488 - MANAGEMENT AND OPERATIONS

Nguyen Ho Quang Trung – GBD17214

 MANAGEMENT & OPERATIONS (488)
ASSIGNMENT 2
Business Program – Semester Spring 2019 Part I

Submission date October 31, 2019 Date received (1st Submission)

Re-submission date Date received (2nd Submission)

Student Name Nguyen Ho Quang Trung Student ID GBD17214

Class No. BMN Assessor Name THAOPUP

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Table of Contents
INTRODUCTION ............................................................................................................................................................. 4

I. Operational Management theorie & approaches: .............................................................................................. 5

1. Discuss the key theories of operations and operations management: .................................................................... 5
1.1 Six Sigma: ....................................................................................................................................................... 5
1.2 Lean production: ............................................................................................................................................ 6
1.3 Queuing theory: ............................................................................................................................................. 7
2. Explain different operations management approaches: .......................................................................................... 8
2.1 MBO & SMART criteria: ................................................................................................................................. 8
2.2 TQM:............................................................................................................................................................. 10
2.3 Kaizen: .......................................................................................................................................................... 11
2.4 JIT Production: ..................................................................................................................................................... 12

II. Important and Value of operation management to achieve business goals: ....................................................... 12
Product design: .......................................................................................................................................................... 12
Process design: ........................................................................................................................................................... 12
Scheduling: ................................................................................................................................................................. 12
Transformation Process: ........................................................................................................................................... 13
Control and Distribution systems: ......................................................................................................................... 14
Logistics and Inventory management: ................................................................................................................... 15
Capacity Management: ............................................................................................................................................. 15

III. Business Enviroment Factors: ............................................................................................................................. 16

1. Industry analysis by using Porter's model: VIETJET AIR .................................................................................. 16
2. Identify a recent scandal of the chosen company or other companies: ................................................................. 19

CONCLUSION ............................................................................................................................................................... 22

References: ................................................................................................................................................................. 23

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 INTRODUCTION
Management and operation is the act of managing the production of goods and services
and involves responsibility to ensure that the business is effective in using less resources
when necessary and effective in meeting customer needs. It involves managing the
conversion of inputs (in terms of materials, labor and energy) into outputs (in the form
of goods and services). Operational managers have a huge responsibility including
operational process management, design, planning, control, performance improvement
and operational strategy and much more. However, in order to perform these
responsibilities well, the manager must have enough skills and knowledge to make them.
This assignment will explain the operations and operations management theories and the
role that leaders and managers play. Next, Explain the importance and value of operations
management in achieving business objectives. The last is assess the factors within the
business environment that impact upon operational management and decision-making
by leaders and managers.

General introduction of Vietjet air
The name of company:
Vietjet Aviation Joint Stock Company (Vietnamese: Công ty Cổ phần Hàng không VietJet),
trading as VietJet Air or Vietjet, is an international low-cost airline from Vietnam. It was
the first privately owned new-age airline to be established in Vietnam, being granted its
initial approval to operate by the Vietnamese Minister of Finance in November 2007. As
of its launch in December 2011, it became the second private airline to offer domestic
service in Vietnam, as well as the fifth airline overall to offer civil domestic flights. VietJet
Air is owned by Sovico Holdings, HDBank, other organisational investors and individual
stakeholders.

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I. Operational Management theorie & approaches:
1. Discuss the key theories of operations and operations management:
1.1 Six Sigma:

Figure 1. Step by step (DMAIC Infographic)

Six Sigma is a method to improve and enhance operational management through handling
errors and defects, reducing fees and saving time. In general, it is meant for high-end
engineering and manufacturing, however it is able to be adopted for other product and
provider industries. Six Sigma emphasizes cyclical improvements while minimizing
production errors to no more than 3.4 times per million units or events (HAYES, Six
Sigma, 2019). It is very difficult to enforce because it takes a lot of money and effort. But
if done well, it makes agencies into enterprise leaders and facilities of Excellence
Targeting to meet customer needs, improving consumer retention, and improving and
maintaining business services and products. Six Sigma applies to all industries. Many
suppliers, including Motorola, offer Six Sigma training with special certifications bearing
the names of gold belts, green belts and black belts. (HAYES, Six Sigma, 2019)
The Five Steps of Six Sigma:
• Define: This definition outlines the problem, goals and capabilities of the project. It is
a group of people, led by a Six Sigma champion, that identifies a wrong process to focus
and decide through analysing the company's goals and requirements.
• Measure: The team measures the initial performance of the process. These statistical
measures form a list of potential inputs that can cause problems and help the group
understand the standard performance of the process.
• Analysis: Then, the team analyses the process by isolating each input, or the
underlying reason for failure and checking it is the root of the problem. Through analysis,
the group determines the reason for the process error.

