OOperation peration SStrategytrategy forfor

CCompetitorsompetitors

CCompetitivenessompetitiveness How effectivelyHow effectively an organization meets the an organization meets the wantswants

and and needs needs of of customerscustomers relative to others that offer relative to others that offer similar goods or services similar goods or services

Competitiveness is the important factor in Competitiveness is the important factor in determiningdetermining about the about the prospects of a companyprospects of a company. . This shows This shows whetherwhether companycompany failsfails or or barely getsbarely gets alongalong or progresses. The key factor is from where it or progresses. The key factor is from where it can be identified,can be identified,

PricePrice Product or ServiceProduct or Service FlexibilityFlexibility QualityQuality Time to perform certain activitiesTime to perform certain activities

PricePrice It is a amount that customer is It is a amount that customer is ready to payready to pay for for product or servicesproduct or services

The organ that The organ that competescompetes on on priceprice may settle to may settle to get fewer get fewer margins in profit.margins in profit.

QualityQuality It refers to materials used, workmanship and It refers to materials used, workmanship and designdesign

It relates to It relates to buyers perceptionbuyers perception, that how well the product , that how well the product serve the serve the purpose of buyerpurpose of buyer..

Product DifferentiationProduct Differentiation There must be There must be identityidentity of the of the product comparing from other similar products in case of product comparing from other similar products in case of special features that are not offered by any other companyspecial features that are not offered by any other company to to same product ( e.g. design, cost, Qty, ease to use, same product ( e.g. design, cost, Qty, ease to use, convenient location, warranty)convenient location, warranty)

FlexibilityFlexibility Ability to respond to changes as pointed out by Ability to respond to changes as pointed out by customer. The changes might increase or decrease in customer. The changes might increase or decrease in volume demandedvolume demanded, or , or changes designchanges design of of product servicesproduct services..

TimeTime How How quicklyquickly a product or a product or service deliveredservice delivered.. How quickly How quickly productproduct/ service/ service developed developed and brought to and brought to

market. The rate at which improvement in product/ service market. The rate at which improvement in product/ service made.made.

WWhy Some Organizations Fail hy Some Organizations Fail ?? Too much emphasis on Too much emphasis on short-termshort-term financial financial

performanceperformance Failing to take advantage of strengths and Failing to take advantage of strengths and opportunitiesopportunities Failing to recognize competitive Failing to recognize competitive threatsthreats Neglecting operations Neglecting operations strategystrategy Too much Too much emphasisemphasis in in productproduct and and service, designservice, design and and

not enough on improvementnot enough on improvement Neglecting investmentsNeglecting investments in in capital capital and and HrHr Failing Failing to establish good to establish good internal communicationsinternal communications Failing to consider Failing to consider customer wantscustomer wants and needs and needsThe key to success is determineThe key to success is determine customer needscustomer needs and and

thenthen efforts to meetefforts to meet customers expectationcustomers expectation

VALUEVALUE is the is the customer wantcustomer want and and needneed and and how to how to deliverdeliver him the value is another question him the value is another question

Value = Value = PerformancePerformance/ Cost = / Cost = (QTY + Speed + Flexibility)/ Cost(QTY + Speed + Flexibility)/ Cost In this model In this model product differentiationproduct differentiation is the part of the is the part of the

Qty Qty This relationship says that customer will evaluate a This relationship says that customer will evaluate a

product or service by its product or service by its performance performance relative to its relative to its cost.cost.

As the nature of product and service As the nature of product and service some times some times quality may be less important than Speed and quality may be less important than Speed and flexibility.flexibility.

A manager can incorporate these differences by A manager can incorporate these differences by weighing each performance factor according to its weighing each performance factor according to its importanceimportance

VALUE = (VALUE = (W1W1 QTY* QTY* W2W2 Speed* Speed* W3 W3 Flexi)/ CostFlexi)/ Cost

SStrategiestrategies

Examples of StrategiesExamples of Strategies

Low costLow costScale-based strategiesScale-based strategiesSpecializationSpecializationFlexible operationsFlexible operationsHigh qualityHigh qualityServiceService

SStrategiestrategiesStrategiesStrategies

Plans for achieving organizational goalsPlans for achieving organizational goals

MissionMission The reason for existence for an organizationThe reason for existence for an organization

Mission StatementMission Statement Answers the question “What business are we in?”Answers the question “What business are we in?”

