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Production and Operations Management Unit 3

Sikkim Manipal University Page No. 46

Unit 3 Operations Strategy

Structure:

3.1 Introduction

Objectives

3..2 Operations Strategy

3. 3 Competitive Capabilities and Core Competencies

3. 4 Operations Strategy as a Competitive Weapon

Product/service expertise

Quick delivery

Flexibility in production

Low cost production and processes

Product variety and product mixQuality

3.5 Linkage Between Corporate, Business, and Operations Strategy

3.6 Developing Operations Strategy

3.7 Elements or Components of Operations Strategy

Designing of the production system

Facilities for production and services

Product or service design and development

Technology selection and process development

Allocation of resources

Facility, capacity, and layout planning3.8 Competitive Priorities

Cost

Quality

Time

Flexibility

3.9 Manufacturing Strategies

Make-to-stock strategy

Assemble-to-order strategy

Make-to-order strategy

3.10 Service Strategies3.11 Global Strategies and Role of Operations Strategy

Strategic alliance

Locating the operations abroad and after sales support

3.12 Case-let 1

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3.13 Case-let 2

3.14 Summary3.15 Glossary

3.16 Terminal Questions

3.17 Answers

3.18 Answers to Caselets 1 & 2

3.1 Introduction

In the previous unit, we dealt with operations management and strategy,

tools for implementation of operations, and industry best practices. In this

unit, we will deal with operations strategy as a competitive weapon;

competitive capabilities and core competencies; linkage between corporate,business, and operations strategy; developing operations strategy; elements

or components of operations strategy; competitive priorities; manufacturing

strategies; service strategies; and global strategies and role of operations

strategy.

To succeed in a competitive business environment, organisations should

evolve sound strategies with which they can achieve their business

objectives. The strategies that are planned for implemention should be long

term and broad based to achieve the set of objectives. The normal practice

is to develop organisational strategies at three levels of operations namely

a) corporate level, b) business level, and c) functional level.

While the corporate strategy looks into organisational goals, developing the

core competence and achieving the competitive advantage for their

products, the business level strategy looks at market segmentation and

competitive priorities to be considered for their products or services. The

functional level strategy looks at operations to produce these products by

managing the capability, productivity, quality, flexibility, cost of production,

delivery, and finally after sales and services.

Organisations achieve competitive advanatge over its competitors by

providing products or services that meet the customer requirements of cost,quality, performance, durability, etc. The corporate strategy determines the

customers to be served, the new products or services to be produced, and

the suitable strategies to be met in competitions from both domestic and

international markets.

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Hence, the operations strategy is a set of decisions taken across the

organisation to help support the implementation of the competitive businessstrategies. The operations strategy links both its long-term and short-term

operational decisions to corporate strategy. Operations strategy is a process

by which the key operations decisions are made and should always be

consistent with the overall strategic objectives of the organisation.

Objectives:

Affter studying this unit, you should be able to:

explain why organisations formulate and develop startegies to gain

competitive advantage

describe the linkage that exists between corporate strategy, business

level strategy, and functional and operations strategy outline the role of operations strategy as a competitive weapon in

domestic and global markets

explain the formation and development of operations strategy

describe the elements of operations strategy and linking operations and

marketing strategy

explain how to set competitive priorities

identify the operations strategies in manufacturing and services

describe global strategies

3.2 Operations Strategy

Operations strategy is defined as the set of decisions that are warranted in

the operational processes in order to support the competitive strategies of

the business. The objectives stated above will give the firm a competitive

advanatage in the products or services that are served to the customers.

Operations strategy is a long-range business plan for the companys

products and will provide a road map for the operational functions to be

pursued. Therefore, the strategic decisions include the capacity to be built

into the production system, the type of processess and manufacturing

technology to be adopted, the nature of products to be produced, and thetype of material flow and other logistics required to achieve the level of

performance.

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Planning of operations strategy is very essentail as it will enable the

organisation to respond to the market needs in an effective manner. It alsogives the opportunity to align the resources and manufacturing activities to

produce and deliver the products and become successful in the market.

