2. Operational Strategy

8/13/2019 2. Operational Strategy

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Subject:Operations

Management

ChapterII: Operations Strategy in a Global Environment

Achieving Competitive Advantage through operations, Ten strategic OM decisions,

Strategy Development, Differences in OM Strategies of Goods and Services. OM

Strategy and PLC


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Why Domestic Business Operations decide to change to international operations?

Reduce Costs (Labor, Taxes, Tariffs etc.) FreeTrade Zones, Differential labor costs in differentcountries, Tax Free businesses etc.

Improve Supply ChainAvailability of resources, suppliers, distributors for cost advantages

Provide better goods and services Advantages through cultural differences, improvedunderstanding through local presence etc.

Understand MarketsImproved interaction with the international markets and exposure

Learn to improve operationsCollaborations, Joint Ventures help improve operations

Attract and retain global talentCan attract and retain better employees

Hyundai, Honda, FedEx, DHL, Merck, Hard Rock Caf, McDonalds, TCS, Reliance,Aditya Birla group..!!!!

A Global View of OperationsWhy Global?


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Strategic Options Managers Use toGain Competitive Advantage

28% - Operations Management

18% - Marketing/distribution

17% - Momentum/name recognition 16% - Quality/service

14% - Good management

4% - Financial resources

3% - Other


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Strategic Options Managers Use toGain Competitive Advantage

28% Operations Management

Low- cost product Product-line breadth Technical superiority Product characteristics/differentiation Continuing product innovation Low-price/high-value offerings Efficient, flexible operations adaptable to

consumers

Engineering research development Location Scheduling


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Developing Missions and Strategies

Missionstatements tell an organizationwhere it is going

TheStrategytells the organization howto get there


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Benefit toSociety

Mission

Philosophyand Values

Profitability andGrowthEnvironment

Customers Public Image

Factors Affecting Mission Statements


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We create, develop, and manufacture the industrys most advanced

information technologies, including computer systems, software,

networking systems, storage devices, and microelectronics.

We have two fundamental missions:

We strive to lead in the creation, development, and manufacture of

the most advanced information technologies.

We translate advanced technologies into value for our customers as

the worlds largest information services company. Our professionalsworldwide provide expertise within specific industries, consulting

services, systems integration, and solution development and

technical support.

IBM Mission Statement


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Competing onDifferentiation

Competing on Cost

StrategyAchieving Competitive advantage through Operations Porters Model

Competing on

Focus / Response

Three conceptual ways of achieving missions

Operations Managers have to deliver goods / services which aredifferent, cheaper,focusedor responsive

Sony, Emirates Airlines

Maruti, SpiceJet, Walmart

BMW, ABN Amro Bank.


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Competing onDifferentiation

Competing on Cost

StrategyAchieving Competitive advantage through Operations

Competing onFocus / Response

Three conceptual ways of achieving missions

Response is defined as including the entire range of values related to timely productdevelopment and delivery, as well as reliable scheduling and flexible performance.

Uniqueness, Convenience, Experience,Technology, Service

Location, Labor, Manufacturing andOperations, Remove Non-Value Added features

Flexibility, Shorter Operations Cycle,Delivery Dates, Reliability


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Goods & Service design Quality

Process and Capacity design

Location selection

Layout design

HR & Job design

Supply chain management

Inventory

Scheduling

Maintenance

TEN Strategic OM Decisions


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Products

Processes

and

Technology

Capacity

Human

Resources Quality

Facilities Sourcing

Services

Operating

Systems

Note: Cross functional /geographic/ organizational boundaries

Strategic Decisions in Operations


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Operations strategy The approach, consistent with organization

strategy, that is used to guide the operations function.

