This document discusses operations strategy and competitiveness. It defines operations strategy as the plan that specifies how resources will be used to support the business strategy. An operations strategy is guided by the overall organizational strategy and involves decisions about areas like process selection, capacity, and supply chains. The role of operations strategy is to first implement, then support, and eventually drive the overall business strategy. For an organization to be competitive, its operations must meet customer wants through competitive priorities like low cost, quality, flexibility and speed.
This document discusses operations strategy and competitiveness. It defines operations strategy as the plan that specifies how resources will be used to support the business strategy. An operations strategy is guided by the overall organizational strategy and involves decisions about areas like process selection, capacity, and supply chains. The role of operations strategy is to first implement, then support, and eventually drive the overall business strategy. For an organization to be competitive, its operations must meet customer wants through competitive priorities like low cost, quality, flexibility and speed.
This document discusses operations strategy and competitiveness. It defines operations strategy as the plan that specifies how resources will be used to support the business strategy. An operations strategy is guided by the overall organizational strategy and involves decisions about areas like process selection, capacity, and supply chains. The role of operations strategy is to first implement, then support, and eventually drive the overall business strategy. For an organization to be competitive, its operations must meet customer wants through competitive priorities like low cost, quality, flexibility and speed.
This document discusses operations strategy and competitiveness. It defines operations strategy as the plan that specifies how resources will be used to support the business strategy. An operations strategy is guided by the overall organizational strategy and involves decisions about areas like process selection, capacity, and supply chains. The role of operations strategy is to first implement, then support, and eventually drive the overall business strategy. For an organization to be competitive, its operations must meet customer wants through competitive priorities like low cost, quality, flexibility and speed.
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COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF MANAGEMENT MASTER OF BUSINESS ADMINISTRATION
CHAPTER TWO OPERATIONS STRATEGY & COMPETITIVENESS By: Mehari H. (Ass. Prof, MBA, MA, BA) E-mail: haileg2003@gmail.com
06/10/2020 1 Learning objectives After studying this chapter you should be able to; – Define business strategy. – Explain how a business strategy is developed. – Explain the role of operations strategy in the organization. – Explain the relationship between business strategy and operations strategy. – Identify competitive priorities of the operations function.
06/10/2020 2 Example • Mission – live a good life • Goal – successful career, good income. • Strategy – obtain a college/university education • Tactics – select a college/university and a major; decide how to finance. • Operations – register, buy books, take courses, study hard. 3 What is a strategy? • Derived from the Greek word “strategos” , meaning ‘leading an army’. • Strategies are the means by which the enterprise achieves its objectives. • They describe the chosen “paths to goal”, or “routes to achievement” or “plans of campaign”. • Strategies act as “ground-rules”, and define the nature and occasion of the decisions needed to achieve enterprise objectives.
06/10/2020 4 Summary
• Strategy is all about :
– How to outcompete rivals. – How to respond to economic and market conditions and growth opportunities. – How to manage functional pieces of the business. – How to improve the firm’s financial and market performance.
06/10/2020 5 WHY DO STRATEGY ? • A firm does strategy: – To improve its financial performance. – To strengthen its competitive position. – To gain a sustainable competitive advantage over its market rivals.
Technology Systems People R&D CRM JIT TQM Distribution
Support Platforms Financial Management Human Resource Management Information Management 06/10/2020 8 Operations Strategy • A long-range plan for the operations function that specifies the design and use of resources to support the business strategy. – ‘Operations’ are the resources that create products and services. – ‘Operational’ is the opposite of strategic, meaning day-to-day and detailed. – The content of operations strategy is the specific decisions and actions which set the operations role, objectives and activities. – The process of operations strategy is the method that is used to make the specific ‘content’ decisions.
9 • is the plan that specifies the design and use of resources to support the business strategy. – This includes the location, size, and type of facilities available; worker skills and talents required; use of technology, special processes needed, special equipment; and quality control methods. • Is the approach, consistent with the organizational strategy , that is used to guide the operations function. 10 Perspectives on operations strategy
06/10/2020 11 Cont’d • There are four slightly different views of operations strategy. 1. Top-down • The ‘top-down’ perspective views strategic decisions at a number of levels. • Corporate strategy – defines what business the company is pursuing. E.g making people happy’ • Business strategy – defines how a particular business will compete. Sets objective on how it positions itself in its marketplace. E.g customer intimacy, product leadership. • Functional strategies – set the objectives for each function’s contribution to its business strategy. – The operations, marketing, finance and other functions will all need to consider how best they should organize themselves to support the business’s objectives. 06/10/2020 12 2. Bottom up • sees overall strategy as emerging from day- to-day operational experience. • This perspective believes that strategy is gradually shaped over time and based on real-life experience rather than theoretical positioning.
06/10/2020 13 3. Market requirement • This perspective is based on the fact that one of the obvious objectives for any organization is to satisfy the requirements of its markets. • No operation that continually fails to serve its markets adequately is likely to survive in the long term. • Hence, operations performance objectives and operations decisions should be primarily influenced by a combination of customers’ needs and competitors’ actions.
06/10/2020 14 4. Operations Resource • is based on the resource-based view (RBV) of the firm. • RBV holds that firms are likely to gain sustainable competitive advantage because of the core competences (or capabilities) of their resources. • This means that the way an organization inherits, or acquires, or develops its operations resources will, over the long term, have a significant impact on its strategic success. • So understanding and developing the capabilities of operations resources is a particularly important perspective on operations strategy.
06/10/2020 15 Operations strategy Decisions – The approach, consistent with organization strategy, that is used to guide the operations function. Decisions What the Decisions Affect
Product and service design Costs, quality, liability, and environmental issues
Capacity Cost, structure, flexibility
Process selection and layout Costs, flexibility, skill level needed, capacity
Work design Quality of work life, employee safety, productivity
Location Costs, visibility
Quality Ability to meet or exceed customer expectations
Projects Costs, new products, services, or operating systems 16
Role of Operations Strategy • Business organizations should be able to master the skills to first ‘implement’, then ‘support’, and then ‘drive’ operations strategy. 1. Implementing business strategy – puts it into practice. 2. Supporting business strategy. – It means developing the capabilities which allow the organization to improve and refine its strategic goals. 3. Driving business strategy. – The third, and most difficult, role of operations is to drive strategy by giving it a unique and long- term advantage. 06/10/2020 17 Competitiveness • Companies must be competitive to sell their goods and services in the market. • How effectively an organization meets the wants and needs of customers relative to others that offer similar goods or services. • Business organizations compete with one another in a variety of ways. – Key among them are price, quality, product or service differentiation, flexibility, and time to perform certain activities.
Competitive priorities • cost • quality • time • flexibility Capabilities • current • needed New Service/ • planned Product Design • design • analysis • development • full launch
Functional area strategies
• finance • operations • marketing • others
19 • Price; is the amount a customer must pay for the product/service. – Focus on lower production costs. • Quality; refers to the materials and workmanship as well as design. – It relates to the buyer’s perceptions of how well the product or service will serve its purpose. • Product differentiation; refers to any special features that cause a product or service to be perceived by the buyer as more suitable than a competitor’s product or service. – E.g. design, cost, quality, ease of use, convenient location, warranty etc. 20 • Flexibility; the ability to respond to changes. The changes might relate to increases or decreases in volume demanded, or to changes in product mix. – The better a company or department is at responding to changes, the greater its competitive advantage over another company. • Time; refers to different aspects of an organization’s operation. – How quickly a product/service is delivered to customers. – How quickly a new product/services are developed and brought in to the market. – The rate at which improvements in products or processes are made. 21 THANK YOU!!