3.3 Competitive Capabilities and Core Competencies

The operations strategies are evolved based on the business strategies.

Some of the business strategies that has a direct bearing to manufacture

are:

To serve a defined product to the stable market

To provide high product variety and customise the design to meet the

specific requirements

To provide rapid response to the market through in-built flexibility and

produce different products to keep abreast with the environmental

changes

To serve these business strategies, the firm should emphasise on achieving

quality, productivity, flexibility, low cost, constant innovation in designs, and

short development cycle for introducing new products and being highly

responsive to the changes in that competitive environment.

Building core competencies and gaining competitive advantage for its

products are great strategies. The core competencies are the unique

resources and strengths that are required to be developed, practised, and

constantly improved upon. This competence becomes the capability when

the strategy is successful and the set objectives of competing is met.

To achieve the competitive advantage, the organisations must provide the

customers with what they want, know when they want, what quality they

prefer and what cost, and how better they serve the customer than their

competitors.

3.4 Operations Strategy as a Competitive Weapon

The important objective of any business is to occupy a position from where

the organisation is able to attract more customers than its competitors. For

this, they should identify the distictive competencies that will give the leading

position in the market segments.

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Competitiveness is one of the crucial factors that decides the survival and

growth of a firm. This competitiveness is how effectively an organisationmeets the needs of its consumers as compared to its immediate

competitors. For such competitions, the organisations look into their

operational strengths and equip themselves effectively to use their strengths

and opportunities as competitive weapons.

These competitive weapons are explained below in detail.

3.4.1 Product/services expertise

Expertise gained through operational strengths in the areas of functionalities

and process capabilities will make them the market leaders for such

products.

3.4.2 Quick delivery

The flexible capacity built into the production line and the process adopted

to produce and supply in time will all together provide the much desired

customer satisfaction. This strategy will help sustain the product and its

market lead.

3.4.3 Flexibility in production

The organisation has to develop a capability for change. The adaptation to

change begins with environmental scanning by which trends can be

monitored to suit the needs of the society. There may be a threat to the

product if competotors gain an edge over the broadening product lines,improved quality, or lowering costs. New entrants into the market or

competiitors offering substitute product may also throw challenges to the

dominant product. To counter this, the desired flexibilty in production must

be built in and operations strategy must be modified accordingly.

3.4.4 Low cost production and processes

The unit cost of each product is required to be lowered to meet the

competition. The cost review on labour, material, and overhead costs of

production lines are to be assessed. An organisation with an efficient and

effective production system will provide such feasibilities to reduce costs.

The operations strategy should also facilitate the processing of products at

lower costs.

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3.4.5 Product variety and product mix

The organisations are producing multiple products to provide variety tocustomers. Here the size of operations matters. Higher the volume, lower

the production costs. Accordingly, operational strategy is to be fine tuned to

suit the desired product mix.

3.4.6 Quality

The operations strategy should ensure that the desired quality level is

maintained, and it meets the customer needs. Competing in the quality of

the product is one of the most important corporate strategies.

3.5 Linkage Between Corporate, Business, and Operations

Strategy

The mission statement is unique to an organisation. It contains a set of long-

range goals. It details the kind of business the company wants to be in, the

type of customers they serve, the basic beliefs of their business, and the

expected goals and profitability.

Similarly, business strategy is a long-range plan and serves as a raod map

to achieve the above-said corporate mission. These plans encompass many

functional areas like production, marketing, finance, human resources, etc.

Operations strategy translates all the decision processes that supports the

business strategy. How these operating strategies work under the corporate

strategies and serve the business strategy is explained in Developing

Operations Strategy below.

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3.6 Developing Operations Strategy

Fig. 3.1: Developing Operations Strategy

Figure 3.1 above depicts how the operations strategy is developed under

the umbrella of the corporate strategy. It shows the factors that go into the

operations strategy and shows the link between the corporate, business,

and the competitive priorities under the operations strategy. Here, the long-

term operations strategic decisions are directly connected to developing

new products, determining production capacity, establishing facilities,

adopting new technologies, locating plants appropriately, and taking suitable

decisons on building and sustaining the quality of products.