GoalsGoals Provide detail and scope of missionProvide detail and scope of mission

TacticsTactics The methods and actions taken to accomplish strategiesThe methods and actions taken to accomplish strategies

How does mission, strategies and tactics relate todecision making and distinctive competencies?

StrategyStrategy TacticsTacticsMissionMission

Strategy ExampleStrategy Example

Rita is a high school student. She would like to have a career in Rita is a high school student. She would like to have a career in business, have a good job, and earn enough income to live business, have a good job, and earn enough income to live comfortablycomfortably

Mission: Mission: Live a good lifeLive a good life Goal: Goal: Successful career, good incomeSuccessful career, good income Strategy: Strategy: Obtain a college educationObtain a college education Tactics: Tactics: Select a college and a majorSelect a college and a major Operations: Operations: Register, buy books, takeRegister, buy books, take

courses, study, graduate, get jobcourses, study, graduate, get job

Planning and Decision MakingPlanning and Decision Making

Mission

Goals

Organizational Strategies

Functional Goals

Finance Strategies

MarketingStrategies

OperationsStrategies

Tactics Tactics Tactics

Operatingprocedures

Operatingprocedures

Operatingprocedures

MM iss ioniss ion The The Basic philosophyBasic philosophy of the firm of the firm Mission statement emanates from entrepreneurMission statement emanates from entrepreneur of from major of from major

strategists in the firm development.strategists in the firm development. The mission can be seen as a The mission can be seen as a link betweenlink between performing some performing some social social

functionfunction and its and its targetstargets / objectives. / objectives. The carefully defined mission itself provides an The carefully defined mission itself provides an explicit statementexplicit statement

to to insiders and outsidersinsiders and outsiders.. Mission can be Mission can be broad broad as to as to loose meaningloose meaning or so abstract or so abstract (that they appear only in (that they appear only in public pronouncement of idealspublic pronouncement of ideals that that

are are different to achievedifferent to achieve)) A A goodgood mission should be mission should be brief, simple straight forwardbrief, simple straight forward must must

focus on customers need and utilities.focus on customers need and utilities. A clear mission should be A clear mission should be inspiration to employeesinspiration to employees which which leads leads to to

commitment, commitment, loyalty loyalty to corporationto corporation The mission The mission once establishedonce established can not be changedcan not be changed easily as they easily as they

become critical component of the corporate culture.become critical component of the corporate culture.

For instance IBM has tried to change its mission several times For instance IBM has tried to change its mission several times but the critical elements established by Thomas Watson but the critical elements established by Thomas Watson company’s founder in the mission statement still encourages company’s founder in the mission statement still encourages IBM sales function to attempt to achieve IBM sales function to attempt to achieve “Quota” , “share “Quota” , “share from the market”from the market” by the end of the year, rather than seeking by the end of the year, rather than seeking to provide customers with “solutions” or to promote non to provide customers with “solutions” or to promote non frame sales.frame sales.

Good missionsGood missions tend to be simple and tend to be simple and easy to understandeasy to understand at all at all levels of an organization.levels of an organization.

They stimulate enthusiasm and They stimulate enthusiasm and commitment amongst commitment amongst employees.employees.

They are They are challengingchallenging.. They are They are short, easy to absorbshort, easy to absorb, accepted, and are frequently , accepted, and are frequently

repeated.repeated. General Motors in USA mission statementGeneral Motors in USA mission statement ““Be number 1 or 2 in the world or sell it, close it, or fix it”Be number 1 or 2 in the world or sell it, close it, or fix it” Such type of brief clear statements Such type of brief clear statements

Example ofExample of MM i ss ion iss ion SS tatements 1tatements 1 Circle- KCircle- K 1.1. We believe our primary business is not so much We believe our primary business is not so much

retail as it is service oriented.retail as it is service oriented.2.2. Certainly our customer’s buy merchandise in our Certainly our customer’s buy merchandise in our

store but they can buy similar items else where store but they can buy similar items else where and perhaps pay lower prices.and perhaps pay lower prices.

