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Operations StrategyOperations Strategy
Prepared by :- Suhad Romi
Supervisor :- Dr. Yousef Abu Farah
Corporate StrategyCorporate Strategy Defines the business will pursue ,
new opportunities , threats in the environment and the objectives that it should be achieved .
It serves as the framework for carrying out all the organization functions .
Operation strategyOperation strategy
It specifies how operations can help implement the firm’s corporate strategy .
Strategic ChoiceStrategic Choice Management set corporate
strategy by making three strategic choices :-
1- Determining the firm’s mission . 2- Monitoring the changes at
environment 3- identifying and developing the
firm’s core competencies .
Corporate StrategyCorporate StrategyMarket analysis
• segmentation• needs
assessment
Socioeconomic and business environment
Corporate strategy• missions• goals• distinctive competencies
Mission Goals
DistinctiveCompetences
How to lead or Formulate the
Corporate Strategy??
How does operation strategy relate to corporate strategy ??
Corporate Strategy :- The overall scope and direction of a corporation and
the way in which its various business operations work together to achieve particular goals.
Operations strategy is the tool that helps to define the methods of producing goods or a service offered to the customer
Operations Strategy :- is the development of a long-term plan for using the major resources of the firm for a high degree of compatibility between these resources and the firm’s long-term corporate strategy
MissionMission
What business are we in now?Who are our customers ?What are our basic beliefs?What are the key performance objectives
(profit, growth, market share, ...) by which we measure success ?
Copyright 2005 Prentice Hall Ch 2- 9
Mission Elements
CustomersMarkets
Employees
PublicImage
Self-Concept Philosophy
SurvivalGrowthProfit
ProductsServices
Technology
Copyright 2005 Prentice Hall
Ch 2-
10
“What do we want to become”?
Vision
Mission Statement
“What is our business”?
ComprehensiveMission Statement
Clear Business Vision
Two Types
- Micro Environment “task environment and operating environment “
Consists of actors in the company’s immediate environment, that affects the performance of the company.◦ The suppliers - Competitors - Stack holders - Customers
- Macro EnvironmentConsists of larger societal forces that affect all the actors in
company’s micro environment. the demographic, economic, natural, technological, political and cultural forces
EXTERNAL ENVIRONMENT
By Examine the external environments , this will lead to a set of :-
Opportunities . Threats .
The Internal ScanningThe Internal Scanning
Internal scanning (organizational analysis):
is concerned with identifying and developing an organization‘s resources and competencies.
14
•Resourcesan organization’s assets.
•CapabilitiesCorporation’s ability to exploit its resources.
•CompetencyA cross –functional integration and coordination of capabilities.
•Core competencySomething that the corporation can do well. (Strengths that represent unique skills or resources.)
•Distinctive competencyWhen Core competencies are superior to those of the competition. or A firm’s strengths that cant be easily matched or imitated by competitors. {Fred R David page 137} 15
16
Core CompetencyCore Competency -: -:
Work Force :- Well trained & flexible workforce . Facilities :- Well located facilities “ offices , stores ,
and plants “ Market & Financial Know how ??
Attract capital form stock sales , market & distributes it’s products , and ability to differentiate it’s product
System & technology . Having an Experts in IS , & New
Technology
At internal scanning ; we should link At internal scanning ; we should link the followings to the strategythe followings to the strategy -: -:
Integrating Strategy & Organizational Structures:
◦Simple structure - Functional structure◦Divisional structure - Strategic business
units
◦ Integrating Strategy & Culture
values , beliefs , rites , rituals , ceremonies
17
By Examine the internal environments , this will lead to a set of :-
Strengths . Weakness .
Global StrategiesGlobal Strategies -: -: It’s include buying foreign Parts or
services , combining with other parts to reduce risks & threats or planning ways to enter market when it’s forbidden .
This will be done by strategic alliance .
An agreement with another firms .
11 - -Collaborative EffortCollaborative Effort -: -:
An agreement between 2 companies , when the first company has core competency that the other company needs and can’t duplicate .
Strategic alliance Strategic alliance formsforms -: -:
22 - -Joint VenturesJoint Ventures
Agreement between 2 firms to jointly produce a products & services .
22 - - Joint VenturesJoint VenturesAdvantages
◦ Allows for sharing of risk (both financial and political)
◦ Provides opportunity to learn new environment
◦ Provides opportunity to achieve synergy by combining strengths of partners
◦ May be the only way to enter market given barriers to entry
Disadvantages◦ Requires more
investment than a licensing agreement
◦ Must share rewards as well as risks
◦ Requires strong coordination
◦ Potential for conflict among partners
◦ Partner may become a competitor
33 - -LicensingLicensingA contractual agreement whereby one
company makes an asset available to another company in exchange fo license fees, or some other form of compensation◦ Patent◦ Trade secret◦ Brand name◦ Product formulations
Advantages to LicensingAdvantages to LicensingProvides additional profitability
with little initial investmentProvides method of
circumventing tariffs, quotas, and other export barriers
Attractive ROILow costs to implement
Disadvantages to Disadvantages to LicensingLicensingLimited participationReturns may be lostLack of controlLicensee may become competitorLicensee may exploit company
resources
Market AnalysisMarket Analysis
4-27
What is Market segmentationWhat is Market segmentation??
The breaking down or building up of
potential buyers into groups called
Market Segments
Market SegmentsMarket Segments
4-29
How to determine the market How to determine the market segment :- segment :-
1. Demographic Factors :- age , income , educational level .
2. Psychological Factors :- pleasure , fear .
3. Industry factors :- specific technologies , certain materials , particular industry .
4-30
Benefits of Market SegmentationBenefits of Market Segmentation
1. Identifies opportunities for new product development
2. Helps design marketing programs most effective for reaching homogenous groups of buyers
3. Improves allocation of marketing resources
Need AssessmentNeed AssessmentThe second step in market
analysis , which identifies the needs of each segment , and assessing how well competitors addressing those needs .
