The Impact of Operations Capability on Firm Performance

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Reviews on the production capabilities of an organization are important to identify its potentials and progress in production in a way that it is ahead of its competitors. It is, therefore, important to use skilled personnel to identify the organizations production capability and per unit costs against those of competing firms to know its strengths and opportunities. It would be a tedious task to estimate the production capabilities and the costs per unit of the competing firms because it is not easy to acquire all the necessary information that competitors have on their production hence the accuracy of the information could be questioned. The use of some techniques and tools is important because they ease the work as well as make it more accurate. Lifecycle costing would enable a person to identify the competitors value of capital goods against their output. Activity-based costing would enable one know the activities that competing firms find valuable and those that cost the firm a lot of money. Input/ outflow analysis would record the inflow of materials into an organization and balance it with the output. The tools and techniques will manage to make an estimation of the production capabilities of the firms and their costs per unit on production.

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Hsu, C., Tan, K., Kannan, V., & Keong Leong, G. (2009). Supply chain management practices as a mediator of the relationship between operations capability and firm performance. International Journal Of Production Research, 47(3), 835-855.

Ryoo, S., Chen, J., Tandon, V., & Wu, B. (2015). The Effects of Capability-enhancing and Capability-identifying Learning on Firm Expansion. Academy Of Management Proceedings, 2015(1), 16921-16921.

Tan, K., Kannan, V., & Narasimhan, R. (2007). The impact of operations capability on firm performance. Int. J. Of Prodn. Res., 45(21), 5135-5156.

Discussion 2

A manager is involved in making the overall decisions that govern the organization. He or she needs to have adequate knowledge on different types of costs to ensure funding is done appropriately, and urgent needs are funded first before financing activities that could wait. The manager could also assist the financial manager to ensure costs of the organization are minimized by making budgets that are sustainable. Long run costs would enable the manager to analyze the current and future state of the market to make production decisions while short-run costs determine the production statistics about the variable costs of the firm. Historical costs will enable the manager to value its products using the original price of the raw materials to ensure the value of goods has returned. The private costs enable the manager to come up with costs that he or the management may make during decision making while social costs would help in the determination of those costs that are private but are inclusive of externalities. The accounting costs would enable the manager to assess the input costs in the firms activities and fixed costs associated with the processes.


Dothan, M. (2006). Costs Of Financial Distress and Interest Coverage Ratios. J Financial Res, 29(2), 147-162.

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