Outline

Operations
; Global Company Profile: Boeing
Management ; A Global View of Operations
Chapter 2 – ; Cultural and Ethical Issues
Operations Strategy in ; Developing Missions And
Strategies
a Global Environment
; Mission
PowerPoint presentation to accompany
Heizer/Render ; Strategy
Principles of Operations Management, 7e
Operations Management, 9e
© 2008 Prentice Hall, Inc. 2–1 © 2008 Prentice Hall, Inc. 2–2

Outline – Continued Outline – Continued

; Achieving Competitive Advantage ; Issues In Operations Strategy

Through Operations
; Research
; Competing On Differentiation
; Preconditions
; Competing On Cost
; Dynamics
; Competing On Response
; Ten Strategic OM Decisions

© 2008 Prentice Hall, Inc. 2–3 © 2008 Prentice Hall, Inc. 2–4

Outline – Continued Outline – Continued

; Strategy Development and ; Global Operations Strategy

Implementation Options
; Critical Success Factors and Core ; International Strategy
Competencies ; Multidomestic Strategy
; Build and Staff the Organization ; Global Strategy
; Integrate OM with Other Activities ; Transnational Strategy

© 2008 Prentice Hall, Inc. 2–5 © 2008 Prentice Hall, Inc. 2–6

1
 Learning Objectives Learning Objectives
When you complete this chapter you When you complete this chapter you
should be able to: should be able to:

1. Define mission and strategy 4. Identify five OM strategy insights

2. Identify and explain three strategic provided by PIMS research
approaches to competitive 5. Identify and explain four global
advantage operations strategy options
3. Identify and define the 10 decisions
of operations management

© 2008 Prentice Hall, Inc. 2–7 © 2008 Prentice Hall, Inc. 2–8

Global Strategies Global Strategies

; Boeing – sales and production are ; Volvo – considered a Swedish company
worldwide but it is controlled by an American
company, Ford. The current Volvo S40 is
; Benetton – moves inventory to stores built in Belgium and shares its platform
around the world faster than its with the Mazda 3 built in Japan and the
competition by building flexibility into Ford Focus built in Europe.
design, production, and distribution
; Haier – A Chinese company, produces
; Sony – purchases components from compact refrigerators (it has one-
one-third of
suppliers in Thailand, Malaysia, and the US market) and wine cabinets (it has
around the world half of the US market) in South Carolina

© 2008 Prentice Hall, Inc. 2–9 © 2008 Prentice Hall, Inc. 2 – 10

Some Multinational Some Multinational

Corporations Corporations
% Sales % Assets % Sales % Assets
Outside Outside Outside Outside
Home Home Home % Foreign Home Home Home % Foreign
Company Country Country Country Workforce Company Country Country Country Workforce

Citicorp USA 34 46 NA ICI Britain 78 50 NA

Colgate-
Colgate- USA 72 63 NA Nestle Switzerland 98 95 97
Palmolive Philips Netherlands 94 85 82
Dow USA 60 50 NA Electronics
Chemical Siemens Germany 51 NA 38
Gillette USA 62 53 NA Unilever Britain & 95 70 64
Honda Japan 63 36 NA Netherlands
IBM USA 57 47 51

© 2008 Prentice Hall, Inc. 2 – 11 © 2008 Prentice Hall, Inc. 2 – 12

2
 Some Boeing Suppliers (787) Some Boeing Suppliers (787)
Firm Country Component Firm Country Component
Latecoere France Passenger doors Cobham UK Fuel pumps and valves
Labinel France Wiring Rolls-
Rolls-Royce UK Engines
Dassault France Design and Smiths Aerospace UK Central computer
PLM software system
Messier-
Messier-Bugatti France Electric brakes BAE SYSTEMS UK Electronics
Thales France Electrical power Alenia Aeronautics Italy Upper center
conversion system fuselage &
and integrated horizontal stabilizer
standby flight display Toray Industries Japan Carbon fiber for
Messier-
Messier-Dowty France Landing gear structure wing and tail units
Diehl Germany Interior lighting
© 2008 Prentice Hall, Inc. 2 – 13 © 2008 Prentice Hall, Inc. 2 – 14

