Operations Strategy for Competitive Advantage

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Chapter 2

Mission/Strategy

Mission - where you are going Strategy - how you are going to get there

Mission

Organizations purpose for being Provides boundaries & focus Answers How can we satisfy peoples needs? Expressed in mission statement

Sample Mission - Circle K

As a service company, our mission is to: Satisfy our customers immediate needs and wants by providing them with a wide variety of goods and services at multiple locations.

Factors Affecting Mission

Philosophy & Valu es Environme nt Missio n Custome rs Benefit to Socie ty Profitabili ty & Growth

Public Image

Strategy Process
Environment al Analysi s Compan y Mission Busines s Strategy Functional Functional Area Area Strategies Operation s Decision s

SWO T Analysi s

Marketin g ecision D s

Fin./Acc t. Decision s

Competing on Differentiation

Uniqueness - can go beyond both the physical characteristics and service attributes to encompass everything that impacts customers perception of value

Competing on Cost

Maximum value as defined by customer Does not imply low value or low quality

Competing on Response

Flexible Reliable Quick Requires institutionalization within firm of ability to respond

10 Decision Areas of OM

Quality Goods & service design Process & capacity design Location selection Layout design Human resource and job design Supply-chain management Inventory Scheduling Maintenance

Characteristics of High ROI Firms (PIMS)

High quality product High capacity utilization High operating effectiveness Low investment intensity Low direct cost per unit

Sources of Strategic Advantage

28% - Operations Management 18% - Marketing and Distribution 17% - Momentum/Name Recognition 16% - Quality/service 14% - Good Management 4% - Financial Resources 3% - Other

Preconditions To Implement a Strategy

One must understand:

Strengths & weaknesses of competitors and new entrants into the market Current and prospective environmental, legal, and economic issues The notion of product life cycle Resources available with the firm and within the OM function

Impetus for Strategy Change

Changes in the organization Stages in the product life cycle Changes in the environment

Strategy & Issues During Product Life

Introduction

Company Strategy & Issues P/OM Strategy & Issues

Best period to increase market share R&D engineering are critical Product design and development are critical Frequent product and process design changes Over-capacity Short production runs High skilled-labor content High production costs Limited number of models Utmost attentions to quality Quick elimination of market-revealed design defects

Strategy & Issues During Product Life

Growth
Company Strategy & Issues P/OM Strategy & Issues
Practical to change prices or quality image Marketing is critical Strengthen niche Forecasting is critical Product and process reliability Competitive product improvements and options Shift toward product oriented Enhance distribution

Strategy & Issues During Product Life

Maturity
Company Strategy & Issues Poor time to increase market share Competitive costs become critical Poor time to change price, image, or quality Defend position via fresh promotional and distribution approaches Standardization Less rapid product changes and more minor annual model changes Optimum capacity Increasing stability of manufacturing process Lower labor skills Long production runs Attention to product improvement and cost cutting Re-examination of necessity of design compromises

P/OM Strategy & Issues

Strategy & Issues During Product Life

Decline
Company Strategy & Issues P/OM Strategy & Issues
Cost control critical to market share

Little product differentiation Cost minimization Overcapacity in the industry Prune line to eliminate items not returning Good margin Reduce capacity

SWOT Analysis Process

Environmental Analysis

Determine Corporate Mission

Form a Strategy

SWOT Analysis to Strategy Formulation

Mission Internal S trengths Strategy Internal W eaknesses Competitive Advantage External T hreats External O pportunities

Critical Success Factors

Critical success factors are those activities or factors that are key to achieving competitive advantage. An Activity Map links competitive advantage, CSFs, and supporting activities.