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Competitive Strategy Vs Operations

Strategy

Peeyush Pandey
Assistant Professor
IIM Rohtak

.
 Learning Objectives

1. Understand Competitive Strategy and Operations strategy

2. Strategy Formulation Process
3. How to align Operations strategy to Competitive Strategy
4. Operational Excellence
 Competitive Strategies

• Competitive strategy defines, relative to its competitors

• The way company satisfies the customers priorities and needs
⮚ Indigo Vs Jet Airways
⮚ Seven eleven Vs Wall mart
⮚ Dell Vs Lenevo
⮚ Bluenile Vs Zales
⮚ Barnes & Noble Vs Amazaon

• Competitive strategy is defined based on product cost, delivery time,

variety and quality.
 Competitive Strategies

• Competitive strategy targets one or more customer segments and provide

product and services to satisfy them.
⮚ Amazon stock some product in warehouse and some delivers through
distribution centre
 Change in competitive strategies

• Competitive dynamics & expectations of customers are changing with time

• Due to the changes in market place, competitive priorities for an organization is likely
to change
– While it was customary for people to book for a passenger car and wait for a few
months to get delivery of the car, today a manufacturer of passenger cars cannot
afford to make customers wait that long
 Operations Strategy

• Operations Strategy
– Alignment of key operations decisions with the strategic objectives of a firm

– These decisions are made on the basis of company’s competitive strategy

• Indigo staff,

• Wall mart location,

• Dell’s raw material etc.
 Strategy Formulation Process

• Step 1: Understand the Competitive Dynamics at the Marketplace 

• Step 2: Identify Order-Qualifying & Order-Winning Attributes 
• Step 3: Identify Strategic Options to achieve Competitive Advantage
• Step 4: Evaluate strategic options considering resources, constraints, values &
objectives.
• Step 5: Develop an Operations Strategy on the basis of the competitive
strategy
• Step 6: Establish relevant measures for operational excellence
 Strategy formulation process

Competitive
Order winners
Dynamics at
Order Qualifiers
the marketplace

Strategic options for Generic Competitive Priorities

competitive advantage Quality, Cost,
Delivery, Flexibility

Firm level
Strengths & Competitive Strategy
Weaknesses

Strategic decisions for Measures for

Operations Strategy
Operations System Operational Excellence
 Performance measurement

• Provide critical linkage between order winning and order qualifying attributes
and choices made in operations
• Useful in comparing performances amongst competitors and for
benchmarking

Quality Cost

Process Capability Indices Average days of inventory

Quality Costs Manufacturing cost
Defects per Million Opportunities Procurement costs
Delivery Flexibility
Lead time for order fulfillment Number of models introduced
Procurement and Manufacturing Lead time New product development time
On time delivery for supplies Process flexibility
Aligning Operations strategy to Competitive strategy
 Product Portfolio

• Product portfolio pertains to decisions on

– what products the organization wants to produce

– the number of variations in each product line

– the extent of customization offered to customers

• Product portfolio as a strategic option

– Wide product portfolio: Overall strategic objective is to provide highly
differentiated set of products and services to the customer
– Narrow product portfolio: Overall strategic objective is one of cost leadership
 Process Choices

• Process choices:
– Project

– Work centre (Job Shop)

– Assembly line

– Manufacturing cell
• Choice of process will be consistent with product portfolio decisions
– A manufacturer emphasizing on production volumes, fewer varieties and less
cost will make process choices pertaining to continuous streamlined flow
– An organization wishing to satisfy an objective of providing wide range of
products to the customers will adopt batch/intermittent flow type
– the need to provide a very large variety and practically a production volume of
one or few will adopt jumbled flow
 Capacity

• Capacity is defined as:

– maximum number of units produced per unit time

– the maximum number of service offerings per unit time

• Capacity decision influences the cost of goods & services offered in three ways:
– Accrued cost advantage due to economies of scale
– Ability to spread fixed costs over a larger capacity

– additional cost advantages in procuring other factors of production

 Technology Choices

• Technological advancements in recent years have given new opportunities for

creating competitive advantage for firms

Strategic Advantages
• Increased machine utilization
• Fast reaction to customer needs
• Scheduling flexibility
• Reduced manufacturing lead time
• Lower in-process inventory
 Supply Chain

• Supply chain refers to the network of entities supplying components and raw material to
an organization as well as those distributing the finished goods of an organization to the
customers through alternative channels
• Two types of supply chains can be configured:
– Efficient supply chain: objective is cost optimization and better utilization of
resources employed in supply chain operations; typically used in the case of
functional products
– Responsive supply chain: the key objective is to develop a capability to respond fast
to the market requirements; typically used in the case of innovative products
 Conclusion

• Understand Competitive Strategy and Operations strategy

• Strategy Formulation Process
• Operational Excellence
• How to align Operations strategy to Competitive Strategy
Thank You