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• Improve: From there, team work to improve productivity and system.
• Control: Finally, the team adds controls to the process to ensure it does not regress
and become ineffective once again.
(HAYES, Six Sigma, 2019)
Real Application:
Motorola’s journey to achieve Six Sigma performance began in 1986 when engineer Bill
Smith quietly set out to devise a methodology to standardize defect measurement and
drive improvements in manufacturing. Developing this new methodology was the first
step on our journey and gave us the tools to begin measuring and comparing the quality
improvement rates of our business groups. Six Sigma became our performance metric
and was reflective of a product or process that has just 3.4 defects per million units or
opportunities. (PIERCE, 2011)
1.2 Lean production:
Learn production is a technique for management focused on waste removal, while still
ensuring quality. This method can be implemented for all components of a business - from
layout, design, production to distribution. Learn production to cut costs by making
businesses more efficient and satisfying desires in the market. his method sets out to
minimize activities that do not add value to the production process, such as holding
stocks, repairing defective products and products around enterprise. ((Introduction),
2017)
Overproduction: The most serious of the wastes, overproduction can cause all other
types of wastes and results in excess inventory. Stocking too much of a product that goes
unused has obvious costs: storage, wasted materials, and excessive capital tied up in
useless inventory.
Inventory waste refers to the waste produced by unprocessed inventory. This includes
the waste of storage, the waste of capital tied up in unprocessed inventory, the waste of
transporting the inventory, the containers used to hold inventory, the lighting of the
storage space, etc. Moreover, having excess inventory can hide the original wastes of
producing said inventory.
Motion: Wasteful motion is all of the motion, whether by a person or a machine, that
could be minimized. If excess motion is used to add value that could have been added by
less, than that margin of motion is wasted. Motion could refer to anything from a worker
bending over to pick something up on the factory floor to additional wear and tear on
machines, resulting in capital depreciation that must be replaced.
Defects refer to a product deviating from the standards of its design or from the
customer’s expectation. Defective products must be replaced; they require paperwork
and human labor to process it.
Over-processing refers to any component of the process of manufacture that is
unnecessary. Painting an area that will never be seen or adding features that will not be
used are examples of over-processing. Essentially, it refers to adding more value than the
customer requires.
Waiting refers to wasted time because of slowed or halted production in one step of the
production chain while a previous step is completed. To take the classic example, the

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production line, if one task along the chain takes longer than another, than any time the
employee in charge of the next task spends waiting is wasted.
Transport is moving materials from one position to another. The transport itself adds no
value to the product, so minimizing these costs is essential. This means having one plant
closer to another in the production chain, or minimizing the costs of transportation using
more efficient methods.

Real Application:
INTEL: Known for their computer processors, Intel adopted the lean manufacturing
techniques to provide a higher quality product to an industry that demands zero bugs.
This ideology has helped reduce the time to bring a microchip to the factory from more
than three months in the past to less than ten days. With items so precise and technical,
Intel quickly realized that producing a higher quantity of lower quality was not the way
to improve profits and increase customer satisfaction. Instead, by implementing quality
control factors and waste reduction techniques, both parties benefit. This is even more so
true in the tech industry where products are changing and being upgraded so frequently.

1.3 Queuing theory:
The queuing theory is to study mathematics of congestion and delay of queuing. Queue
theory examines every aspect of the waiting in line that is ready to be served. Along with
the process of arrival process, service process, number of servers, machine location and
number of customers. As part of operational research, queuing ideas can help users make
the right business enterprise decisions on the road to building cost-effective and efficient
workflow structures. There are many of these queuing theories in fact including many
applications, including how to provide faster customer support, improved traffic, efficient
delivery of orders from warehouse and telecom system design information. (KENTON,
2019)

Real Application:
In 2003, the paper by Stanford School of Business professor Lawrence Wein et al. used
queuing theory to analyze the potential effects of a bioterrorism attack on U.S. soil and
proposed a system to reduce wait times for medications that would decrease the number

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 of deaths caused by such an attack. There are free queuing theory calculators available,
where a user can choose a specific queuing model. (KENTON, 2019)