3.3. But they are waiting to buy from circle –K But they are waiting to buy from circle –K because because we give them added value for their we give them added value for their money.money.

4.4. That That added value is service and convenienceadded value is service and convenience..5.5. As a service company our mission is to satisfy As a service company our mission is to satisfy

customer immediate needs and want by customer immediate needs and want by providing them with wide verity of good and providing them with wide verity of good and services at multiple locationsservices at multiple locations

Example ofExample of MM i ss ion iss ion SS tatements 2tatements 2American Air LineAmerican Air LineFor customerFor customer We will be global market in air transportation & related We will be global market in air transportation & related

information serviceinformation service That leadership will be attained by: That leadership will be attained by: Setting industry standards for safety and securitySetting industry standards for safety and security Providing world class customers servicesProviding world class customers servicesEmployee’s orientedEmployee’s oriented Creating an open and participative work environment that seeks Creating an open and participative work environment that seeks

positive changes:positive changes: Rewards innovations and provide growthRewards innovations and provide growth Security and opportunity to all employeesSecurity and opportunity to all employeesShareholder orientedShareholder oriented Providing consistently superior financial returns for Providing consistently superior financial returns for

shareholdersshareholders

SS trategies , trategies , GG oals and oals and TT acticsactics A mission statement provides general purpose of the A mission statement provides general purpose of the

organizational goals.organizational goals.

GoalsGoals One goal of an organization may be to capture certain One goal of an organization may be to capture certain % age% age of of

market share for a product.market share for a product. Another goal may be to achieve Another goal may be to achieve certain level of profitcertain level of profit abilities abilities The goal and mission The goal and mission establishes a destinationestablishes a destination of organization. of organization. To achieveTo achieve the the goalsgoals we have to we have to plan a strategyplan a strategy.. Behind the strategy is Mission. Behind the strategy is Mission. StrategyStrategy provides focus on decision makingprovides focus on decision making..

Organization Strategies are for the entire organ, which already has Organization Strategies are for the entire organ, which already has functional strategies in it s functional area. And each manager of functional strategies in it s functional area. And each manager of functional area makes his decisions in the environment of his functional area makes his decisions in the environment of his company strategy.company strategy.

TT acticsactics These are methods to accomplish the strategies. They provide These are methods to accomplish the strategies. They provide

specifically direction and guidance for carrying out actual specifically direction and guidance for carrying out actual operation of the strategy.operation of the strategy.

Tactics become the Tactics become the partpart of the of the ProcessProcess Tactics is how to Tactics is how to reach reach the the destinationdestination Operation is actual Operation is actual doingdoing of of processprocess

ConcludingConcluding We process the tactics and the process moves to becomes We process the tactics and the process moves to becomes operation. The tactics are logical derived from quantitative techniques. Behind operation. The tactics are logical derived from quantitative techniques. Behind the tactics is strategy which is running to complete a goal in one functional unit. the tactics is strategy which is running to complete a goal in one functional unit. It the goals are fulfilled one by one it fills the purpose of the mission. It the goals are fulfilled one by one it fills the purpose of the mission.

MissionMission--------GoalsGoals--------StrategyStrategy ----- -----Functional Functional --------FinanceFinance----- ----- tacticstactics--------Opt proceduresOpt procedures Of OrganOf Organ Strategy Strategy MarketingMarketing------ tactics- tactics-------Opt proceduresOpt procedures OperationOperation---- ---- tactics-tactics-------Opt proceduresOpt procedures

OO perations perations SS trategytrategy Organization strategy provides overall direction, it is broad Organization strategy provides overall direction, it is broad

scope. Operation strategy is narrow scope primarily dealing scope. Operation strategy is narrow scope primarily dealing with only operation aspects which relates towith only operation aspects which relates toProducts, Processes, Methods, Operating Resources,Products, Processes, Methods, Operating Resources,

Quality, Cost, Lead time, SchedulingQuality, Cost, Lead time, Scheduling The senior managers of organization should sit with The senior managers of organization should sit with

functional managers and work together to capitalize the functional managers and work together to capitalize the strengths rather then dealing with weaknesses before making strengths rather then dealing with weaknesses before making strategy.strategy.

