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2. Operations Management Operations Strategy for Competitive Advantage Chapter 2 3. Outline
4. Outline - continued
5. Learning Objectives
6. Komatsu Strategies
7. Komatsu Strategies
8. Mission
1995 Corel Corp. 9. Sample Mission - Circle K
10. Sample Mission - Merck
11. Factors Affecting Mission Mission Philosophy & Values Profitability & Growth Environment Customers Public Image Benefit to Society 12. Mission/Strategy
13. Strategy
1995 Corel Corp. 14. Strategy Process Marketing Decisions Operations Decisions Fin./Acct. Decisions Company Mission Business Strategy Functional Area Functional Area Strategies 15. Competitive Advantage Through:
16. Competing on Differentiation
17. Competing on Cost
18. Competing on Response
19. Competing On Any Basis
20. OMs Contribution to Strategy Quality Product Process Location Layout Human Resource Supply Chain Inventory Scheduling Maintenance Compaq Computers ability to follow the PC market Differentiation (Better) Response (Faster) Cost leadership (Cheaper) Southwest Airlines No-frills service Sonys constant innovation of new products Pizza Huts five-minute guarantee at lunchtime Federal Expresss absolutely, positively on time Motorolas automotive products ignition systems Motorolas pagers IBMs after-sale service on mainframe computers Fidelity Securitys broad line of mutual funds FLEXIBILITY Design Volume LOW COST DELIVERY Speed Dependability QUALITY Conformance Performance AFTER-SALE SERVICE BROAD PRODUCT LINE Operations Decisions Examples Specific Strategy Used Competitive Advantage 21. 10 Decision Areas of OM
22. Goods & Services and the 10 Operations Management Decisions 23. Goods & Services and the 10 Operations Management Decisions 24. Goods & Services and the 10 Operations Management Decisions 25. Goods & Services and the 10 Operations Management Decisions 26. Process Design Process-focused Job Shops (Print shop, emergency room , machine shop, fine dining Repetitive (modular) focus Assembly line (Cars, appliances, TVs, fast-food restaurants) Product-focused Continuous (steel, beer, paper, bread) Mass Customization Customization at high Volume (Dell Computers PC) LowModerateHigh Volume High Moderate Low Variety of Products 27. Operations Strategies for Two Drug Companies 28. Operations Strategies for Two Drug Companies - continued 29. Operations Strategies for Two Drug Companies - continued 30. Operations Strategies for Two Drug Companies - continued 31. Characteristics of High ROI Firms
From the PIMS study of the StrategicPlanning Institute 32. Strategic Options Managers Use to Gain Competitive Advantage
33. Strategic Options Managers Use to Gain Competitive Advantage
34. Strategic Options Managers Use to Gain Competitive Advantage - continued
35. Preconditions - To Implement a Strategy
36. Impetus for Strategy Change
37. Stages in the Product Life Cycle Introduction Growth MaturityDeclineGrowth rate 38. Strategy and Issues During a Products Life Introduction Growth Maturity Decline Standardization Less rapid product changes - more minor changes Optimum capacity Increasing stability of process Long production runs Product improvement and cost cutting Little product differentiation Cost minimization Overcapacity in the industry Prune line to eliminate items not returning good margin Reduce capacity Forecasting critical Product and process reliability Competitive product improvements and options Increase capacity Shift toward product focused Enhance distribution Product design and development critical Frequent product and process design changes Short production runs High production costs Limited models Attention to quality Best period to increase market share R&D product engineering critical Practical to change price or quality image Strengthen niche Cost control critical Poor time to change image, price, or quality Competitive costs become critical Defend market position OM Strategy/Issues Company Strategy/Issues HDTV CD-ROM Color copiers Drive-thru restaurants Fax machines Station wagons Sales 3 1/2 Floppy disks Internet 39. Strategy & Issues During Product Life
Best period to increase market share R&D engineering are critical Product design and development are critical Frequent product and process design changes Over-capacity Short production runs High skilled-labor content High production costs Limited number of models Utmost attentions to quality Quick elimination of market-revealed design defects Introduction 40. Strategy & Issues During Product Life
