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Operations Strategy

OPERATIONS STRATEGY

Definition of a strategy

Little agreement amongst either practitioners


academics
Misleading to attempt a single definition
Operations strategy is the total pattern of
decisions which shape the long term
capabilities of any type of operation and their
contribution to overall strategy
Slack Operations Strategy, Prentice Hall, 2002

or

OPERATIONS STRATEGY

3 LEVELS OF STRATEGY
Corporate
Strategy
Business
Level Strategy

Functional
Strategies

Corporate
Head Office
Company A

Company

Sales

Marketing

Marketing

R&D

Finance

Production

HR

Sales

R&D

OPERATIONS STRATEGY

EXAMPLE: 3 LEVELS OF STRATEGY


BAYER S.A.

Corporate
Strategy

Business
Level Strategy

Pharma

Functional
Strategies

Sales

Pesticides

Marketing

Chemicals

Finance

Plastics

R&D

Various

HR

OPERATIONS STRATEGY
Levels of strategic decision making

Level
Corporate
Strategy
[3-5 years
ahead]

Key Strategic Decisions


What business to be in (now & in
the future)?
What business to acquire or divest?
How to allocate financial resources?
Setting corporate values
How to manage the relationships
between businesses?

Influences on
decision making
Environment:
Market, political &
social

Company
ownership:
Values, ethics

OPERATIONS STRATEGY

Corporate Strategy
Often is not obvious to participants that an
organization has a corporate strategy

OPERATIONS STRATEGY
The Terminology of Strategy

Term
Mission

Definition
Overriding purpose in line
with the values or
expectations of stakeholders

A personal
example
Be healthy and fit

Vision or
Describes aspirations for the
strategic intent future, without specifying the
means that will be used to
achieve those desired ends
of the organization

To run the marathon

Goal

General statement of aim or


purpose in line with the
mission. Maybe qualitative

Lose weight and


strengthen muscles

Objective

Quantification (if possible) or


more precise statement of
the goal

Lose 10 Kg by 1
September and run
marathon in 2006

OPERATIONS STRATEGY
The Terminology of Strategy

Term

Definition

A personal example

Core
competences

Resources, processes
or skills which provide
competitive advantage

Proximity to a fitness
centre, supportive family
and friends and past
experience of successful
diet

Strategies

Long term direction

Associate with a
collaborative network (e.g.
join running club), exercise
regularly, compete in
marathons locally, stick to
appropriate diet

OPERATIONS STRATEGY

Term

Definition

A personal example

Strategic
architecture

Combination of
Specific exercise and diet
resources, processes and regime, appropriate training
competences to put
facilities, etc.
strategy into effect

Control

The monitoring of action


steps to:
Assess effectiveness of
strategies and actions
Modify strategies and/or
actions as necessary

Monitor weight, miles run and


measure times:
if satisfactory progress, do
nothing;
if not, consider other
strategies and actions

OPERATIONS STRATEGY

List of some Customer Needs necessary to develop business strategy


Low Price

Ability to satisfy customers requirements more


cost-effectively than competition

Product feature
/performance

The extend to which a product out-performs the


offerings of competition or offers more product
features

Quality & Reliability

The extend to which customers expectations are


satisfied or exceeded by the product or service,
and continue to be satisfied

After sales service

The effectiveness with which customers queries or


complaints are handled

Customization

The ability of the operations system to tailor its


output to meet special customers requirements

Rapid Innovation

The ability of OS to generate and launch new


products into market fast

Volume Flexibility

Ability to cope with abrupt market request

Fast & Reliable


Delivery

Fast & reliable service

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OPERATIONS STRATEGY

QUESTION
Match the following order winners with the products or
services from the list
order winners

Products/services

1. Low Price

a. IKEA

2. Product feature
/performance

b. Rolex

3. Quality & Reliability


4. After sales service
5. Customization
6. Rapid Innovation

c. UPS
d. Domino Pizza
e. PCs
f. Easy Jet

7. Volume Flexibility

g. Tailor

8. Fast & Reliable Delivery

h. Toyota

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OPERATIONS STRATEGY

Considering Customer Needs


ANSWER
1. Low Price

f. Easy Jet

2. Product feature /performance

b. Rolex

3. Quality & Reliability

h. Toyota

4. After sales service

h. TOYOTA

5. Customization

g. Tailor

6. Rapid Innovation

e. PCs

7. Volume Flexibility

a. IKEA

8. Fast & Reliable Delivery

d. Domino Pizza,
c. UPS

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OPERATIONS STRATEGY
Contents of an operations strategy

Success
factors
Low price
Wide variety
Quality
Delivery
Fast response
Reliability

Super
market

Fast Telephone
food services

Petrol
On-line
Financial
stations shopping services

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OPERATIONS STRATEGY

Approaches to determining operations strategy

Fast food restaurants have a rather sort list on the menu.


Could they extend it and still supply all items in as short a delivery
period?

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OPERATIONS STRATEGY

Approaches to determining operations strategy


Trade off (see-saw)
Examples:

Low Price vs. Available Variety

Delivery time vs. Flexibility

Quality vs. Absolute Cost

Personalized attention vs. Low cost of service

High quality service vs. Staff salaries

Performance
Objective 1

Performance
Objective 2

Performance
Objective 1

Performance
Objective 2

One aspect of performance


can be improved at the
expense of others

OPERATIONS STRATEGY

Approaches to determining operations strategy


Trade off
Can you always compromise? For example in the case of airplanes
we can trade off in cruising speed , passenger comfort but not in
safety.

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OPERATIONS STRATEGY

Approaches to determining operations strategy


Trade off
Can you always compromise? For example in the case of airplanes
we can trade off in cruising speed , passenger comfort but not in
safety.
Performance
Objective 2
Performance
Performance
Objective
2
Performance
Objective 1
Objective 1

Move the pivot


(=> continuous improvement)

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OPERATIONS STRATEGY

Order Qualifiers and Winners


Order qualifiers?
They are the basic criteria that permit the firms products to be
considered as candidates for purchase by customers.

Order winners?
They are the criteria that differentiates the products and
services of one firm from another.

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OPERATIONS STRATEGY

Service Breakthroughs

A brand name car can be


an order qualifier

Repair services can be order winners


Examples: Warranty, Roadside Assistance, etc.

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OPERATIONS STRATEGY

Order Qualifiers and Order Winners


EXAMPLES of
Order Qualifiers and
Order Winners?
A company will enter in its supplier list only these
suppliers that are accredited to one of the ISO
9000 quality standards.
Order Qualifiers?
Order Winners?

2-7

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OPERATIONS STRATEGY

Order Qualifiers and Order Winners


ANSWER
OQ
Fast food

Availability
Right

type of food
Low cost

of service
Perceived value for money
Cleanliness

Easy Jet

Availability

Value

University

2-7

OW
Speed

speed

for money
Dependability
Reliability

Range

Reputation

Convenience

of courses
Reputation
Accessibility

Accessibility
Cost

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OPERATIONS STRATEGY

Stage

Volume
Order qualifiers
Competitive
priority
Order winners
Customers
Competitors:

Typical
products

slow

rapid

slow

reputation

Price, range

quality

dependability

availability
quality speed

cost
dependability

cost

early adopters

bulk of market

laggards

increasing

many

declining

Product
characteristics
capability
novelty
innovators

few

decline

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