Focused Operations Management

Chapter 1. The Modern Business Environment

During the past two decades, the business environment in many sectors has been characterized by rapid changes. The main revolution has been the transition from a sellers' market to a buyers' market. The sellers' market, which was rather common in the past, refers to a somewhat monopolistic business environment where the supplier or service provider dictated the dimensions of a transaction:

• Price: Usually determined by a “cost‐plus” approach where the customer is charged the full costs of the services rendered plus a “reasonable profit.”

• Response time: Determined by the supplier (“We are doing our best and we are really trying.”).

• Quality: Determined by the service/product provider (“We are doing the best we can under the circumstances.”).

• Performance: Dictated to the customer (“We know better than the customers what they need. We are the professionals.”).

From a Sellers' Market to a Buyers' Market

Today's business environment is that of a buyers' market. This trend is the result of international transitions and macroeconomic, technological, political, and social changes. This environment is characterized by:

• Globalization of the world economy

• Fierce competition among organizations within and across countries

• Global excess capacities in production, services, and in some areas of development

• Using new managerial approaches

• Availability and accessibility of data and knowledge

• Timely availability of materials and services

• Ease of global travel and conveyance ...