The operations strategy translates the product plans and competitive

priorities into decision making processes. The operation decisions

determine the processes required to handle the volume and variety to be

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produced for each market segement. Hence, these decisions govern the

design of the processes, systems, and the procedures that help theoperations strategy.

Selection of the market is another key element. To suit the market

requirements, operation managers develop appropriate processes and

designs to achieve the set objectives. The operations strategy should be

flexible enough to support a product or service throughout its life cycle and

for future changes in the market demand. The operations strategy should

also be consistent with the other functional strategies of marketing, finance,

and human resources.

3.7 Elements or Components of Operations Strategy

The six elements of operations strategy are:

1) Designing of the production system

2) Facilities for production and services

3) Product or service design and development

4) Technology selection, development, and process development

5) Allocation of resources

6) Focus on facilities planning

3.7.1 Designing of the production system

The designing of the production system involves the selection of the type ofproduct design, processing system, inventory plan for finished goods, etc.

The product design has two varieties. They are:

Customised product design The design is customised when the

volume is low and special features are inbuilt. Examples: Industrial

products like turbines, boilers, air compressors, etc.

Standard product design The designer adopt a universal design so

that the product will have wide acceptance across the customers. Also

the demand is more and quantity is high. Examples: Air conditioners,

TV, fans, etc.

There are two types of production systems. They are product focussed and

process focussed. Product-focussed system is adopted where there is mass

production by using a group of machines. For example, products like

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automobiles, computers, etc. In the process-focussed system, the design is

based on a single task like painting, packing, heat treatment, etc.3.7.2 Facilities for production and services

Certain specialisation in production allows the firm to provide the customers

with products of lower cost, faster delivery, on-time delivery, high product

quality, and flexibility. Here, overheads will be less and the firm can

outperform compared to the competitors. While planning the specialised

lines, the economies of scale and the continuous demand are to be looked

into. For example, Nikon Cameras plan and establish special lines for each

model and manufacture huge quantities for the global market. Here, the

economies of scale and the continuous demand matters.

3.7.3 Product or service design and development

The stages followed in developing a product are:

1. Generating the idea

2. Creating the feasiblity reports

3. Designing the prototype and testing

4. Preparing a production model

5. Evaluating the economies of scale for production

6. Testing the product in the market

7. Obtaining feedback

8. Creating the final design and starting the production.

Any product designed and introduced into the market has its own life cycle.

The various stages of life cycle are:

1) Introduction stage

2) Growth stage

3) Maturity stage

4) Decline stage

Let us now discuss these stages in brief.

In the introduction stage, the sales depends on promotion and marketing

efforts. The product which is successful at this stage will enter the next

stage of growth, where the organisation takes the decisions on the capacity

to be augmented and the investments to be made. During the maturity

stage, the organisation focuses on improving the efficiency of the

processes, minimising the costs, etc. At declining stage, the product may

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meet the obsolesence both in technology and in customer requirments, thus

warranting the stop of production. There are many products that lost itsmarket after going through athe above stages. For example, pagers, floppy

drives, tapes for recording and palying, click-type cameras, typewriters, etc.

3.7.4 Technology selection and process development

A product selected for production will be analysed for the process and the

applicable technology for optimal production. There are many challenges

faced by the operations managers in this decision as the alternatives are

many. The techno-economic analysis for each alternatives will help to

decide the required technology. Combining high technology production

equipments with conventional machines and using robotics, flexible

manufacturing systems, automated devices for material movements, etchave given an edge to the production units to excel in quality, flexibility,

production at economic costs, etc thus enabling the firm to meet the

competitions.

3.7.5 Allocation of resources

The production units face continuous problems of allocating the scarce

resources like capital, machines, equipments, materials, manpower,

services, etc. Allocation at the right time to the right place of production

indicates the efficiency of the production planners. Optimal use of resources

will enable economical production. Minimising waste, optimal utilisation of

resources, and the best quality product demand a sound operations

strategy.