2. Explain different operations management approaches:

2.1 MBO & SMART criteria:
MBO:
Management By Objectives (MBO) is a management version that aims to improve the
performance of a corporation with assistance when identifying goals that can be agreed
through the governing body reason and personnel. In theory, there is a voice in
establishing intentions and travel plans that encourage participation and commitment
among employees, in addition to aligning goals across the agency. (HAYES, Management
by Objectives (MBO), 2019)

The first step is to either determine or revise organizational objectives for the entire
company. This broad overview should be derived from the firm's mission and vision.
The second step is to translate the organizational objectives to employees. Drucker used
the acronym SMART (specific, measurable, acceptable, realistic, time-bound) to express
the concept.

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Step three is stimulating the participation of employees in setting individual objectives.
After the organization's objectives are shared with employees, from the top to the bottom,
employees should be encouraged to help set their own objectives to achieve these larger
organizational objectives. This gives employees greater motivation since they have
greater empowerment.
Step four involves monitoring the progress of employees. In step two, a key component
of the objectives was that they are measurable in order for employees and managers to
determine how well they are met.
The fifth step is to evaluate and reward employee progress. This step includes honest
feedback on what was achieved and not achieved for each employee.
(HAYES, Management by Objectives, 2019)
SMART Criteria:

Figure 2. SMART goals

(SMART, 2018)

The SMART method is a model that helps you remember how to implement your first
MBO goal setting process:

S for Specific: There are a number of key factors that need to be presented in the goals set
for them to be effective. They need to be specific. In different phrases, they must describe
in detail the end result they desire instead of "higher customer support ratings", the goal
should be "improve customer support scores to 12 points using customer service survey
factor".

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M for Measurable: The second example is much more special and also refers to the second
dimension that can be measured. In an effort to be able to use goals as part of the review
process, it is important to be clear whether the person is achieving the goal or not.

A for Achievable: The next important factor to set goals is that they can be achieved. As
an example, one goal says that "one hundred percent of customer satisfaction" cannot be
achieved in practice. It is unbelievable that people must be satisfied with the one hundred
percent service they provide. The purpose of "12 percent improvement in consumer
satisfaction" is good but it may still not be possible if it is delivered to the database
developer. They probably do not have enough influence on customer interaction
procedures to enhance customer satisfaction through 12 percent.
so creating a goal must make sure that you can achieve it.

R for Realistic: This leads to the next factor being reality. The actual goal is the goal of
recognizing unmanageable factors. Any other way, realistic goals can be challenging, but
it's not too difficult, but success is very small. They can be completed with the device that
person is available at their disposal.
T for Time-based: The final problem for a great goal is mainly based on time. In other
words, it's not just, "improving customer support by 12 percent," that's "improving
customer support by using12 percent in the next three hundred and sixty-five days." that
is the ultimate criterion in turning the goal into reality and tangible. This last ingredient
is often implied in MBO placement. The date implied is the next assessment date, when
employees may be held accountable for commitments they have made through their
goals.
(Goal, 2018)

2.2 TQM:
Total quality management is responsible for keeping all stakeholders in the production
system responsible for the overall quality of the service or final product. Total quality
management (TQM) is a detailed approach to managing the overall organization. the
process focuses on the quality of an organization's output, including goods and services,
through the continuous improvement of internal organizational activities. industry
requirements may be described at more than one levels, and can consist of adherence to

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 diverse legal guidelines and guidelines governing the operation of the particular
commercial enterprise. (Management, 2019)

