Production Management

Unit 1- Introduction and Operations Strategy

a. Competitive Positioning of Products and
Services
b. Strategic and Tactical Decisions of Operations
Management
25-03-2010

A Sanjeev raj

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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Today we are going to discuss about…

• Competitive Positioning of Products and

Services.
• Strategic Decisions.
• Tactical Decisions.

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Competitive Positioning of
Products and Services.

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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Competitive Positioning - Definition

“Position a firm occupies in a market, or is trying

to occupy, relative to its competition”.

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Competitive positioning – "Developing and
communicating powerful and meaningful
differences between your offerings and
those of your competition.”

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 In order for a firm to properly position themselves in the
market, the following tasks should be done.

1. Research The Competition:

a. Strengths and Weaknesses.
b. Competitor Strategy.
c. Future plans.

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 2. Research Your Customers by
categorizing them into different market
segments.

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 3. Research Your Company "Company research is best
done after the competitive and customer research.

What you need to find is the truth about your company

and how it really works.

In objective terms, who is directing the future? Are there

unrecognized strengths?

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 4. Decision to Focus - "The decision to
focus involves the decision to take
resources away from unimportant or weak
product lines and place it in strong, core
areas. This can be difficult because the
most distracting products are often the
most novel and interesting.”

5. Involve your people in the decision

process.

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Competitive Positioning at the Business Level

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Generic Business-Level Strategies
1. Cost Leadership
Lowest cost structure vis-à-vis competitors allowing price
flexibility & higher profitability

2. Focused Cost Leadership

Cost leadership in selected market niches where it has a local or
unique cost advantage

3. Differentiation
Features important to customers & distinct from competitors that
allow premium pricing

4. Focused Differentiation
Distinctiveness in selected market niches where it better meets
the needs of customers than the broad differentiators

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Cost Leadership
Cost leaders establish a cost structure that
allows them to provide goods and services
at lower unit costs than competitors.
Strategic Choices:
– The cost leader does not try to be the industry
innovator.
– The cost leader positions its products and services to
appeal to the “average” or typical customer.
– The overriding goal of the cost leader is to increase
efficiency and lower its costs relative to industry rivals.

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Differentiation
Companies with a differentiation strategy
create a product that is different or distinct
from its competitors in an important way.
Strategic Choices:
– A differentiator:
• Strives to differentiate itself on as many dimensions as
possible.
• Focuses on quality, innovation, and responsiveness to
customer needs.
• May segment the market in many niches.
• Concentrates on the organizational functions that provide a
source of distinct advantages.

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Focus
The focuser strives to serve the need of a
targeted niche market segment where it has
either a low-cost or differentiated competitive
advantage.
Strategic Choices:
– The focuser selects a specific market niche that may be based on:
 Geography.
 Type of customer.
 Segment of product line.
– Focused company positions itself as either:
 Low-Cost or
 Differentiator.

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Competitive Positioning:
Choosing an Investment Strategy
• The amount and type of resources that must be invested
to maximize a company’s profitability over time
– Human.
– Functional.
– Financial.

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Stages in the Industry Life Cycle

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Strategic and Tactical Decisions of
Operations Management

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Operations Management Decision
Types

• Strategic (long-term).
• Tactical (intermediate-term).
• Operational planning and control
(short-term).

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Strategic Decisions
• These decisions are of strategic
importance and have long-term
significance for the organization.
• Examples include deciding:
– The design for a new product’s production
process.
– Where to locate a new factory.
– Whether to launch a new-product
development plan.

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Strategic Decisions
Additional E.g.,

Defining the Goals, making policies,

Determination of organizational
objectives, etc are taken at the top
management level.

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Production/Operations
E.g.,

Alternative manufacturing approaches and

alternative approaches to automation.

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Tactical Decisions
These are taken at the middle
management level,
which include acquisition of resources,
plant location, new products
establishments and monitoring of
budgets, etc.

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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• Tactical decisions focus on:
– Specific day-to-day issues
• Resource needs, schedules, & quantities to
produce.
– Tactical decisions are very frequent.
– Tactical decisions must align with strategic
decisions.

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Production/Operations
E.g.,

Summary reports which compare overall

planned or standard performance for such
classifications as cost per unit and labor
used.

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 OM Decisions – Strategic Vs.
Tactical

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Overview
• “Position a firm occupies in a market, or is trying to occupy,
relative to its competition”- Competitive Positioning.
• The decisions are of strategic importance and have long-
term significance for the organization – Strategic Decisions.
• Tactical decisions focus on:
– Specific day-to-day issues
• Resource needs, schedules, & quantities to produce.

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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 Thank You

KVIMIS-MBA0931-PM 1. Introduction and Operations Str

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