Operations and Competitiveness

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					The Nature of Strategy
 What is Strategy?

 concerned with meeting existing market
  needs as well as exploiting opportunities
  for potential market segments (Kimand
  Mauborgne, 2002; Nunes and Cespedes,
 What is Strategy?

 about making the best use of resources,
  and to leverage these resources either
  alone or with partners (Wernerfelt,
  1984;Barney, 1991; Dierickx and Cool,
  1989; Lamming, 1993;Hines, 1994; Stump
  et al., 2002; Ireland et al., 2002);
 What is Strategy?

 the ultimate responsibility of senior-level
  managers within the firm – of course, we
  recognize the vital of importance of a
  range of stakeholders in the process, both
  within the firm and with external linkages
  to the enterprise (Frambach et al.,
  2003;Hax and Majluf, 1991; Dougherty
  and Corse, 1995);
 What is Strategy?

 about devising and implementing
  processes that will enable the enterprise to
  compete and, ideally, to create competitive
  advantage (Whittington, 2001; Hamilton et
  al., 1998);
 What is Strategy?

 concerned with developing capabilities
  within the firm’s operations that are
  superior to other competitors and that
  other competitors either cannot copy or
  will find it extremely difficult to copy (Teece
  et al., 1997; Eisenhardt and Martin, 2000).
 These indications of what strategy is about
  are important because they are all linked
  to operations management in various
  ways. That is not necessarily a problem in
  itself: the problem is that firms often do not
  organize themselves in a way that will
  allow them to make the best possible use
  of their operational capabilities. This is true
  of both manufacturing and service
 Businesses face increasing levels of
  competition, which is becoming more
  global in nature in many industries. Coping
  with this competition demands that
  strategies are in place, because being
  prepared and poised to act rarely, if ever,
  comes about by accident or ‘just happens’
  by chance.
 The success of operations strategy has
  nothing to do with how long the planning
  process has taken, nor has it to do with
  how nicely or how wonderfully articulately
  the strategy is presented to the firm’s
  employees –if indeed strategy is articulated
  to employees! Rather, the success of
  operations strategy will be determined by
  the extent to which it will focus operations’
  efforts into an integrated set of capabilities.
 These capabilities should, in turn, enable the firm
  to compete in the increasingly competitive
  environment common to many industries. It is not
  argued that manufacturing/operations managers
  should necessarily take the lead in business
  strategy, but that they should be an integral part
  of the strategic planning process. Without
  operations managers’ capabilities, the best
  marketing and corporate plans have little chance
  of being achieved.
The importance of being able to accomplish the strategic vision
once it has been formed was highlighted by Fortune (8 March
The Basic Strategy Model
Using Operations Capabilities
in Strategy Formulation
Understanding the Process and
Content of Strategy
The Vital Role of Strategy
Four Characteristics that Tend to
Strategic from Tactical Decisions
   Role of Senior Management