Some Boeing Suppliers (787) Some Boeing Suppliers (787)

Firm Country Component Firm Country Component
Fuji Heavy Japan Center wing box Korean Aviation South Wingtips
Industries Korea
Kawasaki Heavy Japan Forward fuselage, Saab Sweden Cargo access doors
Industries fixed section of wing,
landing gear well
Teijin Seiki Japan Hydraulic actuators
Mitsubishi Heavy Japan Wing box
Industries
Chengdu Aircraft China Rudder
Group
Hafei Aviation China Parts
© 2008 Prentice Hall, Inc. 2 – 15 © 2008 Prentice Hall, Inc. 2 – 16

Reasons to Globalize Reduce Costs

; Foreign locations with lower wage
Reasons to Globalize rates can lower direct and indirect
Tangible 1. Reduce costs (labor, taxes, tariffs, etc.) costs
Reasons 2. Improve supply chain
; Maquiladoras
3. Provide better goods and services
4. Understand markets ; World Trade Organization (WTO)
Intangible 5. Learn to improve operations ; North American Free Trade
Reasons 6. Attract and retain global talent Agreement (NAFTA)
; APEC, SEATO, MERCOSUR
; European Union (EU)
© 2008 Prentice Hall, Inc. 2 – 17 © 2008 Prentice Hall, Inc. 2 – 18

3
 Improve the Supply Chain Provide Better Goods
and Services
; Locating facilities closer to
unique resources ; Objective and subjective
; Auto design to California characteristics of goods and
services
; Athletic shoe production to China
; On-
On-time deliveries
; Perfume manufacturing in France
; Cultural variables
; Improved customer service

© 2008 Prentice Hall, Inc. 2 – 19 © 2008 Prentice Hall, Inc. 2 – 20

Understand Markets Learn to Improve Operations

; Interacting with foreign customers ; Remain open to the free flow of

and suppliers can lead to new ideas
opportunities
; General Motors partnered with a
; Cell phone Japanese auto manufacturer to
design from learn
Europe
; Cell phone ; Equipment and layout have been
fads from improved using Scandinavian
Japan ergonomic competence
; Extend the product life cycle

© 2008 Prentice Hall, Inc. 2 – 21 © 2008 Prentice Hall, Inc. 2 – 22

Attract and Retain Global Cultural and Ethical Issues

Talent
; Cultures can be quite different
; Offer better employment
opportunities ; Attitudes can be quite different
towards
; Better growth opportunities and
insulation against unemployment ; Punctuality ; Thievery
; Relocate unneeded personnel to ; Lunch breaks ; Bribery
more prosperous locations
; Environment ; Child labor
; Incentives for people who like to
travel ; Intellectual
property
© 2008 Prentice Hall, Inc. 2 – 23 © 2008 Prentice Hall, Inc. 2 – 24

4
 You May Wish To Consider Match Product & Parent
; Braun Household
; National literacy rate ; Work ethic Appliances 1. Volkswagen
; Rate of innovation ; Tax rates ; Firestone Tires 2. Bridgestone
; Rate of technology ; Inflation ; Godiva Chocolate 3. Campbell Soup
change ; Availability of raw ; Haagen-
Haagen-Dazs Ice 4. Ford Motor Company
; Number of skilled materials Cream
workers 5. Gillette
; Interest rates ; Jaguar Autos
; Political stability 6. Nestlé
Nestlé
; Population ; MGM Movies
; Product liability laws 7. Pillsbury
; Number of miles of ; Lamborghini Autos
; Export restrictions highway 8. Sony
; Alpo Petfoods
; Variations in language ; Phone system

© 2008 Prentice Hall, Inc. 2 – 25 © 2008 Prentice Hall, Inc. 2 – 26

Match Product & Parent Match Product & Country

; Braun Household ; Braun Household
Appliances 1. Volkswagen Appliances
; Firestone Tires 2. Bridgestone ; Firestone Tires 1. Great Britain
; Godiva Chocolate 3. Campbell Soup ; Godiva Chocolate 2. Germany
; Haagen-
Haagen-Dazs Ice 4. Ford Motor Company ; Haagen-
Haagen-Daz Ice
Cream 3. Japan
5. Gillette Cream
; Jaguar Autos 4. United States
6. Nestlé
Nestlé ; Jaguar Autos
; MGM Movies 5. Switzerland
7. Pillsbury ; MGM Movies
; Lamborghini Autos 8. Sony ; Lamborghini Autos
; Alpo Petfoods ; Alpo Pet Foods

