1

Chapter 2
Operations Strategy and
Competitiveness

McGraw-Hill/Irwin

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/Irwin

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

OBJECTIVES

Operations Strategy

Operations Strategy

Competitive Dimensions

Order Qualifiers and Winners

Strategy Design Process

A Framework for Manufacturing Strategy

Service Strategy Capacity Capabilities

Productivity Measures

Strategy Process

More Product

Corporate Strategy

Increase Org. Size

Operations Strategy

McGraw-Hill/Irwin

Decisions on Processes
and Infrastructure

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

Example

Customer Needs

McGraw-Hill/Irwin

Increase Production Capacity

Build New Factory

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

Competitive Dimensions

Cost or Price

Quality

Delivery Speed

Make the Product or Deliver the Service Cheap

Make a Great Product or Deliver a Great Service
Make the Product or Deliver the Service Quickly

Delivery Reliability

Coping with Changes in Demand

Flexibility and New Product Introduction Speed

Deliver It When Promised

Change Its Volume
Change It

Other Product-Specific Criteria

Support It

McGraw-Hill/Irwin

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

RR/CU MBA 2016-2018/T-II/Section N/S 04 of 20;

Dealing with Trade-offs

For example, if we reduce costs by reducing product
quality inspections, we might reduce product quality.
For example, if we
improve customer
service problem solving
by cross-training
personnel to deal with a
wider-range of
problems, they may
become less efficient at
dealing with commonly
occurring problems.
McGraw-Hill/Irwin

Cost

Flexibility

Delivery
Quality

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

Slide Credit: OM 11e by Aquilano, Chase, Jacob et.al.

Order Qualifiers and Winners

Service Breakthroughs

Defined
qualifiers are the basic
criteria that permit the firms
products to be considered as
candidates for purchase by
customers

Order

Repair services can be order

winners

winners are the criteria that

differentiates the products and
services of one firm from another

Order

McGraw-Hill/Irwin

A brand name
car can be an
order qualifier

Examples: Warranty, Roadside Assistance,

Leases, etc

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/Irwin

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

Operations Strategy Framework

Strategy Design Process

Strategy Map

14

Customer Needs

What it is about!
New product : Old product

Financial Perspective

Improve Shareholder Value

Competitive
dimensions & requirements

Customer Perspective

Internal Perspective

Customer Value Proposition

Quality, Dependability, Speed, Flexibility, and Price

Enterprise capabilities

Build-Increase-Achieve

Operations
Suppliercapabilities
Capabilities
Operationsand
& Supplier
R&DR&D

Learning and Growth Perspective

McGraw-Hill/Irwin

Technology

SystemsSystems
Technology

People
People

Distribution
Distribution

Support Platforms

A Motivated and Prepared

Workforce

Financial management

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

Human resource management

McGraw-Hill/Irwin

Information management

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

15

Steps in Developing a
Manufacturing Strategy

16

Service Strategy Capacity

Capabilities

1. Segment the market according to the

product group
2. Identify product requirements, demand
patterns, and profit margins of each group
3. Determine order qualifiers and winners for
each group
4. Convert order winners into specific
performance requirements

McGraw-Hill/Irwin

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

RR/CU MBA 2016-2018/T-II/Section N/S 04 of 20;

Process-based

Systems-based

Capacities that transforms material or information

and provide advantages on dimensions of cost and
quality
Capacities that are broad-based involving the entire
operating system and provide advantages of short
lead times and customize on demand

Organization-based

McGraw-Hill/Irwin

Capacities that are difficult to replicate and provide

abilities to master new technologies

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

Slide Credit: OM 11e by Aquilano, Chase, Jacob et.al.

17

What is Productivity?

Total Measure Productivity

Defined

Total Measure Productivity = Outputs

Inputs

Productivity is a common measure

on how well resources are being
used. In the broadest sense, it can
be defined as the following ratio:
Outputs
Inputs

McGraw-Hill/Irwin

18

or
= Goods and services produced
All resources used

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/Irwin

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

19

20

Multifactor Measure
Productivity

Partial Measure Productivity

Partial measures of productivity =

Output or Output or Output or Output

Labor

Capital

Materials

Multifactor measures of productivity =

Output
Labor

Energy

Capital

.
+

Energy

Materials

or

Output

Labor
McGraw-Hill/Irwin

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

McGraw-Hill/Irwin

Capital

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

21

22

Example of Productivity
Measurement

You have just determined that your service

employees have used a total of 2400 hours of
labor this week to process 560 insurance
forms. Last week the same crew used only
2000 hours of labor to process 480 forms.
Which productivity measure should be used?
Answer: Could be classified as a Total
Measure or Partial Measure.
Is productivity increasing or decreasing?

End of Chapter 2

Answer: Last weeks productivity = 480/2000 = 0.24,

and this weeks productivity is = 560/2400 = 0.23. So,
productivity is decreasing slightly.

McGraw-Hill/Irwin

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

RR/CU MBA 2016-2018/T-II/Section N/S 04 of 20;

McGraw-Hill/Irwin

2006 The McGraw-Hill Companies, Inc., All Rights Reserved.

Slide Credit: OM 11e by Aquilano, Chase, Jacob et.al.