Lecture 2 - Operations Strategy

7/31/2019 Lecture 2 - Operations Strategy

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Todays competitive market


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Ford BMW

Renault Nissan

Toyota Audi

Mercedes Mitsubishi

Volkswagen GM

Hyundai Fiat


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What is the impact of this globalcompetition?


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What is a strategy?


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Strategic planning exercise Enables an organization to respond to the market needs

in the most effective manner By aligning various resources and activities in the

organization To deliver products & services that are likely to succeed

in the market

Operations Strategy Is a process by which key operations decisions are made

that are consistent with the overall strategic objectives ofa firm

Decisions in the operations function are made on thebasis of the inputs from the overall corporate strategy

Mahadevan (2007), Operations Management:

Theor & Practice Pearson Education


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Operations StrategyCustomer Needs CorporateStrategy

OperationsStrategy

Alignment

Core

Competencies

Decisions

Processes,Infrastructure, andCapabilities


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Steps in Developing a Manufacturing Strategy

1. Segment the market according to the product group.

2. Identify product requirements, demand patterns, and profit

margins of each group.

3. Determine order qualifiers and winners for eachgroup.(criterion for purchase by customer e.g. Brand)

4. Convert order winners into specific performance

requirements.(differentiation, e.g. warranty, quick response,

Lease)


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Operations Strategy - Wal-Mart(USA)

Corporate Strategy

(Gain competitive advantage by) providing customers access to

quality goods, when and where needed, at competitive prices

Operations Strategy

Short flow times

Low inventory levels

Operations Structure

Cross docking

EDI

Fast transportation system

Focused locations

Communication between

retail stores


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Wal-MartOperations Strategy

Inventory at retail stores turned over twice a week(Industry averages once every two weeks)

Improved targeting of products to markets

Sourcing of ProductsWorld-wide

Sales per square foot increased from $140 in 1991

to $250 in 2004 (Industry average increased from

$110 to $150). Sales revenue:$250bn


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Core Competence Competitiveness derives from an ability to build, at lower cost

and more speedily than competitors, the core competenciesthat spawn unanticipated products.

Core competencies are the collective learning in theorganization, especially how to coordinate diverseproduction skills and integrate multiple streams of

technologies. Core competence is about harmonizing streams of

technology.

Core competence is about the organization of work and thedelivery of value.

Companies need to do a better job of leveraging technologiesand offering a wider variety of products on the sametechnology platform.

.


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WHAT IT DOES BEST

WHAT IT CAN DO.. OTHERS CANNOT DO

WHAT WILL PERMIT IT TO ACHIEVE THE BESTIN THE WORLD

STATUS(GAP) W.R.T . WHAT IT CAN NOT DO

DEVELOP PLANS TO FULLY EXPLOIT

CAPABILITIES


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RELIANCE , AMUL , HLL, INFOSYS

MOTOROLA -

MCDONALD -


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OM Decisions

Strategic Decisions

Design Decisions

Operating Decisions


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Yamaha announces plans for a new factory, making it the worlds largestmotorcycle manufacturer (1981)

Honda responds Yamaha wo tsubusu!

(We will crush, squash, slaughter Yamaha)

Honda cut prices, increased advertising, flooded distribution channels

Both firms started with about 60 models

Yamaha introduced 37 product line changes during next 18 months

Honda introduced 113 new products, including new styles and newtechnologies (4-valve engines, composite materials, ...)

Yamaha decimated, despite drastic price cuts, has 12 month inventory ofunsold motor cycles

Yamaha capitulates, Pres. Eguchi publicly apologizes

Honda wins war with superior design, cycle times


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``

Peter Drucker


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The End

Lecture 2 - Operations Strategy

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