2..Operation Strategy in Global Environment

Operation Strategy in Global Environment

Operation Strategy in Global Environment

Some Multinational Corporations% Sales% AssetsOutsideOutsideHomeHomeHome% ForeignCompanyCountryCountryCountryWorkforceNestleSwitzerland989597PhilipsNetherlands948582ElectronicsSiemensGermany51NA38MicrosoftUSA7469

Reasons to GlobalizeReduced costLower wage rates, latest technology of productionLess stringent government regulationsShifting low skilled jobs to other countriesImproved Supply ChainBy locating facilities in the countries where resources are available. Such as Athletic shoe production to ChinaProvide better goods and servicesKnowledge about culture and ways in which business is handled globally in different countries.It helps in the customization of products and services to meet customers changing products and services.Reduce response time to meet customers changing habits for products and services.

Understand MarketEurope lead market with cell phone innovationJapanese lead with the latest cell phone fashionOpportunity to expand product life cycle by operating in the foreign market.Attract and retain global talentBetter growth opportunitiesRelocate unneeded personals to more prosperous locations.Learn to improve operationsRemain open to the free flow of ideas

Developing Mission Vision and Strategy

Mission It is the purpose or rational for the existance of organisation. As Aditya Birla Group : mission is to deliver superior services to the customers, shareholders, employees and society.Vision An aspiration description of what an organization would like to achieve or accomplish in the mid-term or long-term future. It is intended to serves as a clear guide for choosing current and future courses of action. StrategyIt is a unified, comprehensive and integrated plan that is designed to ensure that basic objectives of the enterprise are achieved through proper implementation process. i.e. how to get there.

StrategyAction plan to achieve mission.Functional areas have strategies.Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses.

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Strategies for Competitive AdvantageDifferentiation better, or at least differentCost leadership cheaperResponse rapid response

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OMs Contribution to Strategy

ProductQualityProcessLocationLayoutHuman resourceSupply chainInventorySchedulingMaintenance

FLEXIBILITY:Samsung's constant innovation of new products....Design HPs ability to lead the printer marketVolume

Southwest Airlines economy service....LOW COST

DELIVERY: Pizza Huts 5-minute guarantee at lunchtime.....Speed Federal Expresss absolutely, positively on time...Dependability

QUALITY: Motorolas pagers...Performance

Toyota s after-sale service on heavy equipment....AFTER-SALE SERVICE

Fidelity Securitys broad line of mutual funds.BROAD PRODUCT LINEOperationsSpecificCompetitiveDecisionsExamplesStrategy UsedAdvantage

Response(Faster)Cost leadership(Cheaper)Differentiation(Better)

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10 Strategic OM DecisionsGoods and service design Quality Process and capacity designLocation selectionLayout designHuman resources and job designSupply chain managementInventorySchedulingMaintenance

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Difference between Goods and Services influence how the 10 OM DecisionsOperationsDecisionsGoodsServicesGoods and service designProduct is usually tangibleProduct is not tangibleQualityMany objective standards - TQMMany subjective standardsProcess and capacity designCustomers not involvedCustomer may be directly involvedCapacity must match demand

Table 2.1

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Goods and Services and the 10 OM DecisionsOperationsDecisionsGoodsServicesLocation selectionNear raw materials and laborNear customersLayout designProduction efficiencyEnhances product and productionHuman resources and job designTechnical skills, consistent labor standards, output based wagesInteract with customers, labor standards vary

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Goods and Services and the 10 OM DecisionsOperationsDecisionsGoodsServicesSupply chain Relationship critical to final productImportant, but may not be criticalInventoryRaw materials, work-in-process, and finished goods may be heldCannot be storedSchedulingLevel schedules possibleMeet immediate customer demand

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Goods and Services and the 10 OM DecisionsOperationsDecisionsGoodsServicesMaintenanceOften preventive and takes place at production siteOften repair and takes place at customers site

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Operations Strategies for Two Drug CompaniesBrand Name Drugs, Inc. CiphlaGeneric Drug Corp. xyzCompetitive AdvantageProduct DifferentiationLow CostProduct Selection and DesignHeavy R&D investment; extensive labs; focus on development in a broad range of drug categoriesLow R&D investment; focus on development of generic drugsQualityMajor priority, exceed regulatory requirementsMeets regulatory requirements on a country by country basis

Table 2.2

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Operations Strategies for Two Drug CompaniesBrand Name Drugs, Inc.Generic Drug Corp.Competitive AdvantageProduct DifferentiationLow CostProcessProduct and modular process; long production runs in specialized facilities; build capacity ahead of demandProcess focused; general processes; job shop approach, short-run production; focus on high utilizationLocationStill located in the city where it was foundedRecently moved to low-tax, low-labor-cost environment

