Strategy Process

Company
Mission

Business
Strategy

FunctionalArea
Functional Area
Strategies

Marketing Operations Fin./Acct.

Decisions Decisions Decisions
Competitive Advantage
Through:
Differentiation

Cost leadership

Quick response
better, cheaper, more responsive
Competing on
Differentiation
Uniqueness - can go beyond both the
physical characteristics and service
attributes to encompass everything
that impacts customers perception
of value
Competing on Cost
Maximum value as perceived by
customer
Does not imply low value or low
quality
Competing on Response
Flexible
Reliable
Rapid

Requires institutionalization within the

firm of the ability to respond
Competing On Any Basis
Probably requires the
institutionalization within the firm of
the ability to change, to adapt
 OMs Contribution to
Strategy
Operatio Exampl Specific Competit
ns Strategy ive
Decision es Used
Quality Advanta
s FLEXIBILITY ge
ProductSonys constant innovation of new products Design
Compaq Computers ability to follow the PC market
Volume
Process
Southwest Airlines No-frills service LOW COST
Location
DELIVERY
Layout Pizza Huts five-minute guarantee at lunchtime Speed
Dependability
Federal Expresss absolutely, positively on time Differentiation
Human Resource (Better)
QUALITY
Supply Chain Conformance
Motorolas automotive products ignition systems Respons
Cost e
Motorolas pagers Performance leadership (Faster)
Inventory (Cheaper)
Scheduling
IBMs after-sale service on mainframe computers
AFTER-SALE SERVICE

Maintenance
Fidelity Securitys broad line of mutual BROAD
funds PRODUCT LINE
 Strategic Perspective of OM

An organizations strategy has a long term

impact
An organizations production/operations strategy
is derived directly from the corporate mission
and business strategy.
The overall strategies of organizations are known
as corporate or business
These strategies include a plan for each
functional area known as Functional Strategies
(For e.g., production/operations strategy,
marketing strategy, finance strategy etc).
 Production/operations strategy is a
long-range functional strategy or an
action plan for the production of a
companys product/service and
provides a road-map for what the
production or operations function
must do to achieve the business
strategies.
Some of the decisions included in operations
strategy are on such issues as:
What new products or services must be
developed and when they must be introduced
into production and market?
What new facilities are needed and when
they are needed?
What new technologies and processes must
be developed and when they are needed?
And
What production schemes will be followed to
produce products/services?
Operations and Competitive
strategy
Operations strategy-Concerned with setting
broad policies and plans for using the
resources of a firm to best support its long-
term competitive strategy
Competitive strategy-Developed to increase
the companys competitiveness in market.
Competitive strategies are developed
including strategies related to
Quality,Cost,Dependability,Flexibility and
Speed.
a) Cost Make it
cheap:
Within every industry, there is
usually a segment of the market that
buys solely on the basis of low cost.
To successfully compete in this niche,
a firm must be the low-cost producer,
but even doing this does not always
guarantee profitability and success.
b). Product quality and
reliability-Make it good:
quality can be divided into two
categories: product quality and
process quality.
The goal in establishing the proper
level of product quality is to focus on
the requirements of the customer
c). Delivery Reliability-Delivery
It When Promised:
This dimension relates to the ability
of the firm to supply the product or
service on or before a promised
delivery due date.
d). Coping with Changes in
Demand-Change Its
Volume:
In many markets, a companys
ability to respond to increases and
decreases in demand are an
important factor in its ability to
compete.
The ability to effectively deal with
dynamic market demand over the
long term is an essential element of
operations strategy.
 e). Flexibility and New
Product Introduction
Speed-Change It:
Flexibility, from a strategic
perspective, refers to the ability of a
company to offer a wide variety of
products to its customers.
An important element of this ability to
offer different products is the time
required for a company to develop a
new product and to convert its
processes to offer the new product.
f). Other Product-Specific
Criteria-Support It:
The competitive dimensions just
described are certainly the most
common.
However, often other dimensions
relate to specific products or
situations. Notice that most of the
dimensions listed next are primarily
service in nature.
Often special services are provided
to augment the sales of
 Technical liaison and support
Meeting a launch date:
Supplier after sale support: This
involves the availability of
replacement parts and, possibly, the
modification of older, existing
products to new performance levels.
Other dimensions: These typically
include such factors as colors
available, size, weight, location of
the fabrication site, customization
available, and product mix options.
 Productivity
Measure of process improvement
Represents output relative to
input Units produced
Productivity=
Input used

Productivity increases improve

standard of living
 Productivity Variables

Productivity =

Output
Labor + material + energy + capital +
miscellaneous
 Measurement Problems
Quality may change while the
quantity of inputs and outputs
remains constant
External elements may cause an
increase or decrease in productivity
Precise units of measure may be
lacking
 Productivity Variables
Labor - contributes about 10% of the
annual increase
Capital - contributes about 38% of
the annual increase
Management - contributes about
52% of the annual increase
 Service Productivity
Typically labor intensive
Frequently individually processed
Often an intellectual task performed
by professionals
Often difficult to mechanize
Often difficult to evaluate for quality
 Threaded Questions
1. Why are an organizations operations crucial to its
strategic success?
2. What is operations strategy? Explain its relationship
within the model that depicts organizational strategy
as existing at three different levels.
3. Explain how excelling at each of the five operations
performance objectives (cost, quality, speed,
dependability and flexibility) could provide an
organization with a competitive advantage.
4. What are the measurement problems that occur when
one attempt to measure productivity?
5. Explain production and productivity with suitable
examples.