3.7.6 Facility, capacity, and layout planning

The location, layout, and facilities creation for the production are the key

decision areas for the operations manager. These are critical for achieving

the competitiveness. The decision also influences the future expansion of

the plant. While evaluating the aternatives, the operations manager will

consider the availbility of raw materials, access to market, etc. Enormous

capital requirement is required and the planning is always long range. Here,

the production process adopted and the technology pursued dictates thevolume, quality, and cost of production.

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3.8 Competitive Priorities

Operations stategy reflects the long-term goals of an organisation in itscorporate strategy. To achive good results, a clear understanding of the

operating advantages and a good cross functional coordination between

functional areas of marketing, production, finance, and human resources

departments are required. Operating advantages depend on its processes

and competitive priorities considered while establishing the capabilities. The

basic competitive priorities are:

Cost

Quality

Time

Flexibility

3.8.1 Cost

Cost is one of the primary considerations while marketing a product or a

service. Being a low cost producer, the product accepted by the customer

offers sustainability and can outperform competitors. Lower price and better

quality of a product will ensure higher demand and higher profitability. To

estimate the actual cost of production, the operations manager must

address labour, materials, scrap generations, overhead and other initial cost

of design and development, etc.

3.8.2 QualityQuality is defined by the customer. The operations manager looks into two

important aspects namely high performance design and consisitent quality.

High performance design includes superior features, greater durability,

convenience to services, etc where as consistent design measures the

frequency with which the product meets its design specifications and

performs best.

3.8.3 Time

Faster delivery time, on-time delivery, and speedy development cycle are

the time factors that operations strategy looks into. Faster delivery time is

the time lapsed between the customer order and the delivery. On-time

delivery is the frequecy with which the product is delivered on time. The

developemnt speed is the elapsed time from the idea generation up to the

final design and production of products.

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3.8.4 Flexibility

Flexibility is the ability to provide a wide variety of products, and it measureshow fast the manufacturer can convert its process line used for one product

to produce another product after making the required changes. The two

types of flexibilities are:

Customisation

Volume flexibility

While customisation is the ability of the firm to satisfy the specific needs of

each its customer, the volume flexibility is the ability to accelerate or

decelerate the rate of production to handle the fluctuations in demand. For

example, the production of fertilisers of different specifications and

applications.

3.9 Manufacturing Strategies

There are many types of competitive priorities for processes used in the

manufacturing of products. The manufacturing industry adopts systems

based on demand. The production systems practised are:

Batch production

Mass production

Customised production

Assemble products, test them, and supply

For these, the manufacturing strategies adopted are decided by the

operations manager. The manufacturing strategies differ from industry to

industry and the applicable situations demand and supply. The following are

the three dominant manufacturing strategies:

Make-to-stock

Assemble-to-order

Make-toorder

Let us now discuss these strategies in detail.

3.9.1 Make-to-stock strategy

The manufacturing firms adopt this strategy to ensure immediate delivery of

the products, thereby minimising the delivery times. This straegy is feasible

for standardised products with high volumes and where forecast is

reasonably accurate. To accomplish this, the production units should hold

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good inventory of stocks. For example, chemicals, soft drinks, electronic

components, etc.3.9.2 Assemble-toorder strategy

This strategy serves as a competitive priority of customisation and ensures

fast delivery. This goes with the apporoach to produce customised products

from sub-assemblies and components after the customer orders are

received. This involves assembly processes, fabrication processes, painting,

cleaning, etc. Here, the appropriate inventory of parts and aggregates are

created for smooth functioning of processes. The operations manager

should ensure that the optimal finsihed goods inventory is mainatained as

excess inventory increases the inventory carrying cost and less finished

goods inventory may hamper the delivery of products in time to thecustomers. For example, paints to colours, furnitures, fabricated structures,

etc.

3.9.3 Make-to-order strategy

When products are manufactured to the customer specification, the

tendency is to follow the strategy of make-to-order. The firms evolve a set

of processes that suits the manufacture based on the customer

requirements. This strategy gives a higher degree of customisation, one of

the major competitive priority. The firm can accommodate flexibility and

offer variety. For example, special medical equipments, forgings and

castings, house construction, etc.