Operations Strategy

What does research tell us? High product quality

High capacity utilization

High operating efficiency

Low investment intensity

Low direct cost per unit

ISSUES IN OPERATIONS STRATEGY

Preconditions Strength & Weakness of

competitors

Current & prospective

environmental, technological,

legal and economic issues

PLC, may dictate limitation of

operations strategy

Availability of resources

within firm & within OM

function

Integration

Dynamics Change within the

organization

Change in

environment


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Product Life Cycle

Best period to

increase market

share

R&D engineering iscritical

Practical to change

price or quality

image

Strengthen niche

Poor time to change

image, price, or

quality

Competitive costsbecome critical

Defend market

position

Cost control

critical

Introduction Growth Maturity Decline

CompanyStrategy/Issues

INTERNET TRANSACTIONS

Sales

E-Games

Color TVs

CD-ROMs

3 1/2Floppydisks

LED TVs, SolarProducts

B/W TVs, Analog Cameras

iPods

S d I D i P d Lif


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Strategy and Issues During a Products Life

Introduction Growth Maturity Decline

Standardization and

Less product change

Optimum capacityIncreasing stabilityof process

Long production

runs

Product

improvement andcost cutting

Little product

differentiation

Cost minimization

Overcapacity in the

industry

Remove non-

margin goods

Reduce capacity

Forecasting critical

Product and processreliability

Competitive productimprovements andoptions

Increase capacity

Shift toward productfocused

Enhance distribution

Product design anddevelopment critical

Frequent product andprocess design changes

Short production runs

High production costs

Limited models

Attention to quality

Best period toincrease marketshare

R&D productengineering critical

Practical to changeprice or quality image

Strengthen niche

Cost controlcritical

Poor time to changeimage, price, or quality

Competitive costs becomecritical

Defend market position

OMS

trategy/Issues

CompanyStrategy/Issues

Sales


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Global Strategy

Standardized ProductEconomies of Scale

Cross Cultural Learning

EXAMPLES

Mobile Phones

TVs

International Strategy

Import/export or

license existing product

EXAMPLES

Harley Davidson

Apple Products

Multi Domestic Strategy

Use existing domestic

model globally

Franchise, JV, subsidiaries

EXAMPLES

MC Donald

Cars

Transnational Strategy

Move resources, ideaacross national boundaries

Economies of Scale

Cross Cultural Learning

EXAMPLES

Nestle

Coca Cola

Low High

Local Responsiveness Considerations(Quick Response and / or Differentiation)

High

CostReductionConsiderations

International Operational Strategies


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Process Design

Low Moderate High

Volume

High

Moderate

Low

VarietyofProducts

Process-focused

JOB SHOPS

(Print shop, emergencyroom, machine shop, fine-

dining

restaurant)

Repetitive (modular)

focusASSEMBLY LINE

(Cars, appliances,TVs, fast-foodrestaurants) Product focused

CONTINUOUS

(steel, beer, paper,bread, institutionalkitchen)

Mass Customization

Customization at highVolume

(Dell Computers PC,cafeteria)


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Computing Productivity

Productivity= (Output / Input)

(Current ProductivityPrevious Productivity)

Productivity Growth = ----------------------------------------------------------------X100

(Previous Productivity)

Partial Measures:

(Output / Labor), (Output / Machine), (Output / Capital), (Output /

Energy)

Goods or Services Produced

Total Measure= --------------------------------------------

All inputs used to produce them


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Multi-Factor Measures

(Output / Labor), (Output / Machine), (Output / Capital), (Output /

Energy)

1. (Output) / (Labor + Machine)

2. (Output) / (Labor + Capital + Energy)

I. Determine the productivity for these cases:

a. Four workers installed 720 square yards of carpeting in 8 hours

b. A machine produced 68 usable pieces in two hours.

Calculate Labor Productivity and Rate of Production


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2. Determine the Multi-Factor productivity for the combined input of

Labor, Machine Time and Material given the following data:

Output: 7040 Units Selling Price: Rs. 8/-

Input: Labor: Rs. 1000Materials Cost: Rs. 520

Overhead: Rs. 2000

Output

Multi-Factor Productivity = -------------------------------------------

(Labor + Materials + Overhead)


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hankYou

2. Operational Strategy

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