Summary Operations, Strategy and Operations Strategy

07.09.2016

Introduction
In this chapter, we seek to understand the inter-dependence of Strategy and Operations in a firm and
how they are essential to a firms survival in this competitive era. There is a common misconception
about Operations is that it is all about managing resources for day-to-day activities and hence it cannot
have a long term perspective. It needs to be corrected and linked with firms strategy. Strategy is the
most widely and also loosely used terms in business domain. Strategy is defined as The direction
and scope of an organization over the long-term, which achieves advantage in a changing environment
through its configuration of resources with the aim of fulfilling stakeholder expectations (Johnson et
al., 2005).
Strategic Alignment
When we talk about strategy there are three levels into it which need to be looked at Corporate
level strategy, Business level strategy and Function level strategy. These three strategy levels should
be aligned to each other in such a manner so that the broad corporate level strategy is carried out by
setting small goals in the functional levels. Once the message is clear, all the functions will carry out
their own operations to meet the Vision and Mission of the company.
Operations & Strategy
The link between Operations and Strategy comes into picture when managers are asked to manage
the resources available to achieve the broad level strategy of the firm. Managing and optimizing
available resources is essential for survival and prosperity of a firm within its environment over the
long term.
There are five operations performance objectives:
1 Cost: The ability to produce at low cost.
2 Quality: The ability to produce in accordance with specification and without error.
3 Speed: The ability to do things quickly in response to customer demands and thereby offer short
lead times between when a customer orders a product or service and when they receive it.
4 Dependability: The ability to deliver products and services in accordance with promises made to
customers (e.g. in a quotation or other published information).
5 Flexibility: The ability to change operations. Flexibility can comprise up to four aspects:

The ability to change the volume of production

The ability to change the time taken to produce
The ability to change the mix of different products or services produced
The ability to innovate and introduce new products and services

An organization can achieve operational excellence by having one or more of the above characteristics
but it is highly unlikely that any organization will have all of them. It is also not possible. Hence there
rises the need for trade-offs. An organization should trade-off with one or more areas to focus on one
or two particular areas to achieve operational excellence.
But on a different note, we see organizations being confused on which parameters to target upon and
this lack of clarity leads to suboptimal performance and often results in failure.

Sabyasachi Mukerji / M062-15 / IIM Ranchi PGP2

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Summary Operations, Strategy and Operations Strategy

07.09.2016

To be successful, any firm should prioritize its operations performance objectives and set a clear goal
as to which are its focus areas not many but a few.
It is worth noting, that some operations management scholars reject the concept of the trade-off.
They point to the ability of some organizations to outperform their competitors on multiple
dimensions. They appear to have better quality, greater dependability and a faster response to
changing market conditions and lower costs. It follows the opinion that certain operational capabilities
enhance one another and help achieve operational excellence in a cumulative fashion. And here
comes the Sandcone model of operational excellence:

Sabyasachi Mukerji / M062-15 / IIM Ranchi PGP2

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Summary Operations, Strategy and Operations Strategy

07.09.2016

The model believes that Quality is the first and foremost parameter a firm should focus on. It will
automatically enable the firm to gain a dependability and flexibility which will ultimately lead to Cost
leadership. There are firms who have achieved cost leadership without compromising on quality front.
An organizations operations can be a source of competitive advantage if they are managed
strategically in pursuit of a clear goal for operations. This can be achieved only if the resources are
managed in a strategic manner. And here comes the 4 stage model

Operations Strategy
Operations strategy concerns the pattern of strategic decisions and actions which set the role,
objectives and activities of operations. Mintzberg also had the same line of thought with his definition
of strategy being a pattern of stream of actions.

An organization may have some set of intended strategies but as far as feasibility is concerned, only
some are viable and implementable. These are called deliberate strategies. These set of strategies
coupled with Emergent strategy of the industry makes a firms Realized strategy.

Sabyasachi Mukerji / M062-15 / IIM Ranchi PGP2

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Summary Operations, Strategy and Operations Strategy

07.09.2016

Operations Strategy - Process

The top down model talks about the operations strategy being derived from the business strategy
whereas the bottom up model is just the reverse. The market-led perspective is one in which the
operations strategy is developed in response to the market environment in which the organization
operates. And the operations-led perspective is one in which its excellence in operations is used to
drive the organizations strategy.
Operations Strategy Content
The major strategic decision areas in Operations can be conveniently divided into ten categories under
two broad headings:
1. Structure
a. Facilities the location, size and focus of operational resources
b. Capacity the capacity of operations and their ability to respond to changes in
customer demand
c. Process Technology the technology of the equipment used in operations processes
d. Supply Network the extent to which operations are conducted in-house or are
outsourced
2. Infrastructure
a. Planning and Control (b). Quality management policies and practices
c. Organizational structures
(d) Human Resources
(e) New Product Development
f. Performance Measurement: financial and non-financial performance management
and its linkage to recognition and reward systems.

Sabyasachi Mukerji / M062-15 / IIM Ranchi PGP2

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