3.10 Service Strategies

Here too, the standardised services, customised services, and assemble-to-

order strategies are used for processing as in the case of manufacturing.

The service strategy is the use of processes that provides little variety in

high volumes and mostly customised. For example, FedEx, postal servcies,

etc.

The strategy adopted for designing the operations is to include the

processes that produce a set of standardised services to specific customers.For example, credit cards, Internet, etc.

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3.11 Global Strategies and Role of Operations Strategy

A global strategy pursued by organisations at the corporate level mayinclude buying foriegn parts or servcies and combat traditional domestic

competitions. The firms should also ward off threats from foreign markets as

they can directly supply to the domestic customers. Hence, identifying the

opportunities and threats and evolving the operations strategy require a

global perspective. The other factors to be analysed are the market

segmentation like demographic factors, psychological factors, industry

factors, etc and also identify the needs of product, delivery, volume, and any

other need of the customer.

While evolving the business strategy, the business units considers the

prevailing global conditions along with their existing strengths, weaknesses,

and competencies. The global conditions include factors like market

potential; existing competitions; and economic, political, technological, and

social developments across the countries being considered for their

business strategy.

Two effective strategies adopted by the firms exposed to products being

marketed world over are strategic alliance and locating operations abroad

and after sales service.

3.11.1 Strategic alliance

A strategic alliance is an agreement between the two parties as jointpartners to promote the products. This alliance may be in any form, but

widely accepted are 1) collaboration, 2) joint venture, and 3) technology

transfer and licencing.

Collaboration

A collaboration arrangement beween two parties arises when one firm is

having core competency in a particular product which the other firm wants to

promote in its country. Instead of duplicating the product with their own

design, the local firm and the collobarator join together for their mutual

interest and promote the product. Invariably, the operations strategy

followed by the collaborated company is followed by the domestic company

to keep up the reputation of products. For example, Nikon, IBM, HP, etc.

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Joint venture

Joint venture is an agreement between the two firms to produce jointly. Thisapproach is used to gain access to foreign markets and quickly promote

their interest. Here, the outside firm supplies the technology and expertise

and the local firm provide the required resources for the operations,

processing, human resoucres, infrastructure, etc. For example, Maruti

Suzuki, Hero Honda, etc.

Technology transfer and licencing

Technology transfer is the term used to describe the processes by which

technological knowledge moves within or between organisations. The

technological knowledge that is transferred can assume various forms. It

can be embodied in goods (including physical goods, plant and animalorganisms), services and people, and organisational arrangements, or

codified in blueprints, designs and technical documents.

Licensing is a business arrangement in which one company gives another

company permission to manufacture its product for a specified payment.

While licensing agreements are mainly used in commercialization of a

technology, they are also used by franchisers to promote sales of goods and

services.

3.11.2. Locating the operations abroad and after sales support

Locating the manufacturing operation in a foreign country is another way ofpenetrating the new markets. Since economical and political environment

will be different and the customers needs vary, it is essential for firms to

have a detailed techno-economic survey before planning the entry. The

operations strategy will be different from what the company is presently

practising. If it is a standardised product to be sold in the foriegn country, the

methodology and operational strategy could be the same. For example,

McDonalds, Dominos Pizza, etc.

Self Assessment Questions

1. Select correct answer out of the alternatives given

i. While formulating the corporate objectives, the manager considersa) Market conditions

b) Political and social environments

c) Economic environment

d) all the above

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ii. Nirma manufactures different varieties of soaps for the market and

the production system followed is aa) Customised production

b) Standardised production

c) Stock-to-order

d) Assemble-to-order

iii. When products are produced well in advance and stored for

marketing, the operations strategy is known as

a) Produce-to-stock

b) Produce-to-order

c) Custom-to-order

2. Which of these is not an operation strategy?a) Production systems

b) Product plans

c) Collaboration for production

d) Process decisions

e) Capacity decisions

3. Fill up the blanks with appropriate word/words

i. Operations strategy is defined as the set of decisions that are

warranted in the operational processes, which supports the

_____________of the business.

ii. The six elements of operations strategy that has a direct bearing on

the corporate strategy are:

