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           Operations Strategy
              and Competitive
    Understanding Customer
       Wants and Needs
Dissatisfiers: requirements that are expected in a
good or service. If these features are not present,
   the customer is dissatisfied, sometimes very

Satisfiers: requirements that customers say they

 Exciters/delighters: new or innovative good or
 service features that customers do not expect.

   Understanding Customer
      Wants and Needs
 Basic customer expectations - dissatisfiers and
satisfiers – are generally considered the minimum
performance level required to stay in business and
          are often called order qualifier.

Order winners are goods and service features and
 performance characteristics that differentiate one
customer benefit package from another, and win the
              customer's business.
   Understanding Customer
      Wants and Needs
Search attributes are those that a customer
can determine prior to purchasing the goods
  and/or services. These attributes include
 things like color, price, freshness, style, fit,
           feel, hardness, and smell.

Goods such as supermarket food, furniture,
clothing, automobiles, and houses are high
            in search attributes.
 Understanding Customer
    Wants and Needs

Experience attributes are those that can
only be discerned after purchase or during
           consumption or use.

     Examples of these attributes are
friendliness, taste, wearability, safety, fun,
         and customer satisfaction.
    Understanding Customer
       Wants and Needs

Credence attributes are any aspects of a good
or service that the customer must believe in, but
cannot personally evaluate even after purchase
                and consumption.

  Examples would include the expertise of a
 surgeon or mechanic, the knowledge of a tax
  advisor, or the accuracy of tax preparation
How Customers Evaluate Goods and Services
     Competitive Priorities
 Competitive advantage denotes a firm’s
  ability to achieve market and financial
     superiority over its competitors.

   Competitive priorities represent the
  strategic emphasis that a firm places on
     certain performance measures and
operational capabilities within a value chain.
Competitive Priorities
    Cost
   Quality
    Time
  Flexibility
  Innovation
    Competitive Priorities
 Every organization is concerned with building
 and sustaining a competitive advantage in its

  A strong competitive advantage is driven by
 customer needs and aligns the organization's
   resources with its business opportunities.

  A strong competitive advantage is difficult to
copy, often because of a firm’s culture, habits, or
                  sunk costs.
Interlinking Quality and Probability Performance
Competitive Priority – Quality

  Competitive strategies often led to
tradeoffs between quality and cost;
some company strategies are willing to
        sacrifice quality in order
   to develop a low cost advantage.
      Competitive Priority -- Time

   Time is perhaps the most important source of
              competitive advantage.

 Customers demand quick response, short waiting
     times, and consistency in performance.

  Many firms use time as a competitive weapon to
create and deliver superior goods and services such
  as Charles Schwab, Clarke American Checks,
         CNN, Dell, FedEx, and Wal-Mart.
Competitive Priority -- Time

Reductions in processing (flow) time serve two

  First, they speed up work processes so that
customer response is improved. Deliveries can
    be made faster, and more often on-time.

Second, reductions in processing time can only
be accomplished by streamlining and simplifying
 processes and value chains to eliminate non-
 value-added steps such as rework and waiting
Competitive Priority -- Time

Processing (flow) time reductions
    often drive simultaneous
 improvements in quality, cost,
        and productivity.
    Competitive Priority --

Mass customization requires companies to
 align their activities around differentiated
  customer segments and design goods,
services, and operations around flexibility.

   High-levels of flexibility might require
special strategies such as modular designs,
    interchangeable components, and
          postponement strategies.
Competitive Priority -- Flexibility

Flexible operations require sharing manufacturing
   lines and specialized training for employees.

 Flexible operations may also require attention to
   outsourcing decisions, agreements with key
suppliers, and innovative partnering arrangements,
because delayed shipments and a complex supply
             chain can hinder flexibility.
   Competitive Priority --
  Mass customization is being able to
 make whatever goods and services the
 customer wants, at any volume, at any
    time for anybody, and for a global
organization, from any place in the world.
  Competitive Priority --

    Innovation is the discovery and
         practical application or
commercialization of a device, method,
or idea that differs from existing norms.

 Innovations in all forms encapsulate
         human knowledge.
 Competitive Priority -- Innovation
          Innovations take many forms such as:

  Physical goods such as telephones, automobiles, refrigerators,
       computers, optical fiber, satellites, and cell phones.

Services such as self-service, all-suite hotels, health maintenance
              organizations, and Internet banking

Manufacturing such as computer-aided design, robotic automation,
                        and smart tags.

