Operations Strategy for Competitive Advantage by saj38576

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									                                                          Operations Strategy 1




 Operations Strategy for Competitive Advantage



                     LEARNING OBJECTIVES
Identify or define:
   Mission
   Strategy
   Ten Decisions of OM

Explain:
  Specific approaches used by OM to achieve strategic concepts of
      Differentiation
      Low cost
      Response
2 Operations Strategy




                                Mission/Strategy


¨   Mission - where you are going
¨
¨   Strategy - how you are going to get there




                            Sample Mission - Circle K

As a service company, our mission is to: Satisfy our customers’ immediate
 needs and wants by providing them with a wide variety of goods and
 services at multiple locations.




                           Sample Mission - Merck
The mission of Merck is to provide society with superior products and
 services - innovations and solutions that improve the quality of life and
 satisfy customer needs - to provide employees with meaningful work and
 advancement opportunities and investors with a superior rate of return
                                         Operations Strategy 3




Factors Affecting Mission Strategy Process


     Competitive Advantage Through:

              Differentiation

                Low cost

                Response
4 Operations Strategy




                            Competing on Differentiation

Uniqueness:             can go beyond both the physical characteristics and
                        service attributes to encompass everything that impacts
                        customer’s perception of value



                                   Competing on Cost

                        Maximum value as defined by customer
                        Does not imply low value or low quality



                              Competing on Response

                        Flexible
                        Reliable
                        Quick

 Requires institutionalization within firm of ability to respond
                                                         Operations Strategy 5




                                   Strategy
                           10 Decision Areas of OM

¨   Quality
¨     Goods & service design
¨         Process & capacity design
¨            Location selection
¨               Layout design
¨                  Human resource and job design
¨                     Supply-chain management
¨                         Inventory
¨                            Scheduling
¨                               Maintenance


                  Characteristics of High ROI Firms (PIMS)

¨   High quality product
¨   High capacity utilization
¨   High operating effectiveness
¨   Low investment intensity
¨   Low direct cost per unit



                        Sources of Strategic Advantage

¨   28% - Operations Management
¨   18% - Marketing and Distribution
¨   17% - Momentum/Name Recognition
¨   16% - Quality/service
¨   14% - Good Management
¨    4% - Financial Resources
¨    3% - Other
6 Operations Strategy




                                 Preconditions -
                             To Implement a Strategy

¨   One must understand:
    ¨ Strengths & weaknesses of competitors and new entrants into the market

    ¨ Current and prospective environmental, legal, and economic issues

    ¨ The notion of product life cycle

    ¨ Resources available with the firm and within the OM function




                           Impetus for Strategy Change

¨   Changes in the organization
¨   Stages in the product life cycle
¨   Changes in the environment
                                               Operations Strategy 7




  Strategy & Issues During Product Life
                  Introduction

Best period to increase market share
R&D engineering are critical

Product design and development are critical
Frequent product and process design changes
Over-capacity
Short production runs
High skilled-labor content
High production costs
Limited number of models
Utmost attentions to quality
      Quick elimination of market-revealed design defects
8 Operations Strategy




                                     Growth

                Practical to change prices or quality image
                Marketing is critical
                Strengthen niche

                Forecasting is critical
                Product and process reliability
                Competitive product improvements and options
                Shift toward product oriented
                Enhance distribution
                                                     Operations Strategy 9




                           Maturity

Poor time to increase market share
Competitive costs become critical
Poor time to change price, image, or quality
Defend position via fresh promotional and distribution approaches

Standardization
Less rapid product changes and more minor annual model changes
Optimum capacity
Increasing stability of manufacturing process
Lower labor skills
Long production runs
Attention to product improvement and cost cutting
Re-examination of necessity of design compromises
10 Operations Strategy




                                    Decline

        Cost control critical to market share

        Little product differentiation
        Cost minimization
        Overcapacity in the industry
        Prune line to eliminate items not returning
        Good margin
        Reduce capacity
                               Operations Strategy 11




       SWOT Analysis Process

  ¨ Environmental Analysis



¨ Determine Corporate Mission


      ¨ Form a Strategy
12 Operations Strategy




                         SWOT Analysis to Strategy Formulation



                                      Mission

      Internal                                              External
     Strengths                                            Opportunities
                                     Strategy

   Internal                                                  External
  Weaknesses                                                 Threats
                                   Competitive
                                   Advantage

								
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