Operations StrategyOperations Strategy

Prepared by :- Suhad Romi

Supervisor :- Dr. Yousef Abu Farah

Corporate StrategyCorporate Strategy Defines the business will pursue ,

new opportunities , threats in the environment and the objectives that it should be achieved .

It serves as the framework for carrying out all the organization functions .

Operation strategyOperation strategy

It specifies how operations can help implement the firm’s corporate strategy .

Strategic ChoiceStrategic Choice Management set corporate

strategy by making three strategic choices :-

1- Determining the firm’s mission . 2- Monitoring the changes at

environment 3- identifying and developing the

firm’s core competencies .

Corporate StrategyCorporate StrategyMarket analysis

• segmentation• needs

assessment

Socioeconomic and business environment

Corporate strategy• missions• goals• distinctive competencies

Mission Goals

DistinctiveCompetences

How to lead or Formulate the

Corporate Strategy??

How does operation strategy relate to corporate strategy ??

Corporate Strategy :- The overall scope and direction of a corporation and

the way in which its various business operations work together to achieve particular goals.

Operations strategy is the tool that helps to define the methods of producing goods or a service offered to the customer

Operations Strategy :- is the development of a long-term plan for using the major resources of the firm for a high degree of compatibility between these resources and the firm’s long-term corporate strategy

MissionMission

What business are we in now?Who are our customers ?What are our basic beliefs?What are the key performance objectives

(profit, growth, market share, ...) by which we measure success ?

Copyright 2005 Prentice Hall Ch 2- 9

Mission Elements

CustomersMarkets

Employees

PublicImage

Self-Concept Philosophy

SurvivalGrowthProfit

ProductsServices

Technology

Copyright 2005 Prentice Hall

Ch 2-

10

“What do we want to become”?

Vision

Mission Statement

“What is our business”?

ComprehensiveMission Statement

Clear Business Vision

Two Types

- Micro Environment “task environment and operating environment “

Consists of actors in the company’s immediate environment, that affects the performance of the company.◦ The suppliers - Competitors - Stack holders - Customers

- Macro EnvironmentConsists of larger societal forces that affect all the actors in

company’s micro environment. the demographic, economic, natural, technological, political and cultural forces

EXTERNAL ENVIRONMENT

By Examine the external environments , this will lead to a set of :-

Opportunities . Threats .

The Internal ScanningThe Internal Scanning

Internal scanning (organizational analysis):

is concerned with identifying and developing an organization‘s resources and competencies.

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•Resourcesan organization’s assets.

•CapabilitiesCorporation’s ability to exploit its resources.

•CompetencyA cross –functional integration and coordination of capabilities.

•Core competencySomething that the corporation can do well. (Strengths that represent unique skills or resources.)

•Distinctive competencyWhen Core competencies are superior to those of the competition. or A firm’s strengths that cant be easily matched or imitated by competitors. {Fred R David page 137} 15

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Core CompetencyCore Competency -: -:

Work Force :- Well trained & flexible workforce . Facilities :- Well located facilities “ offices , stores ,

and plants “ Market & Financial Know how ??

Attract capital form stock sales , market & distributes it’s products , and ability to differentiate it’s product

System & technology . Having an Experts in IS , & New

Technology

At internal scanning ; we should link At internal scanning ; we should link the followings to the strategythe followings to the strategy -: -:

Integrating Strategy & Organizational Structures:

◦Simple structure - Functional structure◦Divisional structure - Strategic business

units

◦ Integrating Strategy & Culture

values , beliefs , rites , rituals , ceremonies

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By Examine the internal environments , this will lead to a set of :-

Strengths . Weakness .

Global StrategiesGlobal Strategies -: -: It’s include buying foreign Parts or

services , combining with other parts to reduce risks & threats or planning ways to enter market when it’s forbidden .

This will be done by strategic alliance .

An agreement with another firms .

11 - -Collaborative EffortCollaborative Effort -: -:

An agreement between 2 companies , when the first company has core competency that the other company needs and can’t duplicate .

Strategic alliance Strategic alliance formsforms -: -:

22 - -Joint VenturesJoint Ventures

Agreement between 2 firms to jointly produce a products & services .

22 - - Joint VenturesJoint VenturesAdvantages

◦ Allows for sharing of risk (both financial and political)

◦ Provides opportunity to learn new environment

◦ Provides opportunity to achieve synergy by combining strengths of partners

◦ May be the only way to enter market given barriers to entry

Disadvantages◦ Requires more

investment than a licensing agreement

◦ Must share rewards as well as risks

◦ Requires strong coordination

◦ Potential for conflict among partners

◦ Partner may become a competitor

33 - -LicensingLicensingA contractual agreement whereby one

company makes an asset available to another company in exchange fo license fees, or some other form of compensation◦ Patent◦ Trade secret◦ Brand name◦ Product formulations

Advantages to LicensingAdvantages to LicensingProvides additional profitability

with little initial investmentProvides method of

circumventing tariffs, quotas, and other export barriers

Attractive ROILow costs to implement

Disadvantages to Disadvantages to LicensingLicensingLimited participationReturns may be lostLack of controlLicensee may become competitorLicensee may exploit company

resources

Market AnalysisMarket Analysis

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What is Market segmentationWhat is Market segmentation??

The breaking down or building up of

potential buyers into groups called

Market Segments

Market SegmentsMarket Segments

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How to determine the market How to determine the market segment :- segment :-

1. Demographic Factors :- age , income , educational level .

2. Psychological Factors :- pleasure , fear .

3. Industry factors :- specific technologies , certain materials , particular industry .

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Benefits of Market SegmentationBenefits of Market Segmentation

1. Identifies opportunities for new product development

2. Helps design marketing programs most effective for reaching homogenous groups of buyers

3. Improves allocation of marketing resources

Need AssessmentNeed AssessmentThe second step in market

analysis , which identifies the needs of each segment , and assessing how well competitors addressing those needs .

