Strategy

and

Operations
Strategy
including

Process
 Corporate Strategy

Choices made by the whole company

in the way it does business

Setting the direction of the company

Determines why the company exists

 Dominant orientation
Hayes and Schmenner (1978):
towards a market,
the market for football kit or the market for cooking
equipment

to materials or products,
such as steel strip, into the car industry, the building
industry, the white goods industry.

to a particular technology.
Drilling, casting, signwriting, cleaning .
 competitive priorities
Porter (1985)
Cost Competition

Or Differentiation

Plus
Focus
 competitive priorities
Porter (1985)
Cost Competition
control costs to lower selling price, -
gaining volume, or
to sell at a price similar to that of
competitors whilst making higher profits
through lower material and production
costs.
OR
 competitive priorities
Porter (1985)
Differentiation
providing products which have noticeable
advantages to buyers
continual development of products
products made to specific customer
requirements
services such as after-sales maintenance
and guarantees, or financial arrangements
 competitive priorities
Porter (1985)
PLUS

Focus
The type of products and markets
Will it say "no" to proposals which will
move the company into new areas?
 The focussed factory

Skinner (1985) the manufacturing business

should focus on a
"limited, concise, manageable set of products,
technologies, volumes and markets

NOT try to do too many different things.

 Strategy approach

HOW
WHAT
Make or buy,
Corporate Aims performance
or manage
required
projects
 Mission statements
(after D Samson)
A short, clear, simple, specific statement of
Basis for competition
Policy on Products, Segments, Technologies
For clear and unambiguous communication to the
workforce, managers of manufacturing,
marketing, finance, personnel (etc) and
customers and suppliers
To act as a reference point for decision taking
 Objectives and mission
a computer on every desk Bill Gates
and:
At Microsoft, we work to help people
and businesses throughout the world
realize their full potential. This is our
mission. Everything we do reflects this
mission and the values that make it
possible.
 Ford Motor Company
Our Vision - To become the world's leading consumer company for automotive
products and services.
Our Mission - We are a global family with a proud heritage passionately committed
to providing personal mobility for people around the world.
We anticipate consumer need and deliver outstanding products and services that
improve people's lives.
Our Values -
Our business is driven by our consumer focus, creativity, resourcefulness, and
entrepreneurial spirit.
We are an inspired, diverse team. We respect and value everyone's contribution.
The health and safety of our people are paramount.
We are a leader in environmental responsibility. Our integrity is never
compromised and we make a positive contribution to society.
We constantly strive to improve in everything we do. Guided by these values, we
provide superior returns to our shareholders.
 Corporate strategy
describes what performance is required of
the company and what approaches it will
take to competition and growth.
Stakeholders who is affected and their
influence a tool for strategy analysis
 Stakeholders
Those who are affected by the business or who
have an interest in the operation of the business
(Mendelow 1981)
These include shareholders, government,
customers, suppliers, lenders, employees,
society and competitors.
These provide an environment within which the
company must operate and set the requirements
which the company must fulfil.
 Manufacturing or Operations
Strategy
determines how the company will address
these requirements by the most
appropriate use of the resources available
 Wheelwright and Hayes 4 views of the
role of manufacturing in the company

1 Internally Neutral. No strategic importance, sees mfg as a necessary

evil. Control

2 Externally neutral. Mfg must keep up with competitors, e.g. buy new
equipment. Capability

3 Internally supportive. Mfg to help support business strategy.

Consistency with other functions. Alignment

4 Externally supportive. Mfg capabilities and development help lead

stategy making. Mfg as a competitive weapon. Dynamic
 The need for a strategy
Basis for the coordination of decisions and activities
throughout the organisation.

Focus activities on one particular set of goals

which must be communicated throughout the

organisation.

If there is no coordination, different parts of the company

might work against each other.
 Example Operations view
The factory manager wishes to reduce
the cost of manufacturing, through the
increased use of automatic equipment.

Extremely cheap to run but expensive to

reset for each product variant

Sees technology reducing costs

 Sales view
The sales manager wants to increase
sales

He takes orders for all kinds of special

products with different features for each
customer

Competitors are less willing to customise,

so this keeps the order book full
 Incompatible views
The factory manager sees the sales force chasing the
wrong type of orders, which do not suit the factory

The sales manager sees the factory buying the wrong

type of equipment, which does not suit the orders
coming in

The lack of coordination results in excess costs due to

unsuitable machinery or unsuitable orders

Bad result from both points of view

 Solution strategic view
Alternatives:
1. Focus upon standard products, which are
cheaper to produce.
2. Focus on customised products which may
command higher prices.

