized so that the service can be delivered to the consumer in convenient locations. Also because of simultaneous production and consumption, the customer is involved in and observes the production process and thus may affect (positively or negatively) the outcome of the service transaction.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

 

Service Quality and Employee Behavior


Customers’ perceptions of service quality will be impacted by the customer-oriented behaviors of employees. In fact, the five dimensions of service quality—reliability, responsiveness, assurance, empathy, and tangibles—can be influenced directly by service employees.

Delivering the service as promised—reliability—is often totally within the control of front-line employees. Even in the case of automated services—such as ATMs, automated ticketing machines, or self-serve and pay gasoline pumps—behind the scenes employees are critical for making sure all of the systems are working properly. When services fail or errors are made, employees are essential for setting things right and using their judgment to determine the best course of action for service recovery.

Front-line employees directly influence customer perceptions of responsiveness through their personal willingness to help and their promptness in serving customers. Consider the range of responses you receive from different retail store clerks when you need help finding a particular item of clothing. One employee may ignore your presence, whereas another offers to help you search and calls other stores to locate the item. One may help you immediately and efficiently, whereas another may move slowly in accommodating even the simplest request.

The assurance dimension of service quality is highly dependent on employees’ ability to communicate their credibility and to inspire trust and confidence. The reputation of the organization will help, but in the end, individual employees with whom the customer interacts confirm and build trust in the organization or detract from its reputation and ultimately destroy trust. For startup or relatively unknown organizations, credibility, trust, and confidence will be tied totally to employee actions.

It is difficult to imagine how an organization would deliver “caring, individualized attention” to customers independent of its employees. Empathy implies that employees will pay attention, listen, adapt, and be flexible in delivering what individual customers need. For example, research documents that when employees are customer-oriented, have good rapport with customers, and exhibit perceptive and attentive listening skills, customers will evaluate the service more highly and be more likely to return. Employee appearance and dress are important aspects of the tangibles dimension of quality, along with many other factors that are independent of service employees (the service facility, décor, brochures, signage, and so on).

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Opportunity Analysis


Opportunity analysis consists of three interrelated activities:

  • Opportunity identification
  • Opportunity-organization matching
  • Opportunity evaluation

Opportunity arise from identifying new types or classes of buyers, uncovering unsatisfied needs of buyers, or creating new ways or means for satisfying buyer needs. Opportunity analysis focus on finding markets that an organization can profitably serve.

Opportunity-organization matching determines whether an identified market opportunity is consistent with the definition of the organization’s business, mission statement, and distinctive competencies. This determination usually involves an assessment of organization’s strengths and weaknesses and an identification of the success requirements for operating profitably in a market. A SWOT analysis is often employed to assess the match between identified market opportunities and the organization.

For some companies, market opportunities that promise sizable sales and profit gains are not pursued because they do not conform to an organization’s character.

Opportunity evaluation typically has two distinct phases—qualitative and quantitative. The qualitative phase focuses on matching the attractiveness of an opportunity with the potential for uncovering a market niche. Attractiveness is dependent on 1) competitive activity; 2) buyer requirements; 3) market demand and supplier sources; 4) social, political, economic, and technological forces; and 5) organizational capabilities. Each of these factors in turn must be tied to its impact on the types of buyers sought, the needs of buyers, and the means for satisfying these needs.

Opportunity identification, matching, and evaluation are challenging assignment because subjective factors play a larger role and managerial insight and foresight are necessary. These activities are even more difficult in the global arena, where social and political forces and uncertainties related to organizational capabilities in unfamiliar economic environments assume a significant role.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

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