As obvious this doest happen in reality as we find power As obvious this doest happen in reality as we find power struggle with in the functional units. Some of the latest struggle with in the functional units. Some of the latest approaches in organizations, relating team of managers and approaches in organizations, relating team of managers and workers may reflect growing awareness of the synergistic workers may reflect growing awareness of the synergistic effect of working together rather then competing internally.effect of working together rather then competing internally.

How Organization and Operation Strategies gave birth to How Organization and Operation Strategies gave birth to

SStrategy trategy FFormulationormulation As a matter of fact the As a matter of fact the operation strategyoperation strategy has a major has a major

influence on the competitiveness of an organization.influence on the competitiveness of an organization. In 1970 to 80 early the operation strategy was neglected In 1970 to 80 early the operation strategy was neglected

due to due to importanceimportance given to given to financial and marketingfinancial and marketing strategies. It was because the strategies. It was because the operation managersoperation managers used used to come from the to come from the financial and marketingfinancial and marketing backgrounds.backgrounds. In fact it was a merger of different departments that In fact it was a merger of different departments that conglomerated jointly, dissimilar in nature types of conglomerated jointly, dissimilar in nature types of offices, and appointed operation managers for the post. offices, and appointed operation managers for the post. Such managers could not infuse the soul of techniques Such managers could not infuse the soul of techniques of the operation management except financial and of the operation management except financial and marketing reforms.marketing reforms.

Meanwhile the foreign competitors began to fill the Meanwhile the foreign competitors began to fill the resulting vacuum with operation strategy in USA.resulting vacuum with operation strategy in USA.

In 1980 and early 90s they started realizing the In 1980 and early 90s they started realizing the approach of approach of domestic functional managersdomestic functional managers was was incorrectincorrect and that of foreign companies is correct. and that of foreign companies is correct.

Towards that end many firms developing strategies Towards that end many firms developing strategies had become had become Quality Quality and and TimeTime as their central as their central concern.concern.

The The surveysurvey of manufacturing executives who were of manufacturing executives who were asked to identify strategic and tactical issues that asked to identify strategic and tactical issues that US US manufacturers must focusmanufacturers must focus on to be competitive on to be competitive on a on a global basis in the 1990.global basis in the 1990.

The The top issuestop issues were were QCMQCM and manufacturing and manufacturing planning and control. This shows that the planning and control. This shows that the Functional Functional UnitsUnits operational strategy operational strategy has to be joinedhas to be joined with with Organizational StrategyOrganizational Strategy for the for the Strategy formulationStrategy formulation..

After the War iiAfter the War ii some of the Japanese manufacturing some of the Japanese manufacturing

companies had different strategiescompanies had different strategies

19451945 Use of Use of inexpensive laborinexpensive labor pool just after war pool just after war 1960 1960 High labor productivityHigh labor productivity and low unit cost price and low unit cost price 19701970 Small factoriesSmall factories focus on small products and achieved focus on small products and achieved

specializationspecialization 1980 1980 FlexibleFlexible equipment, change design and volume of product equipment, change design and volume of product

hurriedly, for new products, only quality was stressed upon hurriedly, for new products, only quality was stressed upon Quality Quality

1. Low labor cost strategy 1. Low labor cost strategy 19451945 2. Scale based strategy by high labor productivity 2. Scale based strategy by high labor productivity 19601960 3. Focused factories strategy 3. Focused factories strategy 19701970 4. Flexible factories strategy 4. Flexible factories strategy 19801980 In In 19901990 the leading Japanese manufacturer adopted an approach the leading Japanese manufacturer adopted an approach incorporates new product features and practicing improvement of incorporates new product features and practicing improvement of both both Product Product and and Processes Processes

SS trategy trategy

FF ormulationormulation 11- - DDistinctive istinctive CCompetencies ompetencies

22 - - EEnvironmental nvironmental SScanning canning 3 3 –– SWOT SWOT 4- 4- OOrder rder wwinner and inner and OOrder rder QQualifierualifier

SS trategy trategy FF ormulationormulation 1. For the purpose of formulation strategies senior manager 1. For the purpose of formulation strategies senior manager

must take in to account the must take in to account the Distinctive CompetenciesDistinctive Competencies

2. Scanning of environment2. Scanning of environment of the organization. of the organization.

3 . SWOT3 . SWOT The senior manager must know what competitors are doingThe senior manager must know what competitors are doing

What competitors are planning to doWhat competitors are planning to do

That must be taken in to accountThat must be taken in to account

Other factors that have positive or negative affectsOther factors that have positive or negative affects ..