© 2008 Prentice Hall, Inc. 2 – 27 © 2008 Prentice Hall, Inc. 2 – 28

Match Product & Country

Developing Missions and
; Braun Household
Appliances
Strategies
; Firestone Tires 1. Great Britain
; Godiva Chocolate 2. Germany Mission statements tell an
; Haagen-
Haagen-Daz Ice 3. Japan organization where it is going
Cream
4. United States
; Jaguar Autos
5. Switzerland The Strategy tells the
; MGM Movies
organization how to get there
; Lamborghini Autos
; Alpo Pet Foods

© 2008 Prentice Hall, Inc. 2 – 29 © 2008 Prentice Hall, Inc. 2 – 30

5
 Mission FedEx
FedEx is committed to our People-
People-Service-
Service-Profit
; Mission - where are philosophy. We will produce outstanding financial
returns by providing total reliable, competitively
you going? superior, global air-
air-ground transportation of high
; Organization’
Organization’s priority goods and documents that require rapid,
time-
time-certain delivery. Equally important, positive
purpose for being control of each package will be maintained using real
; Answers ‘What do time electronic tracking and tracing systems. A
we provide society?’
society?’ complete record of each shipment and delivery will
be presented with our request for payment. We will
; Provides boundaries be helpful, courteous, and professional to each other
and focus and the public. We will strive to have a completely
satisfied customer at the end of each transaction.
Figure 2.2
© 2008 Prentice Hall, Inc. 2 – 31 © 2008 Prentice Hall, Inc. 2 – 32

Merck Hard Rock Cafe

The mission of Merck is to provide Our Mission: To spread the spirit of Rock ‘n’
society with superior products and Roll by delivering an exceptional
services - innovations and solutions entertainment and dining experience. We
that improve the quality of life and are committed to being an important,
satisfy customer needs - to provide contributing member of our community and
employees with meaningful work and offering the Hard Rock family a fun, healthy,
advancement opportunities and and nurturing work environment while
investors with a superior rate of return ensuring our long-
long-term success.

Figure 2.2 Figure 2.2

© 2008 Prentice Hall, Inc. 2 – 33 © 2008 Prentice Hall, Inc. 2 – 34

Arnold Palmer Hospital Factors Affecting Mission

Philosophy
Arnold Palmer Hospital is a healing and Values
environment providing family-
family-centered
Profitability
care with compassion, comfort and Environment
and Growth
respect…
respect… when it matters the most.
Mission

Customers Public Image

Benefit to
Society
Figure 2.2
© 2008 Prentice Hall, Inc. 2 – 35 © 2008 Prentice Hall, Inc. 2 – 36

6
 Sample Missions Sample Missions
Sample Company Mission Sample OM Department Missions
Product design To design and produce products and
To manufacture and service an innovative, growing, and services with outstanding quality and
profitable worldwide microwave communications business inherent customer value.
that exceeds our customers’ expectations.
Quality management To attain the exceptional value that is
consistent with our company mission and
Sample Operations Management Mission marketing objectives by close attention to
design, procurement, production, and field
To produce products consistent with the company’s mission service operations
as the worldwide low-cost manufacturer. Process design To determine and design or produce the
production process and equipment that will
be compatible with low-cost product, high
quality, and good quality of work life at
economical cost.

