Service Operations Service Operations Management Management
Operations Strategy Operations Strategy
Lecture 2
Team MembersTeam MembersArzina Ackbar
Beryl Laure
Erica Rath
Karen Sham-Laye
Valentina Barra
Lecture OutlineLecture OutlineDefinition of business policy and
the role of business strategy
Definition of operations strategy
The development of an Operations Strategy
Operations Strategy Model
Characteristics of an effective operations strategy
Business Policy; Business Policy; Operations StrategyOperations Strategy
• Business Policy
• Business Strategy
• Operations Strategy
Developing a Business Developing a Business StrategyStrategy
MISSION;“To build a globally recognized brand
which, by inspiring exceptional experiences among our guests, instilling pride and integrity in our associates and enhancing both the physical and human environment in which we operate, will deliver attractive returns to our shareholders.”
ENVIRONMENTAL SCANING
CORE COMPETENCIES
Developing an Operations Developing an Operations StrategyStrategy
1. Developing a Business Strategy Environmental
Scanning: Monitoring the
business environment for market trends,
threats, and opportunities
Core Competencies:
Our unique strengths that help
us win in the marketplace
Mission: Statement that
defines what our business is; who
our clients are; and how our values
define our business
Business Strategy: Defined long-range plan
for the company
Identifying Competitive Identifying Competitive PrioritiesPrioritiesCommon priorities include:• Cost: Low production costs enables the company to
price its product below competitors- Eg: Lincoln Electric• reduced costs by $10 million a year for 10
years
• Quality: Higher performance or a more consistent product
can support a price premium- Eg: Ritz-Carlton• Every employee is empowered to satisfy a
guest’s wish • Teams at all levels set objectives and devise
quality action plans
• Time: Faster delivery or consistent on-time delivery can
support a price premium- Eg: Wal-Mart • replenishes its stock twice a week
• Flexibility: Highly customized products or volume flexibility
can support a price premium- Eg: Andersen Windows• number of products offered grew from 28,000
to 86,000• number of errors are down to 1 per 200
truckloads
Common priorities includeCommon priorities include: : cont…cont…
ExamplesExamples1. Custom Foot Shoe Store:• customer’s feet are scanned electronically
to capture measurements• custom shoes are mailed to the customer’s
home in weeks
2. Ritz-Carlton –Quality reports tracks:• guest room preventive maintenance cycles• percentage of check-ins with no waiting• time spent to achieve industry-best clean
room appearance
3. L.L. Bean • ships orders the day they are received
4. Southwest Airlines• direct flights mean no baggage transfers• $30 million annual savings in travel agent
commissions by requiring customers to contact the airline directly
5. Hewlett-Packard • produces electronic testing equipment in
five days
ExamplesExamples
Translate Priorities into Translate Priorities into DesignDesign
Factors that Influence Factors that Influence StrategyStrategy
InternalInternal External External
• Human resources • Economic conditions• Facilities and equip • Political conditions• Financial resources • Legal environment• Customers • Technology• Products and services • Competition• Technology • Markets• Suppliers
Example: British AirwaysExample: British Airways• Corporate Mission: To be the undisputed
leader in world travel
• Operations Mission: Deliver overall superior service and good value to the customer
• Distinctive Competence: Friendly, professional service
• Objectives: Well-trained, motivated employees
• Policies: Fast turnaround at counter, quick complaint responses, etc.
Characteristics of anCharacteristics of aneffective operations effective operations
strategy:strategy:• Internally and externally consistent with...
– corporate/business strategy– other functional strategies (marketing, finance)– pattern of structural/infrastructure investment– competitive environment (customers, competitors)
• Builds core operations capabilities– competitive advantages– new opportunities
• Timeless and enduring• Explicit recognition of trade-offs
– targets key performance dimensions– sets clear priorities/ promotes clarity
Understand TradeoffsUnderstand TradeoffsExample: Made-to-Order PizzaExample: Made-to-Order Pizza
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sQUALITY
COST VOLUMEFLEXIBILITY
QUALITY & DESIGNFLEXIBILITY
TIME