This is a strategic decision and cannot be taken at

the level of either of the two managers, except
by consensus, but must instead be decided by a
higher level of management
 A manufacturing strategy
must deal with
The type of products to be manufactured,

the way orders are to be won

the type of manufacturing equipment to be used.

 A more comprehensive strategy

personnel,
training,
factory location,
materials,
components and the make-it-or-buy-it decision,
supplier relationships,
quality control,
information systems,
research and development,
marketing
sales direction
Or more simply..
Plant, Process, People, Product
 A market-based strategy
Fine and Hax (1985) - the company
operates in a series of markets.

the markets for products and services;

Buyers select from many options
Sellers must compete
 technology markets,
Awareness of the full range of available technologies,
including new developments and the incorporation of the
most advantageous technologies both in products and in
manufacturing operations;

factor markets,
The market for component parts and materials, available
through a range of suppliers, which may develop in various
ways affecting availability, alternatives, quality;

labour market,
The market for employees, which may be characterised by
the availability and cost of various skills;
 capital market
The market for investment into the company from
a range of sources which have varying
requirements, and for which the company both
selects and competes.

Markets = competing alternatives

Decisions between alternatives form the basis of

manufacturing strategy.
 Process

Many authors now see the process of

strategy formulation as a key to the
successful management of the company,
and even as more important than strategy
itself.
 Hill (1993) :
Strategy making process - iterative
process taking into account:
Corporate strategy,
Marketing strategies

The way different products win orders

against the competition (required
performance)
 Hill
HOW
WHAT
Make or buy,
Corporate Aims performance
or manage
required
projects

The manufacturing decisions about the most appropriate way to

manufacture the products

The supporting infrastructure must then be made to suit these requirements.

Hill need to link manufacturing and marketing areas in strategy making.

Common area is how products win orders

Criteria for competitive products
Name some!
Criteria for competitive products
Cost

Functions & Features / Quality

performance, features, reliability,
conformance, durability, serviceability,
aesthetics, image/ perception, range

Lead time, LT reliability

 Order Winners

Order-winning criteria influence the

customer's purchasing decision, when the
customer faces a choice between alternative
products which are otherwise acceptable
may include criteria such as cost or delivery lead
time

Identify OWs for buying a car, a house, a tin of

beans, some running shoes
 Order Qualifiers
Order-qualifying criteria are those which
allow the product to be considered by the
customer.
These may be the basic standards of functionality
or quality without which the product would not be
considered in a particular market or for a
particular application

Identify OQs for a cars, a house, a camera, a

bed, computer
 Different criteria are applied to different
products by different types of customer

good market knowledge is needed to set

the requirements for manufacturing.
 Beyond Hill:
The market-based view of strategy would lead us to
suppose that companies operating in similar markets
would pursue similar strategies

Is this true? Are all car makers the same? All PC mfrs?

The capabilities of manufacturing may present the

company with the opportunity to move into new markets

If manufacturing capabilities are considered in the

corporate strategy-making process.
 A capabilities-based
strategy
Following the market means following the
competition

A new product can create a new market or

move the company into a market in which
it is different from its competitors.
Mars Electronics, Vigil radar
Walkman, Toshiba air-conditioning
 Capability to jump
Not from examination of the company's current market
position
but
through a creative analysis of the company's internal
strengths

Besides making strategies which are determined from

the external market and which lead the company to
reconfigure internally (an "outside-in" strategy-making
approach) attention should also be given to the
opportunities which may come from an "inside-out"
approach.
 Thinking on strategy
Think of a product and a possible customer (type).
What OWs and OQs would be important?
What competitors does the product have?
How will you (or did you) beat the competition? What
capabilities is the company exploiting?
Make, buy or project-manage?
What other product could you bring to the customer,
with what OWs and OQs?
What other customer could you bring this product
to? OWs and OQs.
Is your strategy a plan or a process?
 Volume and Variety in manufacturing