All this is referred to All this is referred to SWOT SWOT that you have to see in the that you have to see in the

Organization,. Organization,. Strength, Weakness, Opportunity, ThreatsStrength, Weakness, Opportunity, Threats..

4.4. Formulating successful strategy we have to account both Formulating successful strategy we have to account both Order qualifiers, Order winnerOrder qualifiers, Order winner

1- 1- DD i st inctive ist inctive CC ompetenciesompetencies

These are those These are those special features of the special features of the organization due to organization due to which it has the edge which it has the edge over others over others organizations.organizations.

It is the way an It is the way an organization competes.organization competes.

2-14 Competitiveness, Strategy, and Productivity

Strategy and TacticsStrategy and Tactics

• Distinctive CompetenciesThe special attributes or abilities that give anorganization a competitive edge.• Price• Quality• Time• Flexibility• Service• Location

Banks, ATMs, Dry cleanerService station

ConvenienceLocationLocation

Disneyland, Hewlett Packard, Nordstrom's, IBM

Superior customer service

ServiceService

Burger KingSupermarkets

VarietyVolume

FlexibilityFlexibility

Express Mail, FedEx, PizzaOne-hour photo, UPS

Rapid deliveryOn-time delivery

TimeTime

Sony TV, 5* HotelsLexus, CadillacPepsi, Kodak, MotorolaXerox, Electric Power

High-performance design or high quality Consistent quality

QualityQuality

U.S. first-class postageMotel-6, Red Roof InnsMail order computer

Low CostPricePrice

Examples of Distinctive CompetenciesExamples of Distinctive Competencies

The most effective organization is in which one can perceive The most effective organization is in which one can perceive that that distinctive competenciesdistinctive competencies are based on are based on customers needcustomers need..

The organization must know The organization must know what competitorwhat competitor is doing is doing right nowright now

The marketing and operations should The marketing and operations should work togetherwork together If the competitor is making high quality product, then that If the competitor is making high quality product, then that

should be should be base line for us.base line for us. Only matching with competitor’s product is not only to Only matching with competitor’s product is not only to

survive, rather you have to make a survive, rather you have to make a higher product to gain higher product to gain the share in the marketthe share in the market..

It may be that instead of increasing your qty level you It may be that instead of increasing your qty level you excel in excel in one or moreone or more other other dimensionsdimensions such as delivery leveling time, such as delivery leveling time, after sale serviceafter sale service..

It is necessary that It is necessary that some edge over the othersome edge over the other competitors is competitors is essential on some of the parameters of the product by your essential on some of the parameters of the product by your company.company.

2 -2 - EE nvironmental nvironmental SS canningcanning It is considering of It is considering of events and trendsevents and trends that present that present threats or opportunitiesthreats or opportunities for companies. for companies. 1.1. These are competitor’s activitiesThese are competitor’s activities Changing consumer needsChanging consumer needs LegalLegal EconomicsEconomics PoliticalPolitical Environmental IssuesEnvironmental Issues The potential for new marketThe potential for new market Depending on nature of the organization and the location of the customers, these Depending on nature of the organization and the location of the customers, these

issues may be global, national, regional, or local. Like: issues may be global, national, regional, or local. Like: 1. 1. Disintegration of Soviet Union in 1991-92Disintegration of Soviet Union in 1991-92 2. Reunification of Germany2. Reunification of Germany 3. Formation of European Union3. Formation of European Union These changes had major in puts in to the Strategic Planning of such Global These changes had major in puts in to the Strategic Planning of such Global

Companies.Companies. Like Like Pepsi Cola, Coca-Cola, Kodak, General motors, IBMPepsi Cola, Coca-Cola, Kodak, General motors, IBM But little direct impact on local businessman, supermarkets, landscaping Local But little direct impact on local businessman, supermarkets, landscaping Local

suppliers for Global companies may also be affected due to these international suppliers for Global companies may also be affected due to these international events.events.