1) Designing of the production system

2) Facilities for production and services

3) ________________________________

4) Technology selection, development, and process development

5) Allocation of resources

6) Focus on facilities planning

iii. The following three manufacturing strategies are dominant inindustries:

1) Make-to-stock strategy

2) ____________________

3) Make-to-order strategy

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iv. A strategic alliance is an agreement betwen the two parties as joint

partners to promote the products. This alliance may be in any of theforms, but widely accepted are:

1) Collaboration

2) ______________

3) Technology transfer and licencing

3.12 Case-let 1

Strategic Decisions of Microsoft

Microsoft operates in a very competitive industry. It was dominating in theDOS and held almost 90% of the market in PC operating system. It

invested futher in developing the next generation OS like Windows 95,

Windows NT, etc to keep the lead and to take advantage of the

profitability in this evergreen DOS segment. Before the competition builds

up for DOS, Microsoft had two thoughts whether to harvest the existing

DOS as it is like a cash cow or bring in different systems to keep away

the competitors. Bill Gates, the co-founder and CEO of Microsoft realised

that if his company is not replacing its own product with a better product,

some other company like IBM would come out and they may loose the

market leadership position. They decided to go forward aggressively tothe next competitive advantage before any other competitors does and

introduced many new products. Microsoft still enjoys the market

leadership position in the operating system.

Discussion Questions:

a) The strategic decision to develop new products to keep the market

leadership - is it a corporate strategy or a business strategy? Discuss

b) The strategy of developing new products to counter the anticipated

competition instead of harvesting their existing cash cow product - is

this correct and in this decision, what is the strategy that is involved?c) Explain briefly why Bill Gates believed in the aggressive strategy to

gain the competitive advantage and how has it benefitted the

company?

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3.13 Case-let 2

Tata Motors-Development of New Products to Gain Competitive

Advantage

Designing indegenously, building and marketing a new car is a very

complex process and very few corporates take such a decision. Tata

motors, one of the leading manufacturers of automobiles in India, took

this drive forward in developing the first indegenously designed and

developed car in Indica as a competing model to the then prevailing cars

like Maruti 800 and Zen. This strategy by Tata was a tradeoff between

the price and the features.

Indica car was a success story, and it did give the desired competition toMaruti Suzuki. The target audiance for Tata was the middle class and

fuel efficiency and price were the other primary considerations to woo the

customers. After the design and test runs were satisfactorily done,

benchmarking Indica car for final pricing and positioning in the market

was again a big challenge. Here, the operations strategy adopted was to

offer the first indigenous car at the lowest price possible and with the best

quality. Hence the investment, processes, systems, and procedures for

manufacture of such a car required a total relook by their operations

manager, it was a really big task for the entire Tata Motors.

With the confidence reposed after the success of designing, developing,and marketing Indica cars to Indian roads, Tata Motors embarked on

another ambitious project of their chairman in bringing the prestigious

peoples car, Nano, to Indian roads. Here, the decision to bring out a

peoples car from Tata Motors stable was purely based on the sale price

of Rs. one lakh per car. This challenge was taken up seriously by the

operations managers and the task was accomplished successfully by

offering Nano cars at the declared price.

In the above two success stories,

a) What do you feel are the corporate strategies?

b) What manufacturing priorities might have been pursued by the

operation managers?

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3.14 Summary

Let us recapitulate the important concepts discussed in this unit: Operations strategy is a decision making process of selecting the

suitable manufacturing strategies and manufacturing priorities. This

exercise will enable the organisation to respond to the market needs in

the most effective manner by aligning the resources and activities of the

organisation to deliver the products that are likely to succeed in the

market.

Operations strategy involves planning, organising, and allocating of all

the resources to gain the competitive advantage.

Operations strategy is defined as the set of decisions that are warranted

in the operational processes which supports the competitive strategiesof the business. It is a long-range business plan for the companys

products and will provide a road map for the operational functions to be

pursued for achieving business strategies.