 We can say that strategy formulation tends to
  be the prerogative of senior managers within
  the firm and the final decisions regarding the
  direction of the firm will rest with these senior-
  level managers. However, other levels of the
  firm may also be involved in the development
  of strategic plans and these other levels will
  certainly be involved in their implementation
  (for a good discussion on strategic formulation,
  see Johnson and Scholes, 2003).
Creating Competitive Advantage
 Strategic decisions are intended to create
  competitive advantage for the firm or, at the very
  least, to allow the firm to continue to compete in its
  chosen markets. The term ‘strategy’, as used in the
  ‘business strategy’ sense, originated in military
  terminology. This analogy is not liked by some
  writers (for example, see Kay, 1993) because
  strategy is not always about obliterating the
  competition. However, it should fall under the realm
  of strategists within the firm to determine and exploit
  opportunities and, at the same time, to be aware of,
  and diffuse, potential threats from other players.
The Profound Consequences of
Strategic Decisions
 A strategic decision can profoundly alter,
  and have major consequences for, the
 An operations strategy concerned with
  supply may lead to a reshaping of the
  organization, including outsourcing and
  in-sourcing operations, and configuring
  an internal supply chain, thus profoundly
  altering its nature.
   Long-Term Horizons
 Strategic decisions can have long-term
  implications for the firm and hence the
  factor of time is an important one for
  strategists (Das, 1991; Itami and
  Numagami, 1992). It is important to note
  that strategic planning is not simply
  crystal-ball gazing into the far future; for
  strategy to be effective, it also needs to
  have a sense of timing and urgency in its
Tactical and strategic concerns
in manufacturing operations.
What is Operations
 There is no one best way to formulate strategy
  and the debate on whether strategy should be
  internal, resource-based or fully externally
  market-driven may be seen as of intellectual
  interest only. In practice, many organizations
  will combine both internal and external
  considerations in the same way that they tend
  to innovate as a result of both ‘push
  technology’ (from internal developments) and
  ‘pull demand’ (from market requirements).
 These capabilities are not limited to operations
  only but they must include operations
  capabilities, including quality, innovation,
  flexibility of volume and variety requirements,
  delivery speed and reliability. While excellent
  marketing skills need to be in place within an
  organization, they are of little use if there are
  not world-class operations management
  capabilities (internal and external) also in place
  to support the marketing intentions of the
   The Content of the Strategy
   Should Include:
 process choice – the selection of the
  right approach to producing goods or
  delivering service;
 innovation – the adaptation or renewal
  of the organization’s processes or
  outputs to ensure they adapt to changes
  in the external environment;
 supply chain management – the
  external management of relationships
  with suppliers to ensure the effective and
  efficient supply of inputs;
 control of resources – the internal
  management of inventories;
 production control – the effective and
  efficient management of processes;
 work organization – the management
  and organization of the workforce within
  the organization;
 customer satisfaction – the
  management of quality.
   Specifically, an operations strategy
   must include
   at least the following:
 amounts of capacity required by the
  organization to achieve its aims;
 the range and locations of facilities;
 technology investment to support
  process and product developments;
 formation of strategic buyer–supplier
  relationships as part of the organization’s
  ‘extended enterprise’;
 the rate of new product or service
 organizational structure – to reflect what
  the firm ‘does best’, often entailing
  outsourcing of other activities.
Manufacturing and
Operations Strategy
 Manufacturing strategy was the
  forerunner of the wider aspects of
  operations strategy.
 For manufacturing strategy to be useful,
  it needs to have consistency among
  decisions that affect business-level
  strategy, competitive priorities and
  manufacturing infrastructure.
 Much of the degree to which
  manufacturing strategy will be effective
  relies on the internal consistency of
  manufacturing strategy, manufacturing
  capabilities, marketing – manufacturing
  congruence, and their effects on
  manufacturing performance
Hayes and Wheelwright’s Four
Stages of Strategy
 The scope of structural/infrastructure areas
  that can form part of manufacturing strategy
  is wide-ranging and can include quality
  capabilities (including quality requirements
  that a plant might demand from its supplier
  base), manufacturing processes, investment
  requirements, skills audits, capacity
  requirements, inventory management
  throughout the supply chain and new product
 Manufacturing strategy is concerned with
  combining responsibility for resource
  management (internal factors) as well as
  achieving business (external) requirements.
 Manufacturing strategy is viewed as the
  effective use of manufacturing strengths as a
  competitive weapon for the achievement of
  business and corporate goals.
Why is Operations Strategy
 One of the key tasks for operations
  managers in developing strategy is that
  these managers are aware of
  competitive factors and as a result are
  able to put in place capabilities to deal
  with such competitive requirements.
 All capabilities depend, to a very large
  extent, on managing production/
  operations in a strategic manner.
 Forming an operations strategy that links
  into, and forms part of, the overall
  business strategy can also be a vital
  factor in uniting the organization.
 In today’s turbulent competitive
  environment, a company more than ever
  needs a strategy that specifies the kind
  of competitive advantage that it is
  seeking in the market-place and
  articulates how that advantage is to be
The link between operations
and competitive factors
Service operations – the service profit
 Fundamental to the service profit chain is
  the idea that in order to achieve profits and
  growth for the firm, an operations strategy
  must be in place.
 Service Delivery System is the specific
  combination of facilities, layout, equipment,
  procedures, technology
  and employees needed to achieve this
The Service Profit Chain

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