Practical to change prices or quality image Marketing is critical Strengthen niche Forecasting is critical Product and process reliability Competitive product improvements and options Shift toward product oriented Enhance distribution Growth 41. Strategy & Issues During Product Life
Poor time to increase market share Competitive costs become critical Poor time to change price, image, or quality Defend position via fresh promotional and distribution approaches Standardization Less rapid product changes and more minor annual model changes Optimum capacity Increasing stability of manufacturing process Lower labor skills Long production runs Attention to product improvement and cost cutting Re-examination of necessity of design compromises Maturity 42. Strategy & Issues During Product Life
Cost control critical to market share Little product differentiation Cost minimization Overcapacity in the industry Prune line to eliminate items not returning Good margin Reduce capacity Decline 43. Strategy Development and Implementation
44. SWOT Analysis Process
45. SWOT Analysis to Strategy Formulation Strategy Mission External O pportunities Internal S trengths Internal W eaknesses External T hreats Competitive Advantage 46. IdentifyingCritical Success Factors Decisions Sample Options Product Customized, or standardized Quality Define customer expectations and how to achieve them Process Facility size, technology Location Near supplier or customer Layout Work cells or assembly line Human resourceSpecialized or enriched jobs Supply chain Single or multiple source suppliers Inventory When to reorder, how much to keep on hand Schedule Stable or fluctuating productions rate MaintenanceRepair as required or preventive maintenance Marketing Service Distribution Promotion Channels of distribution Product positioning (image, functions) Finance/Accounting Leverage Cost of capital Working capital Receivables Payables Financial control Lines of credit Production/Operations 47. Critical Success Factors Microsoft & Compaq
48. Activity Mapping: Southwest Airlines Low Cost Competitive Advantage Courteous, but limited passenger service Lean, productive employees Short haul, point-to-point routes, often to secondary airports High aircraft utilization Standardized fleet of Boeing 357 aircraft Frequent, reliable schedules Competitive Advantage: Low Cost 49. Activity Mapping: Southwest Airlines Low Cost Competitive Advantage Courteous, but limited passenger service No seat assignments No baggage transfers Automated ticketing machines No meals 50. Activity Mapping: Southwest Airlines Low Cost Competitive Advantage Short haul, point-to-point routes, often to secondary airports Lower gate costs at secondary airports High number of flights, reduces employee idle time between flights 51. Activity Mapping: Southwest Airlines Low Cost Competitive Advantage Frequent, reliable schedules High number of flights reduces employee idle time between flights Saturate a city with flights flowering administrative costs per passenger for that city 52. Activity Mapping: Southwest Airlines Low Cost Competitive Advantage Standardized fleet of Boeing 357 aircraft Pilot training on only one type of aircraft Reduced maintenance inventory required because of only one type of aircraft Excellent supplier relations with Boeing has aided financing 53. Activity Mapping: Southwest Airlines Low Cost Competitive Advantage High aircraft utilization Flexible employees and standard planes aids scheduling Flexible union contracts Maintenance personnel trained on only one type of aircraft 15 minute gate turnarounds 54. Activity Mapping: Southwest Airlines Low Cost Competitive Advantage Lean, productive employees High level of stock ownership Hire for attitude, then train High employee compensation Empowered employees Automated ticket machines 55. Activity Mapping: Southwest Airlines Low Cost Competitive Advantage Courteous, but limited passenger service Lean, productive employees Short haul, point-to-point routes, often to secondary airports High aircraft utilization Standardized fleet of Boeing 357 aircraft Frequent, reliable schedules Competitive Advantage: Low Cost 56. Vanguards Activity System A broad array of mutual funds excluding some fund categories Efficient investment management approach offering good consistent performance Straightforward client communication and education Strict cost control Direct distributions Very low expenses passed on to client 57. How It Works Company Mission Business Strategy Functional Area Strategies Marketing Decisions Operations Decisions Fin./Acct. Decisions If competitive advantage, leads to achieving Distinctive competencies affect