CHAPTER 2.
OPERATIONS
CHAPTER 2. OPERATIONS
STRATEGY
STRATEGY
GAINING COMPETITIVE
ADVANTAGE
Competitive Advantage
Denotes a fi rm’s ability to
achieve market and
fi nancial superiority over
its competitors.
CREATING COMPETITIVE
ADVANTAGE REQUIRES TO
A FUNDAMENTAL
UNDERSTANDING OF 2
THINGS:
• Management must understand customer needs and
expectations.
• Management must build and leverage operational
capabilities to support desired competitive priorities.
UNDERSTANDING
CUSTOMER WANTS AND
NEEDS
To correctly identify what customers expects requires being “
Close to Customers”. These are the following ways:
• Having employees visits and talk to customers.
• Having managers talk to customer
• Doing formal marketing research
ORDER QUALIFIERS
• refers to the basic customer expectations are
generally considered the minimum
performance level required to stay in
business.
ORDER WINNERS
• are goods and service features and
performance characteristics that diff erentiate
one customer benefit package from another
and win the customer’s business.
EVALUATING GOODS
AND SERVICES
• Research suggests that customers use three
types of attributes evaluating the quality of
goods and services.
THREE TYPES OF
ATTRIBUTES
1. Search Attribute
are those that a customer can determine prior
to purchasing the goods/or services.
these attributes include things like color, price
freshness,style,fit,feel,hardness and smell.
2. EXPERIENCE
ATTRIBUTES
are those that can be discerned only after
purchase or during consumption or use.
examples of these attributes are friendliness,
taste, wearability, safety, fun, and customer
satisfaction.
3. CREDENCE
ATTRIBUTES
are any aspects of a good or service that the
customermust believe in but cannot personally
evaluate even after purchase and consumption.
examples include the expertise of a surgeon or
mechanic, the knowledge of a tax advisor,or the
accuracy of tax preparation of software.
COMPETITIVE
PRIORITIES
represent the strategic emphasis that a firm
places on certain performance measures and
operational capabilities within a value chain.
FIVE COMPETITIVE
PRIORITIES
1.Cost
fi rms achieve their competitive advantage through
low prices.
2. Quality
the role of quality in achieving competitive
advantage was demonstrated by several research
RESEARCHERS HAVE
FOUND THAT:
• Businesses off ering premium- quality goods usually
have large market shares and were early entrants
into their markets.
• Quality is positively and signifi cantly related to a
higher return on investment for almost all kinds of
market situations.
• a strategy of quality improvement usually leads to
increased market share , but at a cost in terms of
reduced short-run profi tability.
• Producers of high -quality goods can usually charge
premium prices.
3. TIME
• In today’s society, time is the most important source
of competitive advantage.
• Customers demand quick response, short waiting
times, and consistency in performance.
• speeding up process in supply chains improves
customer response.
4. FLEXIBILITY
success in globally competitive market requires
both design and demand fl exibility.
fl exibility is manifest in mass- customization
strategies that are becoming increasingly
prevalent today.
Mass Customization is being able to make
whatever goods and services the customer
wants, at any volume, at any time for
anybody , and for a global organization ,from
any place in the world.
5. INNOVATION
is the discovery and practical application or
commercialization of a device,method or idea
that diff ers from existing norms.
OM AND STRATEGIC
PLANNING
Strategy- is a pattern or plan that integrates an
organization’s major, goals, policies, and action
sequences into a cohesive whole.
Strategic Planning- is the process of determining
long-term goals ,policies and plans for an
organization.
3 LEVELS OF STRATEGY
1. Corporate Strategy is necessary to design to
define the businesses in which the corporation will
participate and develop plans for te acquisition
and allocation of resources among these
businesses.
(SBU’s) STRATEGIC
BUSINESS UNIT
• refers to businesses in which the fi rm will
participate.
• are usually defi ned as families of goods or
services having similar characteristics or methods
or creation.
2. BUSINESS STRATEGY
• second level of strategy and defi nes the the focus
for SBU’s.
• major decisions involve which markets to pursue
and how best to compete in those markets ,that is
which competitive priorities the fi rm should pursue.
3. FUNCTIONAL STRATEGY
• the 3rd level of strategy in which the means by
which business strategies are accomplished.
• it is the set of decisions that each functional
area(marketing, fi nance, operations, research and
development , engineering. etc.) develops to support
its particular business strategy.
OPERATIONS STRATEGY
• is the set of decisIons across the value chain
that supports the implementation of higher-
level business strategies.
• it defines how an organization will execute its
chosen business strategies.
FRAMEWORK FOR
OPERATION
STRATEGY
Operation design choices
are the decisions management must make as to what
type of process structure is best suited to produce
goods or create services.
it typically addresses 6 key areas ,types of processes,
value chain integration, and outsourcing,technology ,
capacity and facilities, inventory, and service capacity,
and trade-off s among these decisions.
Infrastructure
• focuses on the non process features and capabilities of
the organization and includes the workforce , operating
plans and control systems ,quality control,
organizational structure, compensation systems,
learning and innovation systems, and support services .
• infrastructure must support process choice
and provide managers with accurate and
timely information to make good decisions.
These decisions lie at the core of
organizational eff ectiveness, and suggests
that the integrative nature of operations
management is one of the most important
