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Business
Strategy
Context for
Operations
Strategy
Chapter 1
McGraw-Hill/Irwin
Operations Strategy
Copyright 2008 The McGraw-Hill Companies, Inc. All rights reserved.
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What is strategy?
Strategic thinking has its roots in military
strategy
The branch of military science dealing with
military command and the planning and conduct
of a war.

And has evolved to focus on business
An elaborate and systematic plan of action.
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Competitive Strategy: The Positioning View
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Competitive Strategy: The Positioning
View
Options for firm positioning:
Cost leadership
Differentiation
Focus

And, within each of the three:
Variety-based
Needs-based
Access-based
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Competitive Strategy: The Positioning
View
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
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Concerns with the Positioning View
Too narrowly focused on industry and
product economics rather than customer
economics
Allows too few options for positioning.
Looking at conflicts among positions might
lead to new options.
Relies too much on analytical tools
Does not acknowledge the need for learning
and adaptation over time
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Competitive Strategy: The Resource-
Based View
Competitive advantage is derived from the
firms development of unique bundles of
resources and capabilities that are:
Inimitable: are difficult or costly to imitate or
replicate
Valuable: allow the firm to improve its market
position relative to competitors
Rare: in relatively short supply
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Competitive Strategy: The Resource-
Based View
Resource: an observable, but not necessarily
tangible, asset that can be valued and traded
e.g., brand, patent, parcel of land, license
Asset or input to production than an organization owns,
controls or has access to on a semi-permanent basis
Capability: not observable, and hence necessarily
intangible, cannot be valued and changes hands
only as part of an entire unit
Processes, activities or functions performed within a
system
Utilize the organization's resources
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Competitive Strategy: The Resource-
Based View
Types of capabilities
Process-based
e.g., McDonalds
Systems- or coordination-based
e.g., Ritz-Carlton
e.g., Southwest Airlines
Organization-based
e.g., Nucor Steel
Network-based
e.g., Zara
e.g., Dell
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Competitive Strategy: Integrating the
Positioning and Resource-Based Views


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How Strategy Is Made
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Levels of Strategy-Making
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Business Strategy: Views the Firm
Might Take
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Business Strategy: Focus on the
Customer
Types of customer needs
Must haves
Linear satisfiers
Delighters
Neutral
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Business Strategy: Dimensions along
which Customers Assess Performance
Cost
Quality
Availability
Features/Innovativeness
Environmental performance
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Business Strategy: Dimensions along
which Customers Assess Performance
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Business Strategy: Making Tradeoffs in
Positioning


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Strategy-Making in Context
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Strategy-Making: Cross-Functional
Participation


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Operations Strategy: Goals
Cost
Quality
Availability
Features/Innovativeness
Environmental Performance
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Operations Strategy: Connecting Operations
Goals to Customer Concerns
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Operations Strategy: Decision
Categories
Structural decisions
Vertical integration
Process technology
Capacity
Facilities

Infrastructural decisions
Sourcing
Information technology
Supply chain
coordination
Business processes and
policies
Capabilities development
Lean operation
Quality
Flexibility
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Strategy-Making: Step 1
Understand what position the firm wants to or can
take in the marketplace by learning about:
Competitors
Suppliers
Complementary product or service offerings and firms
offering them
Spaces outside the industry into which the firm might
expand
Customer needs in terms of:
Cost
Quality
Availability
Features/innovativeness
Environmental performance
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Strategy-Making: Step 2
Understand what capabilities the firm has to
offer, can or should develop both within and
across the key functional areas of the firm:
Operations
Marketing
Research and development
Human resources
Finance and accounting
As well as outside the firm with supply chain
partners
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Strategy-Making: Step 3
Integrate or synthesize the activities and
capabilities of the functions to achieve:
Coherent strategic fit in support of a desired
strategic direction
Development of a set of capabilities to pursue a
new strategic direction
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Integrated Strategy-Making
Framework