Figure 2.3 Figure 2.3

© 2008 Prentice Hall, Inc. 2 – 37 © 2008 Prentice Hall, Inc. 2 – 38

Sample Missions Sample Missions

Sample OM Department Missions
Location To locate, design, and build efficient and
economical facilities that will yield high
value to the company, its employees, and the
community.
Layout design To achieve, through skill, imagination, and
resourcefulness in layout and work methods,
production effectiveness and efficiency
while supporting a high quality of work life.
Human resources To provide a good quality of work life, with
well-designed, safe, rewarding jobs, stable
employment, and equitable pay, in exchange
for outstanding individual contribution from
employees at all levels.
Figure 2.3
© 2008 Prentice Hall, Inc.
Sample OM Department Missions
Supply chain To collaborate with suppliers to develop
management innovative products from stable, effective,
and efficient sources of supply.
Inventory To achieve low investment in inventory
consistent with high customer service levels
and high facility utilization.
Scheduling To achieve high levels of throughput and
timely customer delivery through effective
scheduling.
Maintenance To achieve high utilization of facilities and
equipment by effective preventive
maintenance and prompt repair of facilities
and equipment.
Figure 2.3
2 – 39 © 2008 Prentice Hall, Inc. 2 – 40

Strategic Process Strategy

Organization’s ; Action plan to
Mission achieve mission
; Functional areas
have strategies
Functional
Area Missions ; Strategies exploit
opportunities and
strengths, neutralize
threats, and avoid
Finance/ weaknesses
Marketing Operations
Accounting

© 2008 Prentice Hall, Inc. 2 – 41 © 2008 Prentice Hall, Inc. 2 – 42

7
 Strategies for Competitive Competing on
Advantage Differentiation

; Differentiation – better, or at least Uniqueness can go beyond both the

different physical characteristics and service
attributes to encompass everything
; Cost leadership – cheaper that impacts customer’
customer’s perception of
; Response – rapid response value
; Safeskin gloves – leading edge products
; Walt Disney Magic Kingdom –
experience differentiation
; Hard Rock Cafe – dining experience
© 2008 Prentice Hall, Inc. 2 – 43 © 2008 Prentice Hall, Inc. 2 – 44

Competing on Cost Competing on Response

Provide the maximum value as ; Flexibility is matching market changes in

design innovation and volumes
perceived by customer. Does not
; Institutionalization at Hewlett-
Hewlett-Packard
imply low quality.
; Reliability is meeting schedules
; Southwest Airlines – secondary ; German machine industry
airports, no frills service, efficient
utilization of equipment ; Timeliness is quickness
in design, production,
; Wal-
Wal-Mart – small overheads, shrinkage, and delivery
distribution costs
; Johnson Electric,
; Franz Colruyt – no bags, low light, no Bennigan’
Bennigan’s, Motorola
music, doors on freezers
© 2008 Prentice Hall, Inc. 2 – 45 © 2008 Prentice Hall, Inc. 2 – 46

OM’
OM’s Contribution to Strategy
Operations Specific Competitive
10 Strategic OM Decisions
Decisions Examples Strategy Used Advantage

Product FLEXIBILITY:

Quality
Sony’s constant innovation
of new products………………………………....Design 1. Goods and 6. Human resources
HP’s ability to lead
the printer market………………………………Volume
service design and job design
Process
Southwest Airlines No-frills service……..…..LOW COST 2. Quality 7. Supply chain
Location
DELIVERY:
Layout
Pizza Hut’s 5-minute guarantee
at lunchtime…………………..…..………………….Speed
Differentiation
(Better)
3. Process and management
Federal Express’s “absolutely, capacity design
Human positively on time”………………………..….Dependability 8. Inventory
resource
QUALITY: Response 4. Location
Supply chain
Motorola’s HDTV converters….……........Conformance
Motorola’s pagers………………………..….Performance Cost
(Faster)
selection 9. Scheduling
leadership
Inventory
Caterpillar’s after-sale service
on heavy equipment……………....AFTER-SALE SERVICE
(Cheaper)
5. Layout design 10. Maintenance
Scheduling Fidelity Security’s broad
line of mutual funds………….BROAD PRODUCT LINE
Maintenance Figure 2.4
© 2008 Prentice Hall, Inc. 2 – 47 © 2008 Prentice Hall, Inc. 2 – 48