Need AssessmentNeed AssessmentEach Market segment has market
needs , by which they can grouped into :- 1- Product – Service needs .“ product attributes “ prices , quality “2- Delivery System Need . “ process for delivering the products “ safety , delivery
speed “ 3- Volume needs . Attributes of the demand “ availability , prediction “ 4 – Other needs .Attributes related to the operations , such as
reputation , after sales services .
2-33
Competitive PrioritiesCompetitive Priorities
Cost 1. Low costQuality 2. High-performance
design3. Consistent quality
Time 4. Fast delivery5. On-time delivery6. Development speed
Flexibility 7. Customization8. Volume flexibility
2-34
Competitive PrioritiesCompetitive Priorities
CostQualityFlexibilitySpeed
35
Competitive Priorities-Competitive Priorities-
Four Important Operations Questions: Will you compete on –
Cost? Quality? Time? Flexibility?All of the above? Some? Tradeoffs?
©Wiley 2007 36
Competing on Competing on CostCost??
Offering products/services at a low price relative to
competitors.
◦ Typically high volume products
◦ Often limit product range & offer little customization
◦ Can use lower skill labor
◦ Low cost should not mean low quality
©Wiley 2007 37
Competing on Competing on QualityQuality??Quality may be defined differently by
customers versus employeesQuality dimensions:
1- High performance design: Superior features, high durability, & excellent customer service
2-Product & service consistency: Meets design specifications Error free delivery
Quality issues to address:◦ Product design quality – products/services must meet
requirements◦ Process quality will produce error-free products/services
Competing on Competing on TimeTime??
Time is one of the most important competitive priorities
Being first-to-deliver often wins the race
Time –related issues:
◦ Fast delivery:
Focused on shorter time between order placement and
delivery
◦ On-time delivery:
Deliver product exactly when needed every time
◦ Rapid development speed
Using concurrent processes to shorten product development
time
Competing on Competing on FlexibilityFlexibility??
The company’s environment often changes rapidly
Flexibility is needed to accommodate these changes◦ Product flexibility:
Easily switch production from one item to another Easily customize product/service to meet specific
requirements of a customer◦ Volume flexibility:
Ability to ramp production up and down to match market demands
©Wiley 2007 40
Are There Priority Are There Priority TradeoffsTradeoffs??
Emphasize priorities that support the business strategy, which may require “trade-offs”
Focus on “order qualifiers” and “order winners”◦ Which priorities are “Order Qualifiers”? e.g. Must have excellent quality since everyone expects it◦ Which priorities are “Order Winners”? e.g. Dell competes on all four priorities Southwest Airlines competes on cost McDonald’s competes on consistency FedEx competes on speed Custom tailors compete on flexibility◦ Can you have both high quality and low cost? e.g. Yes, Coke and Pepsi are good examples◦ Can you offer design flexibility and short delivery? e.g. Yes, modular housing manufacturers do it
Flow StrategyFlow Strategy
Flow strategies deal with how the operations of a firm are structured to develop a product or provide a service
In the software industry, they are often called “Process Strategies”
There are two extreme in flow strategies:◦Flexible flow strategyFlexible flow strategy◦Line flow strategyLine flow strategy
Flow StrategyFlow Strategy
Flexible flow: The customers, materials, or information move in diverse ways, with the path of one customer or job often crisscrossing the path that the next one will take.
Line Flow: The customers, materials or information move linearly from one operation to the next, according to a fixed sequence.
Flexible flow Example Flexible flow Example Health CentreHealth Centre
Physical exam
Broken arm
Flu
D
T
R P
B
D: Doctor (examination rooms)R: Radiology (X-ray)T: Triage (assess severity of illness)B: Blood (lab test)P: Pharmacy (fill prescriptions)
Broken arm
Flu
Physical exam
Flexible flow Example Flexible flow Example AAP - Compact 4 cylinderAAP - Compact 4 cylinder
A: Front-end body-to-chassis assembly
H: Hood attachmentF: Fluid fillingS: Start-up testing
Mid-sized
6 cylinder
Compact4 cylinder
A SH F
Mid-sized6 cylinder
Compact
4 cylinder
Capabilities
The Role of Flow StrategyThe Role of Flow Strategy
Operations strategyOperations strategy
• Process decisions• Quality decisions• Capacity,
location, and layout decisions
• Operating decisions
Flow strategy• Flexible flows• Intermediate
flows• Line flows
Typical Flow StrategiesTypical Flow StrategiesMake-to-Stock StrategyStandardized Services StrategyAssemble-to-Order StrategyMake-to-Order StrategyCustomized Services Strategy
Make to stock strategy :- The firms hold items in stock for
immediate delivery to customers . Mass Production :- large volumes of a standard product
for a mass marketStandardization Services
Strategy :-
Strategies based On FlowsStrategies based On Flows -: -:
Make-to-Order◦products and services are made to
customer specifications after an order has been received
Make-to-Stock◦products and services are made in
anticipation of demand
Assemble-to-Order◦products and services add options
according to customer specifications
Linking Flow Strategy Linking Flow Strategy with Competitive with Competitive
PrioritiesPriorities
Flexible Flows Line Flows
Tendency for customized products Tendency for standardized productsand services, with low volumes and services, with high volumes
High-performance design quality Consistent quality
More emphasis on customization More emphasis on low costand volume flexibility
Long delivery times Short delivery times
Flow Strategy