Table 2.2

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Operations Strategies for Two Drug CompaniesBrand Name Drugs, Inc.Generic Drug Corp.Competitive AdvantageProduct DifferentiationLow CostSchedulingCentralized production planningMany short-run products complicate schedulingLayoutLayout supports automated product-focused productionLayout supports process-focused job shop practices

Table 2.2

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Operations Strategies for Two Drug CompaniesBrand Name Drugs, Inc.Generic Drug Corp.Competitive AdvantageProduct DifferentiationLow CostHuman ResourcesHire the best; nationwide searchesVery experienced top executives; other personnel paid below industry averageSupply ChainLong-term supplier relationshipsTends to purchase competitively to find bargains

Table 2.2

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Operations Strategies for Two Drug CompaniesBrand Name Drugs, Inc.Generic Drug Corp.Competitive AdvantageProduct DifferentiationLow CostInventoryHigh finished goods inventory to ensure all demands are metProcess focus drives up work-in-process inventory; finished goods inventory tends to be lowMaintenanceHighly trained staff; extensive parts inventoryHighly trained staff to meet changing demand

Table 2.2

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Issues In Operations StrategyResearch about effective operations management strategiesPreconditions for developing effective OM strategiesThe dynamics of OM strategy development

Strategic Options to Gain a Competitive Advantage28% - Operations Management18% - Marketing/distribution17% - Momentum/name recognition16% - Quality/service14% - Good management 4% - Financial resources 3% - Other

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Elements of Operations Management StrategyLow-cost productTechnical superiorityProduct characteristics/differentiationContinuing product innovationLow-price/high-value offeringsEfficient, flexible operations adaptable to consumersEngineering research developmentLocationScheduling

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Product Life CycleBest period to increase market share

R&D engineering is criticalPractical to change price or quality image

Strengthen nichePoor time to change image, price, or quality

Competitive costs become criticalDefend market positionCost control critical

IntroductionGrowth Maturity Decline

Company Strategy/Issues

Figure 2.5

Internet search enginesSalesSmart PhonesDrive-through restaurantsCD-ROMs3 1/2 Floppy disks

LCD & plasma TVs

Analog TVs

iPods

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Strategic issues in Product Life CycleProduct design and development criticalFrequent product and process design changesShort production runsHigh production costsLimited modelsAttention to quality

Introduction Growth Maturity Decline

OM Strategy/IssuesForecasting criticalProduct and process reliabilityCompetitive product improvements and optionsIncrease capacityShift toward product focusEnhance distributionStandardizationLess rapid product changes more minor changesOptimum capacityIncreasing stability of processLong production runsProduct improvement and cost cuttingLittle product differentiationCost minimizationOvercapacity in the industryPrune line to eliminate items not returning good marginReduce capacityFigure 2.5

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Global Operation Strategy OptionsInternational BusinessMulti National CorporationStrategy OptionsInternational StrategyMulti domestic StrategyGlobal strategyTheplansdevelopedby norganizationtotargetgrowth on agloballevelfor salesofproductsorservices.Transnational strategy

Four International Operations Strategies

Cost Reduction ConsiderationsHighLow

HighLowLocal Responsiveness Considerations(Quick Response and/or Differentiation)

Import/export or license existing product

ExamplesU.S. SteelHarley DavidsonInternational Strategy

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International StrategyImport/export or license existing product

ExamplesU.S. SteelHarley Davidson

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ExamplesU.S. SteelHarley DavidsonFour International Operations Strategies



Standardized productEconomies of scaleCross-cultural learning

ExamplesTexas InstrumentsCaterpillarOtis ElevatorGlobal Strategy

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ExamplesU.S. SteelHarley DavidsonFour International Operations Strategies



Use existing domestic model globallyFranchise, joint ventures, subsidiaries

ExamplesHeinzMcDonaldsThe Body ShopHard Rock CafeMultidomestic Strategy

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Multidomestic StrategyUse existing domestic model globallyFranchise, joint ventures, subsidiaries

ExamplesHeinzThe Body ShopMcDonaldsHard Rock Cafe

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ExamplesTexas InstrumentsCaterpillarOtis ElevatorGlobal StrategyFour International Operations Strategies



Move material, people, ideas across national boundariesEconomies of scaleCross-cultural learning

ExamplesCoca-ColaNestlTransnational Strategy

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ExamplesTexas InstrumentsCaterpillarOtis ElevatorGlobal StrategyTransnational StrategyMove material, people, ideas across national boundariesEconomies of scaleCross-cultural learning

ExamplesCoca-ColaNestlInternational StrategyImport/export or license existing product




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2..Operation Strategy in Global Environment

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