8
 Goods and Services and Goods and Services and
the 10 OM Decisions the 10 OM Decisions
Operations Operations
Decisions Goods Services Decisions Goods Services
Goods and Product is usually Product is not Location Near raw Near customers
service tangible tangible selection materials and
design labor
Quality Many objective Many subjective Layout Production Enhances product
standards standards design efficiency and production
Process Customers not Customer may be Human Technical skills, Interact with
and involved directly involved resources consistent labor customers, labor
capacity Capacity must and job standards, output standards vary
design match demand design based wages
Table 2.1 Table 2.1
© 2008 Prentice Hall, Inc. 2 – 49 © 2008 Prentice Hall, Inc. 2 – 50

Goods and Services and Goods and Services and

the 10 OM Decisions the 10 OM Decisions
Operations Operations
Decisions Goods Services Decisions Goods Services
Supply Relationship Important, but Maintenance Often preventive Often “repair”
repair” and
chain critical to final may not be and takes place takes place at
product critical at production site customer’
customer’s site
Inventory Raw materials, Cannot be stored
work-
work-in-
in-process,
and finished
goods may be
held
Scheduling Level schedules Meet immediate
possible customer demand
Table 2.1 Table 2.1
© 2008 Prentice Hall, Inc. 2 – 51 © 2008 Prentice Hall, Inc. 2 – 52

Managing Global Service Process Design

Operations
High Process-focused Mass Customization
JOB SHOPS Customization at high
Volume
Requires a different perspective on: (Print shop, emergency
room, machine shop, (Dell Computer’s PC,
Variety of Products

fine-dining Repetitive (modular) cafeteria)

restaurant) focus
ASSEMBLY LINE
Moderate
; Capacity planning (Cars, appliances,
TVs, fast-food
restaurants) Product focused
; Location planning CONTINUOUS
(steel, beer, paper,
; Facilities design and layout bread, institutional
kitchen)

; Scheduling Low

Low Moderate High

Volume
© 2008 Prentice Hall, Inc. 2 – 53 © 2008 Prentice Hall, Inc. 2 – 54

9
 Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc.
Competitive
Product Differentiation
Advantage
Product Heavy R&D investment;
Selection and extensive labs; focus on
Design development in a broad
range of drug
categories
Quality Major priority, exceed
regulatory requirements
© 2008 Prentice Hall, Inc.
Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc.
Competitive
Product Differentiation
Advantage
Scheduling Centralized production
planning
Layout Layout supports
automated product-
product-
focused production
© 2008 Prentice Hall, Inc.
Operations Strategies for
Two Drug Companies
Brand Name Drugs, Inc.
Competitive
Product Differentiation
Advantage
Inventory High finished goods
inventory to ensure all
demands are met
Maintenance Highly trained staff;
extensive parts
inventory
© 2008 Prentice Hall, Inc.
Operations Strategies for
Two Drug Companies
Generic Drug Corp. Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Low Cost Product Differentiation Low Cost
Advantage
Low R&D investment; Process Product and modular Process focused;
focus on development process; long general processes; “job
of generic drugs production runs in shop”
shop” approach, short-
short-
specialized facilities; run production; focus
build capacity ahead of on high utilization
Meets regulatory demand
requirements on a Location Still located in the city Recently moved to low-
low-
country by country where it was founded tax, low-
low-labor-
labor-cost
basis environment
Table 2.2 Table 2.2
2 – 55 © 2008 Prentice Hall, Inc. 2 – 56
Operations Strategies for
Two Drug Companies
Generic Drug Corp. Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Low Cost Product Differentiation Low Cost
Advantage
Many short-
short-run Human Hire the best; Very experienced top
products complicate Resources nationwide searches executives; other
scheduling personnel paid below
industry average
Layout supports Supply Chain Long-
Long-term supplier Tends to purchase
process-
process-focused “job relationships competitively to find
shop”
shop” practices bargains
Table 2.2 Table 2.2
2 – 57 © 2008 Prentice Hall, Inc. 2 – 58
Issues In Operations Strategy
Generic Drug Corp. ; Research about effective
Low Cost operations management
strategies
Process focus drives up
work-
work-in-
in-process
inventory; finished
; Preconditions for developing
goods inventory tends effective OM strategies
to be low
Highly trained staff to ; The dynamics of OM strategy
meet changing demand
development
Table 2.2
2 – 59 © 2008 Prentice Hall, Inc. 2 – 60
10
 Characteristics of Strategic Options to Gain a
High ROI Firms Competitive Advantage
; High product quality 28% - Operations Management
; High capacity utilization 18% - Marketing/distribution
; High operating efficiency 17% - Momentum/name recognition
; Low investment intensity 16% - Quality/service
; Low direct cost per unit 14% - Good management
4% - Financial resources
From the PIMS program of the Strategic Planning Institute
3% - Other
© 2008 Prentice Hall, Inc. 2 – 61 © 2008 Prentice Hall, Inc. 2 – 62