2.3 Kaizen:
Kaizen is the continual process of detecting and reducing or eliminating errors in
manufacturing, streamlining supply chain management, improving the customer
experience, and ensuring that employees are up to speed with training. Total quality
management aims to hold all parties involved in the production process accountable for
the overall quality of the final product or service. (BARONE, 2019)
To put it more simply, the Kaizen method is based on the belief that continuous,
incremental improvement will change dramatically over time. When teams implement
Kaizen, they avoid the volatility, instability, and mistakes that often accompany
innovation. In Japanese, Kaizen means "a good change". Although Kaizen is often applied
to industrial processes such as supply chain and logistics, it is also useful for increasing
one's personal productivity and work habits. This philosophy is like an antidote for
everyone as adults or returning home after a day of work. Kaizen is not about hustling or
working more, it is about rational adjustment, accepting failures and applying lessons to
work better. Kaizen is a method of improving work efficiency, satisfaction and wasting
time. The core principles of Kaizen's continuous improvement include: Standardizing a
process so that it is repeatable and organized; Focus on measuring and assessing data
usage progress. Compare results with individual requirements; Innovation to achieve
similar results; Respond to changing circumstances and develop methods over time.
Because Kaizen is a philosophy, it is not a rigid system, so it is flexible and adaptable to
everyone's work styles, interests and personalities. The Kaizen philosophy sounds like it
might make us feel burdened in theory, but rest assured that people are keen to seek
innovation, which means most of these principles can be applied intuitively. There are
three ways to get started with Kaizen: Determine where waste of time and energy; For
greater productivity or greater efficiency, ask yourself to take small steps every day; Take
time to review what is working and improving. Kaizen is an alternative to the sense of
failure we experience after setting goals, bulleting too ambitiously and causing us to give
up a few weeks later. Kaizen will not change our lives overnight, but it will help us change
little by little to achieve the best effect.

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 2.4 JIT Production:
The just-in-time (JIT) inventory system is a management strategy that aligns raw-
material orders from suppliers directly with production schedules. Companies employ
this inventory strategy to increase efficiency and decrease waste by receiving goods only
as they need them for the production process, which reduces inventory costs. This
method requires producers to forecast demand accurately. (BANTON, 2019)

II. Important and Value of operation management to achieve business goals:

1. Operational functions of a business
Product design:
Product design is one of Operations Management's core steps. One of the most important
steps is creating a product or service. It definitely affects the product's earnings. During
the product design process, the basic limiting characteristics of the design of the
production system are set. While designing a product or an item to be manufactured in
non-manufacturing processes, the product designer shall define the materials, tolerances,
basic dimensions, methods for joining parts and the like, and shall set the minimum
possible cost of production by means of these requirements. The product designer
specifies materials, tolerances, basic dimensions, methods of joining parts and the like
when designing the product or the object to be manufactured in non-manufacturing
processes, and by means of these requirements sets the minimum possible cost of
production. (HWA, 2019)
Process design:
Process Design is any part of an organization that turns inputs into outputs. System layout
is the collection of goods and services inputs, processes, job flows and methods. A good
system layout should take into account the suitability of the process to the overall goal of
the company. Process design requires a broad view of the organization as a whole and
should not have a myopic perspective. And the system must generate consumer
satisfaction at different stages with continuous management involvement. (Harvey,
2019)
Scheduling:
Scheduling can be defined as "prescribing when and where each operation necessary to
manufacture the product is to be performed." It is also defined as "establishing times at
which each event or operation involving a procedure can be started and completed." The

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main goal of scheduling is to plan the work sequence so that production can be arranged
systematically towards completion. (production and operations, 2019)
There are three types of process scheduler:
1. Long Term or job scheduler It brings the new process to the ‘Ready State’. It controls
Degree of Multi-programming, i.e., number of process present in ready state at any
point of time.It is important that the long-term scheduler make a careful selection of
both IO and CPU bound process.
2. Short term or CPU scheduler: It is responsible for selecting one process from ready
state for scheduling it on the running state. Note: Short-term scheduler only selects
the process to schedule it doesn't load the process on running.
Dispatcher is responsible for loading the process selected by Short-term scheduler on
the CPU (Ready to Running State) Context switching is done by dispatcher only. A
dispatcher does the following:
- Switching context.
- Switching to user mode.
- Jumping to the proper location in the newly loaded program.
3. Medium-term scheduler It is responsible for suspending and resuming the process. It
mainly does swapping (moving processes from main memory to disk and vice versa).
Swapping may be necessary to improve the process mix or because a change in
memory requirements has overcommitted available memory, requiring memory to be
freed up.
Transformation Process:
A transformation process is any activity or group of activities that takes, transforms and
adds value to one or more inputs and provides outputs to consumers or customers. Where
the sources are raw materials, the process involved is fairly easy to identify, as when milk
is converted into cheese and butter. (2019)
A transition is any activity or activity group that has one or more inputs, transforms and
adds value to them and provides output to the customer or the customer. Where the
inputs are raw materials, determining the relevant variation is relatively easy, since when
the milk is transformed into cheese and butter. Where the input is information or people,
the nature of the transformation may be less obvious. For example, a hospital turns an ill
patient (input) into a healthy patient (output). Transitions include: a change in the
physical properties of a material or customer; change the location of materials,

