Wk1 Strategy

8/6/2019 Wk1 Strategy

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Operations Strategy


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Todays competitive market

Buyers market

Buyer wants it faster,

better, and

cheaper/customised

Competitors are global

Increasing short Life-cycles


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Car choices in 1980

Ambassador

Premier

Standard-Herald


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5/20

What is the impact of this global

competition?

Operations mustachieve simultaneous

improvement of

price, quality, and

delivery speed.


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What is a strategy?

Strategy is the determination of thebasic long-term goals and the objectives

of an enterprise, and the adoption ofcourses of action and the allocation of

resources necessary for carrying out

these goals.


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Defining the Corporate Strategy

Differentiation (Quality; Uniqueness;

e.g., Luxury cars, Fashion Industry,

Cost Leadership (Price;

e.g., Wal-Mart, Southwest

Airlines, Generic Drugs)

Responsiveness (Reliability; Quickness; Flexibility;

e.g.,Dell, Overnight Delivery Services)

Competitive Advantage through which

the company market share is attracted


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9/20

Mahadevan (2007), Operations Management: Theory

Operations Strategy

y Strategic planning exercise Enables an organisation to respond to the market needs in the

most effective manner

By aligning various resources and activities in the organisation

To deliver products & services that are likely to succeed in themarket

y Operations Strategy Is a process by which key operations decisions are made that

are consistent with the overall strategic objectives of a firm

Decisions in the operations function are made on the basis ofthe inputs from the overall corporate strategy


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Operations Strategy

Customer Needs Corporate Strategy

Operations Strategy

Alignment

Core

Competencies

Decisions

Processes, Infrastructure,and Capabilities


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Steps in Developing a Operations

Strategy

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 eachgroup.(criterion for purchase by customer e.g.Brand)

4. Convert order winners into specific performance

requirements.(differentiation, e.g. warranty, quick response,

Lease)


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Operations Strategy - Wal-Mart(USA)

Corporate Strategy

(Gain competitive advantage by) providing customers access to

quality goods, when and where needed, at competitive prices

Operations Strategy

Short flow times

Low inventory levels

Operations Structure

Cross docking

EDI

Fast transportation system

Focused locations

Communication between

retail stores


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Wal-Mart Operations Strategy

Inventory at retail stores turned over twice a week(Industry averages once every two weeks)

Improved targeting of products to markets

Sourcing of Products World-wide

Sales per square foot increased from $140 in 1991

to $250 in 2004 (Industry average increased from

$110 to $150). Sales revenue:$250bn


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Core Competence

CompetitivenessCompetitiveness derives from an ability to build, at lower costand more speedily than competitors, the core competenciescore competenciesthat spawn unanticipated products.

Core competencies are the collective learningcollective learning in theorganization, especially how to coordinate diverse

production skills and integrate multiple streams of

technologies. Core competence is about harmonizing streams ofharmonizing streams of

technologytechnology.

Core competence is about the organization of workorganization of work and thedelivery of valuedelivery of value.

Companies need to do a better job of leveraging technologiesand offering a wider variety of products on the sametechnology platform.

.


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CORE COMPETANCE.

HOW TO IDENTIFY ?

WHAT IT DOES BEST

WHAT IT CAN DO.. OTHERS CANNOT DO

WHAT WILL PERMIT IT TO ACHIEVE THE BEST IN THE

WORLD

STATUS(GAP) W.R.T . WHAT IT CAN NOT DO

DEVELOP PLANS TO FULLY EXPLOIT CAPABILITIES


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CORE COMPETANCY. EXAMPLES

RELIANCE , AMUL , HLL, INFOSYS

SONY - MINIATURISATION

HONDA - MOTORS

MOTOROLA - WIRELESS COMMUNICATION

MCDONALD - LOCALISATION/ HYGIENE


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OM Decisions Strategic Decisions

Design Decisions

Operating Decisions


18/20

Yamaha announces plans for a new factory, making it the worldslargest motorcycle manufacturer (1981)

Honda responds Yamaha wo tsubusu!

(We will crush, squash, slaughter Yamaha)

Honda cut prices, increased advertising, flooded distributionchannels

Both firms started with about 60 models

Yamaha introduced 37 product line changes during next 18months

Honda introduced 113 new products, including new styles andnew technologies (4-valve engines, composite materials, ...)

Yamaha decimated, despite drastic price cuts, has 12 monthinventory of unsold motor cycles

Yamaha capitulates, Pres. Eguchi publicly apologizes

Honda wins war with superior design, cycle times


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GOALS FOR OM EXCELLENCE

y OPERATIONAL EXCELLENCE

y ON-TIME DELIVERY PERFORMANCE

y ZERO ERROR

y INVENTORY REDUCTION


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Questioning The Process

``It is always amazing how many of the thingswe do will never be missed. And nothing is

less productive than to make more efficientwhat should not be done at all.

Peter Drucker

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Wk1 Strategy