  Management practices such as customer satisfaction surveys,
        quantitative decision models, and Six Sigma.
         Strategic Planning

Strategy is a pattern or plan that integrates an
   organization’s major goals, policies, and
   action sequences into a cohesive whole.

Effective strategies develop around a few key
competitive priorities - such as low cost or fast
 service time - which provide a focus for the
      entire organization, and exploit an
   organization’s core competencies - the
    strengths unique to that organization.
                    Strategic Planning

         Most large organizations have three levels of strategy:

A Corporate strategy is necessary to define the businesses in which the
  corporation will participate and develop plans for the acquisition and
            allocation of resources among those businesses.

 A Business strategy defines the focus for SBUs. The major decisions
   involve which markets to pursue and how best to compete in those
    markets; that is, what competitive priorities the firm should pursue

A Functional strategy is the set of decisions that each functional area -
marketing, finance, operations, research and development, engineering,
    and so on - develops to support its particular business strategy.
           Strategic Planning

   The operations strategy is how an organization’s
 processes are designed and organized to produce the
type of goods and services to support the corporate and
                 business strategies.

 Managers recognize that the value (supply) chain can
    be leveraged to provide a distinct competitive
advantage, and that operations is a core competency
                for the organization.

Whoever has superior operational capability over the
 long term is the odds-on-favorite to win the industry
     Strategic Planning Process

Strategy     development    refers   to   a
company's approach, formal or informal, for
making key long-term business decisions.
The process typically takes into account
customer and market requirements, the
competitive environment, industry structure
and non-industry competitors, financial and
societal risks, human resource capabilities
and needs, technological capabilities, and
supplier capabilities.
              Strategic Planning Process

The major steps are as follows:

Step 1 - Gather and Analyze Strategic Performance Data
Step 2 - Review/Analyze Existing Strategic Directions and
Step 3 - Revise/Develop Strategy
Step 4 - Deploy Objectives and Action Plans
Step 5 - Review Progress and Results
Step 6 - Continually Evaluate and Improve

The next step is to translate business strategy into operations
strategy, policies, and resource allocation plans
             Strategic Planning Process

The strategic mission of a firm defines its reason for existence.
The strategic vision (SV) describes where the organization is
headed and what it intends to be.
Example Strategic Vision:
  Values are attitudes and policies for all
employees to follow that direct the journey to
    achieving the organization’s vision.

Values are reinforced through conscious and
 subconscious behavior at all levels of the

Strategic Values
  for a leading
 restaurant are:
                 Operations Strategy

An operations strategy defines how an organization will execute
                its chosen business strategies.

Developing an operations strategy involves translating competitive
priorities into operational capabilities by making a variety of choices
           and trade-offs for design and operating decisions.

  Operating decisions must be aligned with achieving the desired
                      competitive priorities.

   For example, if corporate objectives are to be the low cost and
  mass market producer of a good then adopting an assembly line
 type of process is how operations can help achieve this corporate
                  Operations Strategy and Competitive Priorities

•   Professor Terry Hill’s Strategy Development Framework

•   Operations design choices are the decisions management must make as to
    what type of process structure is best suited to produce goods or create

   Types of processes and alternative designs
   Supply chain integration and outsourcing
   Technology
   Capacity and Facilities (size, timing, location)
   Inventory
   Trade-off Analysis
Hill’s Strategy Development Framework
               Operations Strategy and Competitive Priorities

•   Hill’s Strategy Development Framework
•   Infrastructure focuses on the non-process
•   features and capabilities of the organization and includes the
            workforce,
            operating plans and control systems,
            quality control,
            organizational structure,
            compensation systems,
            learning and innovation systems, and
            support services.
Four Key Decision Loops in Terry Hill’s
    Generic Strategy Framework
                 Operations Strategy and Competitive Priorities

•   Hill’s Strategy Framework Applied to McDonald’s

•   McDonald's vision is to be the world's best quick service restaurant
    experience. Being the best means providing outstanding quality, service,
    cleanliness and value, so that we make every customer in every restaurant
    smile. To achieve our vision, we focus on three worldwide strategies:

                » (1)   Be The Best Employer
                » (2)   Deliver Operational Excellence
                » (3)   Achieve Enduring Profitable Growth

•   Customer Benefit Package Design and Strategy
•   Strategy Development for McDonald’s
McDonald’s Customer Benefit Package
Applying the Hill’s Strategy Development
  Framework to McDonald’s (slide 1)
Applying the Hill’s Strategy Development
  Framework to McDonald’s (slide 2)

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