Business operating management

Yuzhi Zhao

chapter3.pptx

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Operations Strategy

COLLIER/EVANS

Operations + Supply Chain Management

LEARNING OUTCOMES

Explain how organizations seek to gain competitive advantage

Explain approaches for understanding customer wants and needs

Describe how customers evaluate goods and services

Explain the five key competitive priorities

Explain the role of organizations management, sustainability, and operations in strategic planning

Describe Hill’s framework for operations strategy

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Competitive Advantage

LO 3-1

Firm’s ability to achieve market and financial superiority over its competitors

Requires:

Understanding customer needs and expectations

Building and leveraging operational capabilities to support desired competitive priorities

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Customers’ Expectations

LO 3-2

Understood by segmenting customers based on their unique wants and needs

Order qualifiers: Basic customer expectations

Minimum performance level required to stay in business

Order winners: Goods and service features and performance characteristics that differentiate one customer benefit package from another

Help win the customers’ business

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Evaluating Goods and Services

LO 3-3

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Exhibit 3.1

How Customers Evaluate Goods and Services

LO 3-3

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Competitive Priorities

LO 3-4

Strategic emphasis that a firm places on certain performance measures and operational capabilities within a value chain

Types

Cost

Quality

Time

Flexibility

Innovation

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Low-Cost Goods and Services

LO 3-4

Help firms gain a competitive advantage

Low prices can be achieved by:

High productivity

High capacity utilization

Achieving economies of scale

Efficient design and operation of the supply chain

Improvement in quality

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Exhibit 3.2

Interlinking Quality and Profitability Performance

LO 3-4

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Time

LO 3-4

Important source of competitive advantage

Customers demand quick responses, short waiting times, and consistency in performance

Speeding up processes in supply chains improves customer response

Reductions

Accomplished by streamlining and simplifying processes and value chains

Drive improvements in quality, cost, and productivity

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Flexibility

LO 3-4

Manifests in mass-customization strategies

Mass customization: Ability to make goods and services that global customers require at any volume and time

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Innovation

LO 3-4

Discovery and practical application or commercialization of a device, method, or idea that differs from existing norms

Innovative companies focus on:

Outstanding product research, design, and development

High product quality

Ability to modify production facilities to produce new products frequently

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Strategy

LO 3-5

Pattern or plan that integrates an organization’s major goals, policies, and action sequences into a cohesive whole

Effective strategies

Develop around competitive priorities

Provide focus for an organization and exploit its core competencies

Core competencies: Strengths unique to an organization

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Strategic Planning

LO 3-5

Process of determining long-term goals, policies, and plans for an organization

Helps an organization build a strong position to achieve its goals, despite unforeseen external forces

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Levels of Strategy, Part 1

LO 3-5

Corporate strategy

Defines businesses in which corporations participate and develop plans for:

Acquisition and allocation of resources among strategic business units (SBUs)

Business strategy

Helps make decisions about the competitive priorities that SBUs need to pursue to gain competitive advantage

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Levels of Strategy, Part 2

LO 3-5

Functional strategy - Set of decisions that each functional area develops to support its particular business strategy

Operations strategy

Set of decisions made across value chains that supports implementation of higher-level business strategies

Developed by translating competitive priorities into operational capabilities

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Sustainability

LO 3-5

Type of an organizational strategy and is also considered a corporate strategy by some companies

Requires innovation in value chains, operations design, and day-to-day management activities

Dimensions

Environmental

Social

Economic

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Operations Design Choices

LO 3-6

Decisions made for determining the process structures that are best suited for producing goods or creating services

Address:

Types of processes

Value chain integration and outsourcing

Technology

Capacity and facilities

Inventory and service capacity

Trade-offs

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Infrastructure

LO 3-6

Focuses on nonprocess features and the capabilities of an organization

Includes:

Workforce

Operating plans and control systems

Quality control

Organizational structure

Compensation systems

Learning and innovation systems

Support services

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Exhibit 3.3

Hill’s Strategy Development Framework

LO 3-6

Exhibit 3.3Hill’s Strategy Development Framework

Corporate Objectives	Marketing Strategy	How Do Goods and Services Qualify and Win Orders in the Marketplace?	Operations Strategy, Operations Design Choices	Operations Strategy, Infrastructure
• Growth • Economic sustainability (survival)+ • Profit • Return on investment • Other market and financial measures • Social (welfare) sustainability+ • Environmental sustainability+	• Goods and services markets and segments • Range • Mix • Volumes • Standardization versus customization • Level of innovation • Leader versus follower alternatives	• Safety • Price (cost) • Range • Flexibility • Demand • Goods and service design • Quality • Service • Goods • Environment • Social (community) • Brand image • Delivery • Speed • Variability • Technical support • Pre- and postservice support	• Type of processes and alternative designs • Supply chain integration and outsourcing • Technology • Capacity and facilities (size, timing, location) • Inventory • Trade-off analysis	• Workforce • Operating plans and control system(s) • Quality control • Organizational structure • Compensation system • Learning and innovation systems • Support services

+Note: We have added sustainability criteria to Professor Hill's original framework.

Sources: Adapted from T. Hill, Manufacturing Strategy: Text and Cases, 3rd ed., Burr Ridge, IL: McGraw-Hill, 2000, p. 32; T. Hill, Operations Management: Strategic Context and Managerial Analysis, 2nd ed., Prigrame MacMillan, 2005, p.50.

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Exhibit 3.4

Four Key Decision Loops in Terry Hill’s Generic Strategy Framework

LO 3-6

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Operations Strategy at McDonald’s, Part 1

LO 3-6

Aims to:

Be the best employer

Deliver operational excellence

Achieve enduring profitable growth

Build a sustainable business by:

Adopting an approach of reducing, reusing, and recycling

Striving to provide eco-friendly workplaces and restaurants

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Operations Strategy at McDonald’s, Part 2

LO 3-6

Working with suppliers and outside experts to continuously improve:

Purchasing decisions

Evaluation of supplier performance regarding animal welfare

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Corporate Strategy at McDonald's

LO 3-6

Profitable growth

Operational excellence

Leveraging innovation and technology capabilities

Developing and maintaining a diverse workforce

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KEY TERMS

Competitive advantage

Order qualifiers

Order winners

Search attributes

Experience attributes

Credence attributes

Competitive priorities

Mass customization

Innovation

Strategy

Core competencies

Operations strategy

Operations design choices

Infrastructure

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SUMMARY

Competitive advantage is required to show a firm’s ability to achieve superiority over its competitors

Understanding competitive priorities provides basis for designing the processes that create and deliver goods and services

Professor Terry Hill proposed a framework that ties corporate and marketing strategy to operations strategy

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4LTR Press

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