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information or customers; change of ownership of documents or information; storage or
accommodation of materials, information or customers; change in purpose or form of
information; change in physiological or psychological state of customers. Usually all three
types of inputs - materials, information and customers - are converted by the same
organization. For example, withdrawing money from a bank account related to customer
account information, documents such as checks and currencies and customers.
Treatment for patients in hospitals is not only related to the health status of clients, but
also to any materials used in treatment and patient information. A useful way to
categorize different types of conversions is: manufacturing - creating physical products;
transport - material or customer movement; supply - change of ownership of goods;
service - treat customers or store documents. A number of different transformations are
often required to create a good or service. Overall transformations can be described as
macro operations and more detailed transformations in this macro activity as micro
operations.

Control and Distribution systems:
A control systems includes mechanical or electronic equipment, it manage, command,
direct or adjust the behavior of other devices or systems using control loops. Control
system is a central part of industry and automation. It is used to increase production,
efficiency and safety for many areas such as agriculture, chemical plants, pulp and paper
mills,... (M, 2016)

The distribution system parallels the transmission system in nature, but each network
spans a much smaller geographic area. The distribution system also serves individual
customers, rather than other systems. (feleke, 2016) Distribution system design is,
ideally, the process of specifying the most economical network that will provide the
required bidirectional bandwidth to the required number of terminal points and still
meet defined performance goals. The performance goals, in turn, may be derived from
internal quality standards, governmental regulations, the perceived requirements for
reliable signal transportation, or all of the preceding. Typical system specifications will
include noise, distortion, response variation, delivered signal levels (and their stability),
hum, and a number of specifications specific to signal types carried. Reliability, another
important consideration, is discussed in Chapter 12, and the effects of imperfect

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impedance matching among components are discussed in Chapter 7. The distribution
system performance must also be considered as part of a chain that includes headend
channel processing and terminal equipment effects on signals. Finally, the coaxial
distribution system will usually be cascaded with a linear fiber-optic link, although
occasionally microwave is used where physical plant construction is impractical. These
are treated in subsequent chapters. (Murty, 2017)

Logistics and Inventory management:

Logistics defines as the detailed coordination of a complex operation involving many
people, facilities, or supplies. Although this definition is true, logistics has taken on a new
meaning in today’s digital world. Logistics can alternatively be explained as the detailed
coordination of information, physical, and financial flows to and from trading partners
and consumers. Each contains their own set of supporting activities and personnel to
carry out those activities, but one cannot function without the other. (Inventory, 2019)

Inventory management refers to the process by which the stock of a business is

purchased, processed and used. These include the management of raw materials,
components and finished products, as well as the storage and processing of these items.
(Hayes, 2019). Compared to larger organizations with more physical space, in smaller
companies, the goods may go directly to the stock area instead of a receiving location, and
if the business is a wholesale distributor, the goods may be finished products rather than
raw materials or components. The goods are then pulled from the stock areas and moved
to production facilities where they are made into finished goods. The finished goods may
be returned to stock areas where they are held prior to shipment, or they may be shipped
directly to customers.Inventory management uses a variety of data to keep track of the
goods as they move through the process, including lot numbers, serial numbers, cost of
goods, quantity of goods and the dates when they move through the process.

Capacity Management:
Capacity management is all resource management of an organization such as labour force,
raw materials manufacturing and office space, technology and equipment,
Capacity management also related ability of working processes of many different
department in, an organization, for example, new product development. And also

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 manager limited capabilities when other resources are combined. (BLOOMENTHAL,
2019)

III. Business Enviroment Factors:

1. Industry analysis by using Porter's model: VIETJET AIR

supplier buyer
power power
RIVALRY
barriers threat of
to enter substitutes

Customers: A customer can be an individual or an organization buying a product to use
or an organization that buys a product for resale with profit. Customers are an important
part of any business because they generate the revenue for businesses, a profit
organization will not succeed without attracting many customers, successful business
company must find customers for their products (Nordmeyer, 2018)

The supplier: Suppliers can have a serious impact on businesses and suppliers providing
equipment and materials for companies that produce goods and services (KOTLER,
WONG, SAUNDERS, & ARMSTRONG, 2005). To be profitable, businesses need to have
good value on products and supplies from suppliers and provide good value to customers
(Kokemuller, 2018).

