supply chain management ...
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om5-4.pptxCopyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
OM
Operations Strategy
4
COLLIER/EVANS
5
1
Explain how organizations seek to gain competitive advantage
Explain approaches for understanding customer wants and needs
Describe how customers evaluate goods and services
LEARNING OUTCOMES
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OM5 | CH4
2
Explain the five key competitive priorities
Explain the role of OM, sustainability, and operations in strategic planning
Describe Hill’s framework for operations strategy
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OM5 | CH4
LEARNING OUTCOMES (continued)
Competitive Advantage
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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4
Understanding Customer Wants and Needs
Customers are categorized into various segments based on their needs and wants
By understanding the unique needs of each segment, a company can design:
Appropriate customer benefit packages
Competitive strategies
Processes to create goods and services
Order qualifiers: Basic customer expectations for the minimum performance level required to stay in business
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5
Understanding Customer Wants and Needs
Order winners: Goods and service features and performance characteristics that differentiate one customer benefit package from another and win the customer’s business
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6
Evaluating Goods and Services
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7
Search attributes
Experience attributes
Credence attributes
Aspects of a good or service that a customer can determine prior to purchase
Aspects of a good or service that can be discerned only after purchase or during consumption or use
Aspects of a good or service that the customer believes in and cannot be discerned even after purchase and consumption
4.1 How Customers Evaluate Goods and Services
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Exhibit
8
Competitive Priorities
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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9
Cost
Each industry has a low price market segment
Low cost results from:
High productivity
High capacity utilization
Economies of scale
Continuous improvement is essential to achieve a low-cost competitive advantage
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10
Quality
Businesses offering premium quality goods have large market shares and were early entrants into the markets
Positively and significantly related to a higher return on investment for all kinds of market situations
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11
Quality
Strategy of quality improvement leads to increased market share
High goods quality producers can charge premium prices
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12
4.2 Interlinking Quality and Profitability Performance
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Exhibit
13
Time
Important source of competitive advantage
Customers demand quick response, short waiting times, and consistency in performance
Speeding up work processes improves customer response
Deliveries can be made faster and on-time
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14
Time
Reductions:
Accomplished only by streamlining and simplifying processes and value chains
To eliminate non-value-added steps such as rework and waiting time
Drive improvements in quality, cost, and productivity
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15
Flexibility
Success in global markets requires design and demand flexibility
Visible in mass customization strategies
Mass customization: Ability to make goods and services that the customer requires at any:
Volume
Time for anybody, and for a global organization
Place in the world
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16
Innovation
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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17
OM and Strategic Planning
Strategy: Pattern or plan that integrates an organization’s major goals, policies, and action sequences into a cohesive whole
Direction an organization takes and the competitive priorities it chooses are driven by its strategy
Effective strategies to develop key competitive priorities
Low cost or fast service time
Exploit an organization’s core competencies
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18
Strategic Planning
Process of determining long-term goals, policies, and plans for an organization
Objective - Build a strong position for the organization to achieve its goals despite unforeseen external forces
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19
Levels of Strategy
Corporate strategy - Businesses in which the corporation will participate and develop plans for the acquisition and allocation of resources among those businesses
These businesses in which the firm participates are called strategic business units (SBUs)
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20
Levels of Strategy
Business strategy - Defines the focus for SBUs
Major decisions involves:
Pursuing the target markets
Best way to compete in target markets
Functional strategy - Set of decisions that each functional area develops to support its particular business strategy
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21
Levels of Strategy
Organization will decide on the execution of its chosen business strategies
Development - Translating competitive priorities into operational capabilities
By making variety of choices and trade-offs for design and operating decisions
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22
Sustainability
Organizational strategy in many firms
Dimensions
Environmental
Social
Economic
Requires major changes in the culture of an organization
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23
A Framework for Operations Strategy
Operations design choices: Management decisions taken for the appropriate type of process structure to be adopted while producing goods or creating services
Key areas it addresses
Types of processes
Value chain integration and outsourcing
Technology, capacity and facilities
Inventory and service capacity
Trade-offs
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24
A Framework for Operations Strategy
Infrastructure: Focuses on the non-process features and capabilities of the organization
Workforce
Operating plans and control systems
Quality control
Organizational structure
Compensation systems
Learning and innovation systems
Support services
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25
4.3 Hill’s Strategy Development Framework
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Exhibit
26
4.4 Four Key Decision Loops in Terry Hill’s Generic Strategy Framework
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Exhibit
27
Operations Strategy at McDonald’s
Vision - World's best quick service restaurant experience
Worldwide strategies
Be the best employer
Deliver operational excellence
Achieve enduring profitable growth
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OM5 | CH4
28
Operations Strategy at McDonald’s
Sustainability initiatives
Build a sustainable McDonald’s that involves all facets of business
Commit to a three-pronged approach
Reduce
Reuse
Recycle
Strive to provide eco-friendly workplaces and restaurants
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29
Operations Strategy at McDonald’s
Sustainability initiatives
Work with suppliers and outside experts to continuously improve:
Purchasing decisions
Evaluation of supplier performance regarding animal welfare
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30
4.5 McDonald’s Customer Benefit Package
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Exhibit
31
Competitive advantage is required to show the firm’s ability to achieve superiority over competitors
Customers perceive greater risks when buying services than when buying goods
Understanding competitive priorities provides basis for designing the process that create and deliver goods and services
SUMMARY
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OM5 | CH4
When an organization takes a direction and the decisions on competitive priorities are driven by its strategy
Framework for operations strategy is designed for goods-producing organization and to be applied to service-providing firms
SUMMARY
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OM5 | CH4
Competitive advantage
Competitive priorities
Credence attributes
Experience attributes
Infrastructure
Innovation
Mass customization
Operations design choices
Operations strategy
KEY TERMS
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OM5 | CH4
Order qualifiers
Order winners
Search attributes
Strategy
KEY TERMS
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Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
OM5 | CH4
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Copyright ©2016 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
OM5 | CH4