Elements of Operations Preconditions

Management Strategy
One must understand:
; Low-
Low-cost product
; Product-
Product-line breadth ; Strengths and weaknesses of competitors and
; Technical superiority possible new entrants into the market
; Product characteristics/differentiation ; Current and prospective environmental,
; Continuing product innovation technological, legal, and economic issues
; Low-
Low-price/high-
price/high-value offerings ; The product life cycle
; Efficient, flexible operations adaptable to ; Resources available within the firm and within
consumers
the OM function
; Engineering research development
; Location ; Integration of OM strategy with company’
company’s
strategy and with other functional areas
; Scheduling
© 2008 Prentice Hall, Inc. 2 – 63 © 2008 Prentice Hall, Inc. 2 – 64

Dynamics of Product Life Cycle

Strategic Change
Introduction Growth Maturity Decline
Best period to Practical to change Poor time to Cost control

; Changes within the organization

Company Strategy/Issues

increase market price or quality change image, critical

share image price, or quality

; Personnel R&D engineering is

critical
Strengthen niche Competitive costs
become critical
; Finance Defend market
position
CD-
CD-ROMs
; Technology Internet search engines
Analog TVs
Drive-
Drive-through
; Product life LCD & plasma TVs restaurants

; Changes in the environment Sales iPods

3 1/2”
1/2”
Xbox 360 Floppy
disks

Figure 2.5
© 2008 Prentice Hall, Inc. 2 – 65 © 2008 Prentice Hall, Inc. 2 – 66

11
 Product Life Cycle SWOT Analysis
Introduction Growth Maturity Decline
Product design Forecasting Standardization Little product
and critical Less rapid differentiation Mission
development Product and product changes Cost
OM Strategy/Issues

critical process – more minor minimization

Frequent reliability changes Overcapacity Internal External
product and Competitive Optimum in the
process design product capacity industry
Strengths Opportunities
changes improvements
Short production and options
Increasing Prune line to Analysis
stability of eliminate
runs Increase capacity process items not
High production returning
costs
Shift toward Long production
good margin
Internal External
product focus runs
Limited models Enhance Product Reduce Weaknesses Threats
Attention to distribution improvement capacity
quality and cost cutting Strategy

Figure 2.5
© 2008 Prentice Hall, Inc. 2 – 67 © 2008 Prentice Hall, Inc. 2 – 68

Strategy Development Process Strategy Development and

Implementation
Environmental Analysis
Identify the strengths, weaknesses, opportunities, and threats.
Understand the environment, customers, industry, and competitors.
; Identify critical success factors
; Build and staff the organization
Determine Corporate Mission
State the reason for the firm’s existence and identify the ; Integrate OM with other activities
value it wishes to create.

The operations manager’s job is to implement

Form a Strategy an OM strategy, provide competitive
Build a competitive advantage, such as low price, design, or
volume flexibility, quality, quick delivery, dependability, after-
advantage, and increase productivity
sale service, broad product lines.