Meredith J, Management of Operations, Wiley 1992

 RESOURCE A

RESOURCE E

Johnson, Chambers, Harland, Harrison, Slack

Cases in Operations Management, Pitman 1993
Johnson, Chambers, Harland, Harrison, Slack
Cases in Operations Management, Pitman 1993
Johnson, Chambers, Harland, Harrison, Slack
Cases in Operations Management, Pitman 1993
Johnson, Chambers, Harland, Harrison, Slack
Cases in Operations Management, Pitman 1993
Volume and Variety in services
High

Professional
services
Much
Variety

Service shops
Low

Mass services

None

One Few Many Very Many

Volume (or batch size)
 Useful reading on strategy
Acur N and Gurtsen F (2003) The formalisation of manufacturing
strategy and its influence on the relationship between competitive
objectives, improvement goals and action plans International
Journal of Operations Management 23 10 pp 1114 1141
Acur N and Bititci U (2004) A balanced approach to strategy process
International Journal of Operations Management 24 1 pp 99 117
Berry W L and Hill T (1992) Linking systems to strategy International
Journal of Operations Management 12 10 pp 3 15
Brown S, Lamming R, Bessant J, and Jones P, (2005) Strategic
Operations Management (2nd edition) Butterworth Heinemann,
Oxford
Buffa E (1984) Meeting the competitive challenge: operations strategy
for US Companies Macmillan
Collis D J and Montgomery C A (1995) Competing on resources
Harvard Business Review 118-28
Dangayach G S and Deshmukh S G (2001) Manufacturing strategy
literature review and some issues International Journal of
Operations Management 24 4 pp 409 423
Harrison A (1998) Manufacturing strategy and the concept of world
class manufacturing International Journal of Operations
Management 18 4 397-408
Hayes RH and Pisano GP (1994) Beyond world class operations - the
new manufacturing strategy Harvard Business Review Jan-Feb.
pp 77-86.
Hayes, R and Wheelwright, S (1984) Restoring our competitive edge:
competing through manufacturing Collier Macmillan NY
Hill T (1993) Manufacturing strategy 2nd ed Macmillan Basingstoke
Hill T (1984) The strategic management of the operations function
Macmillan UK
Mendelow, A. L., (1981) "Environmental Scanning--The Impact of the
Stakeholder Concept. ICIS 1981 Proceedings. Paper 20.
New C C (1992) World class manufacturing versus trade-off International
Journal of Operations and Production Management 12 6 19-31
Platts K W (1995) Integrated manufacturing: a strategic approach
Integrated Manufacturing Systems (6) 3
Prahalad C K and Hamel G (1990) The core competencies of the
corporation Harvard Business Review 68 3 79-93
Schonberger, R J. (1996) World Class Manufacturing: the next decade:
building power, strength, and value New York: Free Press, 1996. 0-
684-82303-9
Skinner W (1969) Manufacturing - the missing link in corporate strategy
Harvard Business Review May-June pp 136-45
Slack N, Chambers S, Johnston R (200x) Operations management Latest
edition Harlow: Financial Times Prentice Hall
Spring M and Boaden R (1997) One more time, how do you win orders: a
critical reappraisal of the Hills manufacturing strategy framework
International Journal of Operations Management 17 8 757-79
Swink M and Hegarty W H (1998) Core manufacturing capabilities and
their links to product differentiation International Journal of
Operations Management 18 4 374-96
Teece DJ, Shuen A, Pisano G (1997) Dynamic capabilities and strategic
management Strategic Management Journal 18 (7)
Voss C A and Blackmon K (1998) Differences in manufacturing strategy
decisions between Japanese and Western manufacturing plants: the
role of strategic time orientation Journal of Operations Management
16 147-58
White G P (1996) A meta analysis model of manufacturing capabilities
Journal of Operations Management 14 315-31
Wheelwright S C and Hayes R H, 1985, Competing through manufacturing,
Harvard Business Review, Jan-Feb, pp99-109
 References
Childe S J, Introduction to Computer Aided Production
Management, Chapman & Hall 1997
Johnston R, Chambers S, Harland C, Harrison A, Slack
N, Cases in Operations Management, Pitman 1993
Meredith J, The Management of Operations, Wiley 1992
Porter M E, 1985, Competitive Advantage, The Free
Press, New York
Slack N, Chambers S, Johnston R, Operations
Management, 8th edn. Prentice Hall 2016