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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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Computing Productivity
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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Computing Productivity
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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