Strategic decisions include capacity building; evolving production

systems, type of processes, manufacturing technology to be adopted,

nature of products to be produced, type of material flow and other

logistics, and the means to achieve the required level of performance.

Corporate strategy involves monitoring and making changes to suit the

external environment and exploiting the core competencies.

Competitiveness is one of the crucial factors that decides the survival

and growth of a firm. Organisations will look into their operational

strengths and use them effectively as competitive weapons.

There are six elements of operations. They are designing of the

production system; facilities for production and services; product or

service design and development; technology selection, development,

and process development; allocation of resources; and focus on facilities

planning.

Operating strategy should also analyse the competitive priorities like

cost, quality, time, and flexibility which are the capabilities to be built in

to meet the market expectations.

The three dominant manufacturing strategies are make-to-stock

strategy, assemble-to-order strategy, and make-to-order strategy. These

systems are practised for categories of batch production; mass

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production; customised production; and assemble the product, test it,

and supply. A global strategy pursued at the corporate level may include buying

foriegn parts or servcies and combat traditional domestic competitions.

Other factors analysed here are the market segmentation like

demographic factors, psychological factors, industry factors, etc and

identify the needs of product, delivery, volume, and any other

requirement of the customer.

3.15 Glossary

Cash cow products: Cash cow products provide lots of cash for the

firms. They have high market share, and they are always in the growing

market.

Competitive advantages: Organisations achieve competitive

advantages by providing their customers what they want and better or

more effective products than their competitors and take the lead

Core competence: The organisations resources and capabilities are

the sources of their unique competencies

Customisation: Customisation is the ability of a firm to satisfy the

specific needs of each customer.

3.16 Terminal Questions

1. What is meant by operations strategy? How is it related to corporate

strategy?

2. What is meant by core competence and competitive advantage?

3. What are the types of competitive weapons that a firm can use to meet

the objectives of the operations strategy?

4. How do you develop operations strategy? Explain briefly the relationship

that exists between corporate strategy, business strategy, and

operations strategy.

5. Explain briefly the elements of operations strategy.6. Explain the basic competitive priorities considered while formulating

operations strategy by a firm?

7. What are the manufacturing strategies that can be applied by a firm to

meet the operations strategy?

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8. Under global strategies, explain the salient features of the collaboration

arrangement and the joint venture policies for gaining competitiveadvantage.

3.17 Answers

Self Assessment Questions

1. (i) d. All the above

(ii) b. Standardised production

(iii) a. Produce-to-stock

2. c. Collaboration for production3. (i) Competitive strategies

(ii) 3. Product design and development

(iii) 2. Assemble-to-order

(iv) 2. Joint venture

Terminal Questions

1. Refer section 3.2



4. Refer section 3.5 & 3.6





3.18 Answers to Caselets 1 & 2

Caselet-1 a It is a corporate strategy, planned with a long-term

vision, not only to sustain the existing business but also

to keep the competitive advantage.

b Todays cash cow product may not be so in the future.

The development lead time required to immediately

bring new product should be borne in mind. Hence, the

decision taken to bring new versions made Microsoft to

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keep the competitive edge over its competitors.

c Bill Gates aggressive policy of keeping the competitive

advantage has benefitted the company as they are,

even today, the front runners and has many first-mover

products to their credit.

Caselet-2 a The vital decision to indigenously design and develop a

new car, Indica and compete with the existing models

and also bringing out similarly the Nano as the peoplescar with the price band fixed at Rs. one lakh per car

are the corporate strategies.

b Low cost, high volume production of cars to suit the

Indain roads, and also build with many features for

satisfying the customer, that too, within the price band

fixed were all the challenges faced by the operations

manager. To achieve this, they created facilities,

production systems, and all other procedures.

Reference:

Frazier, G., and Gaither, N. (2002. Operations Management South

Western/Thomson Learning.

Ronald, E. J. And Everett, A.E. (2009). Production & Operations

Management Phi Learning.

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