© 2008 Prentice Hall, Inc. Figure 2.6 2 – 69 © 2008 Prentice Hall, Inc. 2 – 70

Critical Success Factors Activity Mapping

Marketing Finance/Accounting Production/Operations
Service Leverage Courteous, but
Distribution Cost of capital Limited Passenger
Promotion Working capital Service
Channels of distribution Receivables
Product positioning Payables
(image, functions) Financial control
Lean, Short Haul, Point-to-
Lines of credit Productive Point Routes, Often to
Employees Secondary Airports
Decisions Sample Options Chapter
Product Customized, or standardized 5
Competitive Advantage:
Quality Define customer expectations and how to achieve them 6, S6 Low Cost
Process Facility size, technology, capacity 7, S7
Location Near supplier or near customer 8
Layout Work cells or assembly line 9
High Frequent,
Human resource Specialized or enriched jobs 10, S10 Aircraft Reliable
Supply chain Single or multiple suppliers 11, S11 Utilization Standardized Schedules
Inventory When to reorder, how much to keep on hand 12, 14, 16 Fleet of Boeing
Schedule Stable or fluctuating production rate 13, 15
Maintenance Repair as required or preventive maintenance 17 737 Aircraft
Figure 2.8
Figure 2.7
© 2008 Prentice Hall, Inc. 2 – 71 © 2008 Prentice Hall, Inc. 2 – 72

12
 Activity Mapping Activity Mapping
Courteous, but Courteous, but
Limited Passenger Limited Passenger
Service Service
No meals (peanuts)
Lean, Short Haul, Point-to- Lean,
Lower gate costs at Short Haul, Point-to-
Productive Point Routes, Often to Productive Point Routes, Often to
Employees Secondary Airports secondary airports
Employees Secondary Airports
Automated ticketing machines
High number of flights
Competitive Advantage:
No seat assignments Competitive Advantage:
Low Cost reduces employee idleCost
Low time
No baggage transfers between flights
High Frequent, High Frequent,
Aircraft No meals (peanuts) Reliable Aircraft Reliable
Utilization Standardized Schedules Utilization Standardized Schedules
Fleet of Boeing Fleet of Boeing
737 Aircraft 737 Aircraft
Figure 2.8 Figure 2.8
© 2008 Prentice Hall, Inc. 2 – 73 © 2008 Prentice Hall, Inc. 2 – 74

Activity Mapping Activity Mapping

Pilot training required on
Courteous,
High number but
of flights Courteous,
onlyLimited
one type but
of aircraft
Limited Passenger
reduces employee idle time Passenger
Service Reduced Service
maintenance
between flights
Lean, Short Haul, Point-to- Lean,
inventory required because Short Haul, Point-to-
Saturate a city with flights,
Productive Point Routes, Often to Productive of only one type of aircraft
Point Routes, Often to
lowering administrative
Employees Secondary Airports Employees Secondary Airports
costs (advertising, HR, etc.) Excellent supplier relations
Competitive
per passenger Advantage:
for that city with Boeing
Competitive has aided
Advantage:
Low Cost financing
Low Cost
Pilot training required on
Highonly one type of aircraft Frequent, High Frequent,
Aircraft Reliable Aircraft Reliable
Reduced maintenance
Utilization Schedules Utilization Schedules
Standardized Standardized
inventory required because
Fleet of Boeing Fleet of Boeing
of only one type ofAircraft
737 aircraft 737 Aircraft
Figure 2.8 Figure 2.8
© 2008 Prentice Hall, Inc. 2 – 75 © 2008 Prentice Hall, Inc. 2 – 76

Activity Mapping Activity Mapping

Automated ticketing
Courteous, but Courteous, but
machines
Limited Passenger
Reduced maintenance Limited Passenger
Service Service
Empowered employees
inventory required because
Lean, of only one type of aircraft
Short Haul, Point-to- Lean, High employee
Short Haul, Point-to-
Productive Point Routes, Often to Productive Point Routes, Often to
compensation
Flexible union
Employees Flexible employeesSecondary
and Airports Employees Secondary Airports
contracts standard planes aid Hire for attitude, then train
Competitive Advantage:
scheduling Competitive Advantage:
Low Cost LowHigh level of stock
Cost
Maintenance personnel ownership
High trained only one type of
Frequent, High
Aircraft aircraft Reliable Aircraft
High number of flightsFrequent,
Reliable
Utilization Schedules Utilization reduces employee idle timeSchedules
Standardized
20-minute gate turnarounds Standardized
Fleet of Boeing between
Fleet of Boeing flights
737 Aircraft 737 Aircraft
Figure 2.8 Figure 2.8
© 2008 Prentice Hall, Inc. 2 – 77 © 2008 Prentice Hall, Inc. 2 – 78

