B207A

Big ideas in organizations

Shaping Business Opportunities I
Block 1- Reading 12
Operations Strategy
Operations strategy
Operations strategy: ‘the pattern of strategic decisions
and actions that set the role, objectives and activities of the
operation’.
These decisions are mainly taken in the development of
four key areas (Key operations strategy ): capacity and
facilities, supply chain development, technology and
workforce.

Reading 12: Operations

Defining operations strategy (Table 1, page 102)
Decision Area Key questions
Capacity and facilities How many facilities should we have?
How big should each site be?
Where should these be located? Etc..

Supply chain development How much of the total value chain do we own?
How many suppliers should we have?
How global is our supply network? Etc..

Technology How automated are our processes

How integrated are our system?
How dedicated is our technology? Etc..

Workforce How hierarchical is our management structure?

How central is our planning and coordination?
How do we group our departments?
What skills and capabilities do we develop in our workforce? Etc.

Reading 12: Operations

Operations strategy
In practice, the process of operations strategy development is often seen as one of
market reconciliation. How are resources best configured and managed to fit market
requirements?

Reading 12: Operations

Operations strategy
Three general themes about how operations strategy is defined and reconciled:
The predominant theme is one of market influence. Operations strategy decisions
are taken in the context of the market position of the organization, taking into
consideration any differing requirements based on different markets or segments.
Some authors link operations strategy to the ideas used in the strategic
management literature of competences or capabilities. Can organizations exploit
their operations’ competences or performance capabilities in the marketplace?
Some operations strategies can be driven by a corporate or entrepreneurial
vision. Many entrepreneurs take a very personal view of how to configure their
operations, ignoring the theory of how operations should be designed.

Reading 12: Operations

Performance objectives
Operations requirements are classified by six generic types of
performance objectives that influence how the operation affects
customer satisfaction:
1. Quality
2. Speed
3. Flexibility
4. Sustainability
5. Dependability
6. Cost
Reading 12: Operations
Quality
 Conformance quality: High-performance products often
need to have their quality defined by clear specification,
either in terms of what they can do or in terms of a
product characteristic.
 It must also be considered that customers judge quality
just through perception.

Reading 12: Operations

Speed
Operations need to perform a task in the shortest possible
time span.
This speed measure is referred to as throughput time,
which is defined as the time taken for a resource to work
through a process from start to finish.

Reading 12: Operations

Flexibility
Flexibility: the ability to change what you do.
There are three main types of flexibility that operations might possess as a performance
characteristic:
 Variety flexibility is the ability to produce more than one type of product or service.
 Mix flexibility is the ability to cope with different types of customers or products at
the same time or in a close sequence.
 Volume flexibility is the ability to adjust how much you produce dependent on market
demand.
Response flexibility: a change is needed very quickly, for example to respond to a sudden
rush of customers into a shop.
Range flexibility: a change of great magnitude is needed, but this can be done over time
in a planned way. (See table 2 page 107 )
Reading 12: Operations
Sustainability
One widely used definition of sustainability is:
(A) Capable of being maintained at length without interruption, weakening
or loss in power or quality.
(B) Of, relating to, or being a method of harvesting or using a resource so
that the resource is not depleted or permanently damaged.
 There are three well-known aspects of sustainability:
◦ Environmental sustainability
◦ Economic sustainability
◦ Social sustainability.

Reading 12: Operations

Dependability
Dependability is about keeping your promises, focusing mostly on delivery
promises.
Don’t’ confuse dependability with quality; good products that don’t break down
are dependable- but this is not what is meant with dependability. Schedule
adherence is a key issue with dependability.

Reading 12: Operations

Cost
It seems obvious that, in the majority of markets, customers will
consider price as one of the main buying criteria.
Although there isn’t always a link between unit cost and price,
producers in markets that are price-sensitive will have to adjust their
operations strategy to take account of the cost impact of their decisions.
The total unit cost is influenced directly by factors such as the cost of
materials and labour, but can also be influenced by factors such as the
cost of equipment or working capital. It should be no surprise that many
low-cost producers try to develop lean processes where work-in-
progress is minimised, reducing the need for working capital.

Reading 12: Operations

Polar representation of performance objective
In most practical situations, the process of determining the
importance of performance objectives is largely subjective
rather than scientific.
One practical approach is to consider all the performance
objectives and allocate scores that add up to 100 across
each of the objectives.

Reading 12: Operations

Polar representation of performance objective

Reading 12: Operations

 Block 1
Session 10: Marketing and operations
Block 1- Reading 13
Marketing and operations coordination
Marketing and operations coordination
The relationship between marketing and operations functions
within many organizations an often be quite difficult.
A commonly used term is ‘siloed working’ which represents a
lack of communication between management functions.

Reading 13: Marketing and operations coordination

The importance of strategic coordination
Companies driven by marketing planning could allow operations strategy to
drift through lack of attention.
The cause of conflicts between marketing and operations:
A difference in the way marketing managers and operations managers were
evaluated and rewarded.
Inherent complexity, with marketing managers relying on ‘soft’ (qualitative)
data for marketing activities and operations managers using ‘hard’ (quantified)
data for manufacturing purposes. The two can be difficult to match up.
Cultural differences, with marketing and operations managers having
different task orientations and social concerns.

Reading 13: Marketing and operations coordination

The importance of strategic coordination
Complicating factors include:
The need to interface not only with each other but other functions such as
research and development and engineering.
The need for cooperation being greater for companies undergoing rapid growth.
Technological change putting greater strain on product demand and processes.
The difficulty of changing increasingly automated operations.
The greater visibility of poor performance from capital costs and constraints.
(see table 1 page 118 for examples of conflict between the two functions)

Reading 13: Marketing and operations coordination

The importance of strategic coordination
 Situations where marketing and operations strategies inadvertently diverge
during product life cycles include:
• Where the nature of competition changes
• Where customers’ needs adapt
• Where the operations requirements change
• Where marketing strategies enter new markets with different performance
objectives
• Where subtle changes to market positioning require operations to adapt its
strategy
• Where competitors may force change on both marketing and operations
Reading 13: Marketing and operations coordination
Improving coordination
Signs of improved coordination between marketing and operations:
New roles are being created that combine the two functions into ‘marketing
operations managers.
Traditional management of marketing channels is also beginning to be replaced by
holistic approaches which prioritize:
Speed – to increase responsiveness and reduce the cost of life cycle times .
Insight - to improve understanding of customers, target segments and use the best
mix of media to reach them.
Access – to provide dynamic capability through continuous input facility (including
data, creative assets and business decisions) .
Flexibility – to adapt to changing needs, priorities, preferences and demand.
Reading 13: Marketing and operations coordination
Improving coordination
The activities of demand creation and demand fulfilment should be
brought closer together. One example of this is from Christopher and
Ryals (2014), who propose a new discipline of demand chain
management (see Figure 1 page 120).
This framework shows how there might be degrees of coordination
between marketing and operations functions. In some cases this could be
limited to short-term collaboration on activities such as promotions that
create demand surges. At the fullest extent the process of developing
marketing and operations plans could be fully integrated.

Reading 13: Marketing and operations coordination

 Block 1
Session 10: Marketing and operations
IKEA case study
See IKEA case page 121
Go to session 10 and browse through the activities about IKEA.