22.. Another factor is technological change Another factor is technological change

In productsIn products (High definition TV, improved chips, improved (High definition TV, improved chips, improved cell phones, improved design of earth quake proof structure)cell phones, improved design of earth quake proof structure)

In ServicesIn Services (faster ordering processing, faster delivery)(faster ordering processing, faster delivery)

In processesIn processes (Robotics, automation, computer assisting (Robotics, automation, computer assisting processing, point of sale scanners, flexible manufacturing processing, point of sale scanners, flexible manufacturing system)system)

The obvious benefit is competitive edge in which, the risk that if The obvious benefit is competitive edge in which, the risk that if the wrong choice of the wrong choice of automationautomation is adopted where it could be done is adopted where it could be done with out it may have with out it may have competitive disadvantagecompetitive disadvantage of higher operating of higher operating

costscosts..

External FactorsExternal Factors

Important External FactorsImportant External Factors Economic ConditionsEconomic Conditions Health and direction of economy, Health and direction of economy,

inflation, deflection, taxes, trafficinflation, deflection, taxes, traffic

Political ConditionPolitical Condition Political stability, instability unfavorable for Political stability, instability unfavorable for the businessthe business

Legal EnvironmentLegal Environment Govt. regulations, trade restrictions, Govt. regulations, trade restrictions, minimum wage law, product liability Law, anti trust Law.minimum wage law, product liability Law, anti trust Law.

TechnologyTechnology The rate at which product innovations are The rate at which product innovations are occurring, current and future process technology (equipment, occurring, current and future process technology (equipment, material handling)material handling)

CompetitionCompetition On account of price, Qty, special features of On account of price, Qty, special features of competitors, Ease to enter market competitors, Ease to enter market

MarketsMarkets This includes brand Loyalties, location, size, and ease of This includes brand Loyalties, location, size, and ease of entry, potential of growth, long term stability, and demographicsentry, potential of growth, long term stability, and demographics

Internal FactorsInternal Factors

Important Internal FactorsImportant Internal Factors

Human ResourceHuman Resource Skills of managers and worker, Special talents, Skills of managers and worker, Special talents, (creativity, designing, problem solving, loyalties to the organization, expertise (creativity, designing, problem solving, loyalties to the organization, expertise and dedication)and dedication)

Facilities and EquipmentFacilities and Equipment Capacities, location, age, and cost to maintain Capacities, location, age, and cost to maintain or replace can have significant impact on operationsor replace can have significant impact on operations

Financial ResourcesFinancial Resources Cash flow access to additional funding, existing debt Cash flow access to additional funding, existing debt Burdon, cost of capital are important considerationBurdon, cost of capital are important consideration

Customers Customers Loyalty, existing relationship, understanding of wants and needs Loyalty, existing relationship, understanding of wants and needs are importantare important

Product and ServiceProduct and Service Potential of new product and servicePotential of new product and service

TechnologyTechnology The ability to integrate new technology, the problems of new The ability to integrate new technology, the problems of new technology on current and future operationstechnology on current and future operations

Supplier Supplier Dependability of suppliers, Quality, flexibility and service, and Dependability of suppliers, Quality, flexibility and service, and relationship with suppliersrelationship with suppliers

OthersOthers Other factors include labor relation, company and product image, Other factors include labor relation, company and product image, distribution channel, relationship with distributors, maintenance of facilities distribution channel, relationship with distributors, maintenance of facilities and equipment, access to resources, access to market.and equipment, access to resources, access to market.