13
 Four International Four International
Operations Strategies
International
Operations Strategies
High High
Strategy
Cost Reduction Considerations

; Import/export or

Cost Reduction Considerations

license existing
product
Examples
U.S. Steel International Strategy
; Import/export or
Harley Davidson license existing
product

Examples
U.S. Steel
Harley Davidson

Low Low
Low High Low High
Local Responsiveness Considerations Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 79 © 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 80

Four International Four International

Operations Strategies
Global Operations Strategies
High Strategy High

; Standardized Global Strategy

; Standardized product
Cost Reduction Considerations

Cost Reduction Considerations

; Economies of scale
product ; Cross-cultural learning

; Economies of scale Examples

Texas Instruments
; Cross-cultural Caterpillar
Otis Elevator
learning
Examples
International Strategy
; Import/export or
International Strategy
; Import/export or

product
Texas Instruments
license existing license existing
product

Examples Caterpillar Examples

U.S. Steel U.S. Steel
Otis Elevator
Harley Davidson Harley Davidson

Low Low
Low High Low High
Local Responsiveness Considerations Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 81 © 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 82

FourMultidomestic
International Four International
Operations Strategies
Strategy Operations Strategies
High High
; Use existing
Global Strategy Global Strategy
; Standardizeddomestic model ; Standardized product
Cost Reduction Considerations

Cost Reduction Considerations

product
; Economies of scale ; Economies of scale
globally
; Cross-cultural learning ; Cross-cultural learning

Texas ;
Examples Examples

Caterpillar
Franchise, joint
Instruments Texas Instruments
Caterpillar
Otis Elevatorventures, Otis Elevator

subsidiaries
International Strategy International Strategy Multidomestic Strategy
Examples
; Import/export or
license existing
; Import/export or
license existing
; Use existing
domestic model globally
; Franchise, joint ventures,
product Heinz product subsidiaries

U.S. SteelMcDonald’s
Examples Examples Examples
U.S. Steel Heinz The Body Shop
The Body Shop
Harley Davidson Harley Davidson McDonald’s Hard Rock Cafe

Low Hard Rock Cafe Low

Low High Low High
Local Responsiveness Considerations Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 83 © 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 84

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 Four International Four International
Operations Strategies
Transnational Operations Strategies
High Strategy High

; Move material,
Global Strategy
; Standardized product
Global Strategy
; Standardized product
Transnational Strategy
; Move material, people, ideas
Cost Reduction Considerations

Cost Reduction Considerations

; Economies of scale ; Economies of scale
people, ideas
; Cross-cultural learning ; Cross-cultural learning
across national boundaries
; Economies of scale
; Cross-cultural learning
Examples across national
Texas Instruments
Examples
Texas Instruments Examples
Caterpillar boundaries Caterpillar Coca-Cola
Otis Elevator Otis Elevator Nestlé
; Economies of scale
; Cross-cultural
International Strategy Multidomestic Strategy International Strategy Multidomestic Strategy
learning
; Import/export or
; Use existing
domestic model globally ; Import/export or
; Use existing
domestic model globally
license existing ; Franchise, joint ventures, license existing ; Franchise, joint ventures,
product subsidiaries product subsidiaries
Examples
Examples Examples Examples Examples
U.S. Steel U.S. Steel
Coca-Cola
Harley Davidson
Heinz The Body Shop
McDonald’s Hard Rock Cafe Harley Davidson
Heinz The Body Shop
McDonald’s Hard Rock Cafe

Low Nestlé Low

Low High Low High
Local Responsiveness Considerations Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 85 © 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 86

Ranking Corruption
Rank Country 2006 CPI Score (out of 10)
1 Finland 9.6 Least
1 Iceland 9.6 Corrupt
1 New Zealand 9.6
5 Singapore 9.4
7 Switzerland 9.1
11 UK 8.6
14 Canada 8.5
15 Hong Kong 8.3
16 Germany 8.0
17 Japan 7.6
20 USA, Belgium 7.3
34 Israel, Taiwan 5.9
70 Brazil, China, Mexico 3.3 Most
121 Russia 2.5 Corrupt
Table 8.2
© 2008 Prentice Hall, Inc. 2 – 87

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