Competitors: All organizations are competitors. so they must constantly gather
information about their opponents. Companies that want to survive and win competitors
must make sure their products are truly unique and different. Their products and services

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must be strong. Thus, products and services compete with rival products in the minds of
consumers (Bhasin, 2018).

Threat of new entry: A high threat of new entrance can both make an industry more
competitive and decrease profit potential for existing competitors. On the other hand, a
low threat of entry makes an industry less competitive and increases profit potential for
the existing firms. New entrants are deterred by barriers to entry. (Wilkinson, 2013)

Threat of substitution: A substitute product is one that may offer the same or similar
benefits to a company as a product from another industry. The threat of a substitute is
the level of risk that a company faces from replacement by its substitutes. (Martin, 2014)

Five competitive forces model of airline industry:

Competitive Rivalry: The competition is lessened by the brand identities of different
firms. For example, Jetblue is known for its amenities and Southwest is known for its low
prices. The market share seemed to be equally distributed because each company has its
own part of the market and because switching costs are low none of the firms can really
hold a large percentage of the market.
The strongest forces in this industry are the competition of existing firms and the power
of suppliers. The rivalry of existing players is high and will push out any firm that doesn't
have enough capital. Suppliers are strong forces because planes are so costly to make. If
the suppliers changed the credit terms by even a small amount it could mean a significant
loss for the firm. On the other hand the other forces involved seem to have a weak threat.
It is costly and time consuming to enter the market which lowers the risk of entry. Buyers
have a weak force because of the low switching costs and substitutes are weak because
they are usually too costly.
The profit in this industry is high because for most people flying in necessary. It is not a
trend which makes this industry profitable for the long term. Airlines that are more
profitable are in a better position because they usually have more planes and a larger
variety of flights which provides further convenience for the consumer.

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Custumer: The airline industry is made up of two groups of buyers. First, there are
individual flyers. They buy plane tickets for a number of reasons that can be personal or
business related. This group is extremely diverse; most people in developed countries
have purchased a plane ticket. They can do this through the specific airline or through the
second group of buyers; travel agencies and online portals. This buyer group works as a
middle man between the airlines and the flyers. They work with multiple airline firms in
order to give customers the best flight possible. Between these two groups there is
definitely a large amount of buyers compared to the number of firms. There are low
switching costs between firms because many people choose the flight based on where
they are going and the cost at the time. This is some loyalty to firms but not enough for
high switching costs. Each customer needs a lot of important information. They need to
know the details of what is provided during the flight. Buyers need to understand the
timing of the flight and the safety aspects of flying in general. The service provided is
unique. Each airline has a niche. Some airlines focus on cost, while others focus on having
the best amenities, etc. Overall the bargaining power of buyers has an extremely low
threat in this industry.

Threat of new entry: Threat of new entrants is another major aspect of the five forces.
This aspect has a low threat for the airline industry. There are two aspects that do
however raise the threat level. First, there are extremely low switching costs. Second,
there are no proprietary products or services involved.
Even with these two aspects the industry still has a very low threat overall. Existing firms
have a large cost advantage. This industry requires a large amount of capital and without
a strong customer base there will be little to no profit in the first few years. Existing firms
can and will use their high capital to retaliate against newer firms with whatever means
necessary such as lowering prices and taking a loss.

Supplier: There are low switching costs between firms because many people choose the
flight based on where they are going and the cost at the time. This is some loyalty to firms
but not enough for high switching costs. Each customer needs a lot of important
information. They need to know the details of what is provided during the flight. Buyers
need to understand the timing of the flight and the safety aspects of flying in general. The
service provided is unique. Each airline has a niche. Some airlines focus on cost, while

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 others focus on having the best amenities, etc. Overall the bargaining power of buyers has
an extremely low threat in this industry.
Airline companies cannot easily switch suppliers. Most firms have long term contracts
with their suppliers. Planes are such high capital products that firms probably make long
term loan agreements and have more favorable credit terms when they don’t switch
companies. It is difficult to enter into the plane manufacturing industry because of the
capital needed to enter.

Threat of Substitution: After looking at the threat of entry it is important to also
consider the threat of substitutes. This industry has a medium substitute risk level. There
are substitutes in the airline industry. Consumers can choose other form of transportation
such as a car, bus, train, or boat to get to their destination. There is however a cost to
switch. Some means of transportation can be more costly than a plane ticket. The main
cost is time. Planes are by far the fastest form of transportation available. Airlines surpass
all other forms of transportation when it comes to cost, convenience, and sometimes
service. Consumers do sometimes choose other methods for various reasons such as cost
if they are not traveling very far which raises the risk.