SWOTSWOT andand Strategic Choice Strategic Choice

Strategy FormulationStrategy Formulation

Internal Internal

Potential Potential Strengths Strengths Potential Potential

WeaknessesWeaknesses Core skillsCore skills Adequate financesAdequate finances Good customer perceptionGood customer perception High market shareHigh market share High productivityHigh productivity High product/ service qualityHigh product/ service quality Low production costsLow production costs Superior R&DSuperior R&D High Innovation RecordHigh Innovation Record Good Top ManagementGood Top Management Proprietary TechnologyProprietary Technology Access to DistributionAccess to Distribution Political ProtectionPolitical Protection Well established strategyWell established strategy OthersOthers

Lack of Strategic DirectionLack of Strategic Direction Obsolete PlantObsolete Plant Weak IT SystemWeak IT System Weak Control SystemWeak Control System Lack of FinanceLack of Finance Lack of Management SkillsLack of Management Skills Internal Power StruggleInternal Power Struggle Weak Marketing SkillsWeak Marketing Skills Lack of Raw Material AssessLack of Raw Material Assess Poor access to DistributionPoor access to Distribution High Cost StructureHigh Cost Structure Poor Product QualityPoor Product Quality Poor Record on InnovationPoor Record on Innovation OthersOthers

ExternalExternal

Potential Potential Opportunit ies Opportunit ies Potential Potential

ThreatsThreats Entry to new market segmentEntry to new market segment Diversification to related activitiesDiversification to related activities Vertical Integration Vertical Integration

((forward or backward)forward or backward)

High Growth ProspectsHigh Growth Prospects Export MarketsExport Markets Weak CompetitorsWeak Competitors Government ContractGovernment Contract DeregulationDeregulation othersothers

New Low cost CompetitorsNew Low cost Competitors Technological SubstitutesTechnological Substitutes Slow GrowthSlow Growth New Regularity RequirementsNew Regularity Requirements Foreign Exchange ratesForeign Exchange rates Bargaining Power of Bargaining Power of

Customers/SuppliersCustomers/Suppliers Adverse Demographic ShiftAdverse Demographic Shift Vulnerable to RecessionVulnerable to Recession Changing Consumer NeedsChanging Consumer Needs OthersOthers

3 - 3 - SWOTSWOT and Strategic Choiceand Strategic Choice Strategy Strategy

FormulationFormulation

With CompaniesWith Companies The comparison of S,W,O,T is referred to as SWOAT analysis The comparison of S,W,O,T is referred to as SWOAT analysis The main purpose of SWOT analysis is to The main purpose of SWOT analysis is to identify strategies that identify strategies that

fit or match a company’s resourcesfit or match a company’s resources, and capabilities , and capabilities to the to the demands of the environmentdemands of the environment in which company operates. in which company operates.

Internal Internal (Strength, Weaknesses)------------>(Strength, Weaknesses)------------>Build and correctBuild and correct

External External (Opportunities, Threats)---------->(Opportunities, Threats)---------->Company generate Alternative strategiesCompany generate Alternative strategies StrengthStrength -------needs ------ -------needs ------Building upBuilding up WeaknessWeakness------needs-------------needs-------CorrectionCorrection OpportunityOpportunity----should---------should-----be exploitedbe exploited ThreatsThreats----------are-------------------are---------EncounteredEncountered

In other words for the purpose generating strategic alternatives by In other words for the purpose generating strategic alternatives by SWOT analysis should be we to build up on a company’s SWOT analysis should be we to build up on a company’s strengthstrength in order to exploit in order to exploit opportunitiesopportunities , encounter , encounter threats threats and correct and correct weaknesses.weaknesses.

SWOT is a SWOT is a simple toolsimple tool for determining strategic for determining strategic position of the company.position of the company.

It is It is used byused by senior executivessenior executives who are undertaking a who are undertaking a fundamental reappraisal of business.fundamental reappraisal of business.

It gives to It gives to Executives free thinking environmentExecutives free thinking environment unencumbered by constraints often imposed by unencumbered by constraints often imposed by finance driven budgetaryfinance driven budgetary planning system. planning system.

It also allows a It also allows a test of perceived common purposetest of perceived common purpose with with in an organization when carried out in an organization when carried out at various levels in at various levels in the firm.the firm.

