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Are 157 - Are 157 Production analysis Dennis Zack christina...

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Are 157 Production analysis Dennis Zack christina OH: W 9:30-11 and R 2-3:30 TA: M 10-12 (SSH 113) TA: M 2:30-430 SSH 110 or something) Zach Dennis kelvin Course overview 1. Finance function (year to year becomes less and less credible a. Main objective: obtain funds to operate the firm b. Then: manage the funds day to day. 2. Marketing function: a. How to increase demand, advertising etc. b. Estimate/forecast demand 3. Productions aka operations function (less media attention bc overlap w/design and engineering, not all econ) 50% of jobs are operations, by FAR the biggest. a. Produce the good/services 4. Organization chart a. 5. Relation of operation/production function to this class. a. Standard econ theory production function: q = f(x1, x2, x3….Xn) i. There are too many products not for sale that would have to be accounted for under this method ie, play structure at a Mc Donalds. b. Profit function: pi = p X q ( x1, x2, …xn) – (TC) – (etc) c. We will consider Transformation function where we match multiple inputs to multiple outputs.
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i. d. Econometrics i. “hedonic” models of demand are useful 1. ie what each characteristic of a product is worth a. aka the # of bedrooms/ pool/ school district, what is the value added of each aspect of the product. 2. useful to know what is important for customers. 6. Some types of operations a. Producing goods (actually making it, the farming, manufacturing, mining, etc. ) b. Storage and transportation (moving a good from one point in time to another, warehousing, UPS, FEDEX, taxis, buses etc.) c. Exchanging ownership (the retail industry, stock brokers, library) d. Entertainment ( movies, etc) e. Communication (radio, newspaper, phones, etc.) 7. Classifying Operations by: a. Degree of complexity of good/service (heart surgery vs making a sandwich) i. Complex Services ( something the average customer cannot do themselves or if they did it, it wouldn’t be a good job) 1. Playing a violin/accounting/ ii. Simple/non complex (can be done by average person, ie mow the lawn/ watch the kids) b. Degree of customization i. Custom Services 1. firm comes to your house or working on your situation personally. a. Ex. working with an accountant/ lawyer/CFP/child care/lawn mowing ii. Standard/ not custom Services 1. A retail store, they are just open to anyone. There is no effort to cater to each customer individually. 8. Matrix of Services Operations types
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a. i. 1 and 3 high complexity helps with pricing power 1. hard to be able to be qualified to perform the services 2. hard to find good employees to find the skilled labor, ie to get a professor, there are 3 days of interviews ii. 2 and 4 low complexity severe price competition, need to manage costs and be efficient 1. but it’s easier to find employees. iii. 1 and 2 custom goods limits ability to have economies of scale and bread out of a certain ratio of Staff to customers. To expand you need more staff.
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