2. Identify a recent scandal of the chosen company or other companies:

In 2009 and 2011, Toyota, recalled more than eight million vehicles worldwide as they
discovered that there were incidents on the accelerator pedal in eight Prius hybrid
models. This issue was discovered through several reports saying that many vehicles
have been unintentionally accelerated. And then Toyota recalls more than 8 million cars
for repairs. This incident created a towel lock for Japanese car manufacturers in the UK,
where they used about 10,000 people directly or through their dealer network. Toyota's
Burnaston plant in Derbyshire has cut 750 jobs to meet reduced car demand. It may have
to cut the number of employees even further if concerns about a dangerous acceleration
pedal lead to significantly lower sales. In addition, it has a lot of impact on customers,
making them worry about their cars, and it greatly affects customer loyalty. (Guthrie,
2010)
Sustainability: Toyota has reached a record $1.32 billion settlement to resolve a criminal
investigation into safety issues that have been linked to at least five deaths. The Toyota
deal with the US Justice Department, which had been expected, resolved issues that had

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dogged the company since at least 2007. The auto maker still faces hundreds of private
lawsuits over the problems. Toyota recalled 12 million vehicles worldwide in 2009 and
2010 as the scandal spread and tarnished its once stellar reputation.

CSR: This incident created a towel lock for Japanese car manufacturers in the UK, where
they used about 10,000 people directly or through their dealer network. Toyota's
Burnaston plant in Derbyshire has cut 750 jobs to meet reduced car demand.
Toyota considers employees as its most significant stakeholders. This stakeholder group
aims for job security, career development and fair employment practices. Toyota’s
corporate social responsibility strategies address the interests of these stakeholders
through satisfactory salaries and wages and a career development program for advancing
employees. For example, Toyota has an On-the-Job Development (OJD) program, as well
as training courses specific to career paths in the firm. These training courses include
Toyota Way Development, Technical Development, and Management Development. In
addition, the company offers financial assistance for employees’ continuing formal
education. Thus, Toyota’s corporate social responsibility programs satisfy the interests of
employees as stakeholders.

Ethic: The Japanese car maker admitted it misled United States consumers by concealing
and making deceptive statements over two safety issues that caused cars to accelerate
even as drivers tried to slow them down.
US attorney-general Eric Holder said Toyota's conduct was "shameful".
"It showed blatant disregard for systems and laws designed to look after the safety of
consumers," he said.
"Rather than promptly disclosing and correcting safety issues about which they were
aware, Toyota made misleading public statements to consumers and gave inaccurate facts
to members of Congress.
"When car owners get behind the wheel, they have a right to expect that their vehicle is
safe.
"If part of the automobile turns out to have safety issues, the car company has a duty
upfront to tell car customers about them, to fix them quickly and to immediately tell the
truth about the problem.
"Toyota violated this basic compact."

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Relevant stakeholder pressures:
In a statement, Toyota called the agreement difficult, but "a major step toward putting
this unfortunate chapter behind us". The company said it has made fundamental change
in its corporate structure and safety procedures since the investigation started. Brake-
override systems are now standard on all Toyota vehicles.
The recall came at a difficult time for Toyota, as it was struggling to emerge from the
recession and had already suffered from a resultant decrease in sales,and the low
exchange rate from yen to US dollars. On the day the recall was announced in the US, it
was also announced that 750 jobs would be cut at Toyota's British plant at Burnaston,
near Derby. Also, it was estimated that each Toyota dealership in the US could lose
between US$1.75 million to US$2 million a month in revenue, a total loss of US$2,470
million across the country from the entire incident. Additionally, Toyota Motors as a
whole announced that it could face losses totaling as much as US$2,000 million from lost
output and sales worldwide. Between 25 January and 29 January 2010 Toyota shares fell
in value by 15%.
According to analysts, Toyota owners (including owners of cars not recalled) may also be
economically affected by the recall, as the damage to Toyota's reputation could negatively
affect the resale value of used cars.

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 CONCLUSION
To conclude, it is crucial to apply operation management in the organization. It facilitates
the managers to have better decisions about controlling the enterprise and also provide
methods to achieve to goal effectively. Operation management is one of the factors that
contributes to the successful of the organization. Applying it by the wrong method would
make the objectives become more difficult to achieve.

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