For strategy formulation the firm attempts to For strategy formulation the firm attempts to build build upon its upon its Strength Strength and and eliminateeliminate its its weaknesses.weaknesses. When When the firm does not possess the skills required to take the firm does not possess the skills required to take advantage ofadvantage of opportunitiesopportunities or or avoid Threatsavoid Threats, the , the necessary resources may be identified from SWOT necessary resources may be identified from SWOT analysis and step up to procure the strength or reduce analysis and step up to procure the strength or reduce weaknesses.weaknesses.

4- 4- OO rder rder ww inner inner and and OO rder rder

QQ ualif ierualif ier Terry Hills describes Terry Hills describes

Order QualifierOrder Qualifier Those characteristics that Those characteristics that potential customer perceives as minimum potential customer perceives as minimum standards of acceptability to be considered as a standards of acceptability to be considered as a potential for purchasepotential for purchase

Order WinnerOrder Winner Those characteristics of an Those characteristics of an organization’s goods or services that cause them organization’s goods or services that cause them to be perceived as to be perceived as better than the competitorsbetter than the competitors

QQ uality and ual ity and TT ime ime ss trategiestrategiesCost minimization strategy is the traditional strategy of the Cost minimization strategy is the traditional strategy of the business administration. But now some of the organizations have business administration. But now some of the organizations have adopted new strategies of adopted new strategies of Qty Qty andand Time Time along with along with cost cost minimizationminimization. These two approaches are gaining popularity in the . These two approaches are gaining popularity in the business sphere.business sphere.Quality StrategyQuality Strategy It is based on satisfying the customer only qty in all It is based on satisfying the customer only qty in all

phases of organization. The phases of organization are such as phases of organization. The phases of organization are such as design, production service after sale etc .In all of these qty must design, production service after sale etc .In all of these qty must be maintained separately.be maintained separately.

Time based StrategyTime based Strategy Time required to accomplish various activities Time required to accomplish various activities (e.g. developing new product or service and market them, (e.g. developing new product or service and market them, respond to change in customer demand, or deliver product, or respond to change in customer demand, or deliver product, or perform a service) By doing so the organ seeks to improve service perform a service) By doing so the organ seeks to improve service to the customer and gain a competitive advantage over rivals who to the customer and gain a competitive advantage over rivals who take more time to accomplish the same task. take more time to accomplish the same task.

In the time bared service rationale is that In the time bared service rationale is that <<time time <<cost cost >>productivity productivity >>QtyQty

OOrganizations rganizations havehave achieved achieved time time reduction reduction in some of thein some of the followingfollowing

Planning TimePlanning Time In this time the organ: changes it In this time the organ: changes it design quickly, produce it quickly, and send to the design quickly, produce it quickly, and send to the market quickly, because there is competition and market quickly, because there is competition and threat.threat.

Product ServiceProduct Service DesignDesign TimeTime The time needed to The time needed to develop and market a new a redesign product or develop and market a new a redesign product or serviceservice

Processing timeProcessing time The time needed to produce goods The time needed to produce goods and provide services. This can improve the and provide services. This can improve the Scheduling, Repairing Equipment, Wasted efforts, Scheduling, Repairing Equipment, Wasted efforts, Inventories, Training and like.Inventories, Training and like.

TTime ime to theseto these reduced. reduced. OOnly when nly when PProcess time squeezed ?rocess time squeezed ?

Change over timeChange over time The time taken to change in The time taken to change in providing one product to another. This involves providing one product to another. This involves equipment setting, attachments, different methods, equipment setting, attachments, different methods, schedule materialsschedule materials..

Delivery timeDelivery time The time needed to fill orderThe time needed to fill order Response time for complaintsResponse time for complaints The customer complaints about quality, time of delivery The customer complaints about quality, time of delivery

and incorrect shipments.and incorrect shipments. The employees may also complaint about The employees may also complaint about working working

conditionsconditions that are given in the factory, the that are given in the factory, the equipmentequipment problems old, problems old, obsoleteobsolete or non functional giving or non functional giving quality quality problems.problems.

2-21 Competitiveness, Strategy, and Productivity

Quality and Time StrategiesQuality and Time Strategies

• Quality-based strategies• Focuses on maintaining or

improving the quality of an organization’s products or services

• Quality at the source

• Time-based strategies• Focuses on reduction of time

needed to accomplish tasks