Need AssessmentNeed AssessmentEach Market segment has market

needs , by which they can grouped into :- 1- Product – Service needs .“ product attributes “ prices , quality “2- Delivery System Need . “ process for delivering the products “ safety , delivery

speed “ 3- Volume needs . Attributes of the demand “ availability , prediction “ 4 – Other needs .Attributes related to the operations , such as

reputation , after sales services .

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Competitive PrioritiesCompetitive Priorities

Cost 1. Low costQuality 2. High-performance

design3. Consistent quality

Time 4. Fast delivery5. On-time delivery6. Development speed

Flexibility 7. Customization8. Volume flexibility

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Competitive PrioritiesCompetitive Priorities

CostQualityFlexibilitySpeed

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Competitive Priorities-Competitive Priorities-

Four Important Operations Questions: Will you compete on –

Cost? Quality? Time? Flexibility?All of the above? Some? Tradeoffs?

©Wiley 2007 36

Competing on Competing on CostCost??

Offering products/services at a low price relative to

competitors.

◦ Typically high volume products

◦ Often limit product range & offer little customization

◦ Can use lower skill labor

◦ Low cost should not mean low quality

©Wiley 2007 37

Competing on Competing on QualityQuality??Quality may be defined differently by

customers versus employeesQuality dimensions:

1- High performance design: Superior features, high durability, & excellent customer service

2-Product & service consistency: Meets design specifications Error free delivery

Quality issues to address:◦ Product design quality – products/services must meet

requirements◦ Process quality will produce error-free products/services

Competing on Competing on TimeTime??

Time is one of the most important competitive priorities

Being first-to-deliver often wins the race

Time –related issues:

◦ Fast delivery:

Focused on shorter time between order placement and

delivery

◦ On-time delivery:

Deliver product exactly when needed every time

◦ Rapid development speed

Using concurrent processes to shorten product development

time

Competing on Competing on FlexibilityFlexibility??

The company’s environment often changes rapidly

Flexibility is needed to accommodate these changes◦ Product flexibility:

Easily switch production from one item to another Easily customize product/service to meet specific

requirements of a customer◦ Volume flexibility:

Ability to ramp production up and down to match market demands

©Wiley 2007 40

Are There Priority Are There Priority TradeoffsTradeoffs??

Emphasize priorities that support the business strategy, which may require “trade-offs”

Focus on “order qualifiers” and “order winners”◦ Which priorities are “Order Qualifiers”? e.g. Must have excellent quality since everyone expects it◦ Which priorities are “Order Winners”? e.g. Dell competes on all four priorities Southwest Airlines competes on cost McDonald’s competes on consistency FedEx competes on speed Custom tailors compete on flexibility◦ Can you have both high quality and low cost? e.g. Yes, Coke and Pepsi are good examples◦ Can you offer design flexibility and short delivery? e.g. Yes, modular housing manufacturers do it

Flow StrategyFlow Strategy

Flow strategies deal with how the operations of a firm are structured to develop a product or provide a service

In the software industry, they are often called “Process Strategies”

There are two extreme in flow strategies:◦Flexible flow strategyFlexible flow strategy◦Line flow strategyLine flow strategy

Flow StrategyFlow Strategy

Flexible flow: The customers, materials, or information move in diverse ways, with the path of one customer or job often crisscrossing the path that the next one will take.

Line Flow: The customers, materials or information move linearly from one operation to the next, according to a fixed sequence.

Flexible flow Example Flexible flow Example Health CentreHealth Centre

Physical exam

Broken arm

Flu

D

T

R P

B

D: Doctor (examination rooms)R: Radiology (X-ray)T: Triage (assess severity of illness)B: Blood (lab test)P: Pharmacy (fill prescriptions)

Broken arm

Flu

Physical exam

Flexible flow Example Flexible flow Example AAP - Compact 4 cylinderAAP - Compact 4 cylinder

A: Front-end body-to-chassis assembly

H: Hood attachmentF: Fluid fillingS: Start-up testing

Mid-sized

6 cylinder

Compact4 cylinder

A SH F

Mid-sized6 cylinder

Compact

4 cylinder

Capabilities

The Role of Flow StrategyThe Role of Flow Strategy

Operations strategyOperations strategy

• Process decisions• Quality decisions• Capacity,

location, and layout decisions

• Operating decisions

Flow strategy• Flexible flows• Intermediate

flows• Line flows

Typical Flow StrategiesTypical Flow StrategiesMake-to-Stock StrategyStandardized Services StrategyAssemble-to-Order StrategyMake-to-Order StrategyCustomized Services Strategy

Make to stock strategy :- The firms hold items in stock for

immediate delivery to customers . Mass Production :- large volumes of a standard product

for a mass marketStandardization Services

Strategy :-

Strategies based On FlowsStrategies based On Flows -: -:

Make-to-Order◦products and services are made to

customer specifications after an order has been received

Make-to-Stock◦products and services are made in

anticipation of demand

Assemble-to-Order◦products and services add options

according to customer specifications

Linking Flow Strategy Linking Flow Strategy with Competitive with Competitive

PrioritiesPriorities

Flexible Flows Line Flows

Tendency for customized products Tendency for standardized productsand services, with low volumes and services, with high volumes

High-performance design quality Consistent quality

More emphasis on customization More emphasis on low costand volume flexibility

Long delivery times Short delivery times

Flow Strategy