Operations Strategy Introduction

Views:
 
     
 

Presentation Description

No description available.

Comments

Presentation Transcript

Operations Strategy 1:

Operations Strategy 1 An Introduction to Operations Strategy Ch 1 Slack & Lewis

Strategy:

Strategy What is strategy? : Strategy can be defined as an organization’s sense of purpose – a policy, a focus statement, a philosophy for the achievement of an objective. “Understanding where the business is at the moment, A clear view about where it wants to be in the future, A wide-scale debate about how it will reach its future destination” – Jack Welch

Strategy:

Strategy The direction and scope of an organization over the long-term, which achieves advantage in a changing environment through its configuration of resources with the aim of fulfilling stake holder expectations (Johnson et al., 2005)

Strategy:

2- 4 Strategy Mission The reason for existence for an organization Mission Statement States the purpose of an organization Goals Provide detail and scope of mission Strategies Plans for achieving organizational goals Tactics The methods and actions taken to accomplish strategies

Operations and Operations Management:

Operations and Operations Management What is operations? : Operations is the activity of managing the resources and processes that produce and deliver goods and services. What is operations management? : The design, operation and improvement of the external systems, resources and technologies that create and deliver the firm’s primary product and service combinations.

Framework for Operations Strategy:

Framework for Operations Strategy Issues : Capacity Variety Cost Quality Economical Operations Forecasts Role in Strategy : R & D Sales Marketing Finance Strategic Planning Operations How OPERATIONS can be used for competitive advantage in today’s World

Competitive Strategy : The Positioning View:

Competitive Strategy : The Positioning View Porter’s Five Forces Model of Competition

Competitive strategy : The Positioning View:

Competitive strategy : The Positioning View Competitive strategy is formulated based on Differentiation : A firm could stand out by delivering a set of unique products or services Product differentiation - uniqueness Differentiate Service through experience differentiation Cost leadership : A firm could aim to low cost provider Achieving maximum value as perceived by customer Focus : A firm could serve a narrow segment of market Customer groups, product lines, geographic segments

Competitive strategy : Resource-Based View:

Competitive strategy : Resource-Based View Positioning View suggests that industry structure plays the central role in creating opportunities for superior profitability, whereas Resource-Based View says that competitive advantage is derived from the firm’s development of its resources and capabilities. Inimitable : are difficult or costly to imitate or replicate Valuable : allow the firm to view its market position relative to competitors Rare : in relative short supply

Competitive strategy : Resource-Based View:

Competitive strategy : Resource-Based View Resource : an observable, not necessarily tangible, asset that can be valued and traded Physical, Technologies, Financial (Tangible) Brand, Information System, Culture, Reputation (Intangible) Asset or input (tangible or intangible) to production that an organization owns, controls, has access to. Resources are skills, methodologies and technologies that are available to the firm, when combined, can be used to create competitive advantage. Sustainability of this advantage depends on the ease with which the resources can be imitated / substituted.

Competitive strategy : Resource-Based View:

Competitive strategy : Resource-Based View Capability : Process, activity or function performed within a system and reflects the ability of an organization to perform a coordinated set of tasks, utilizing organizational resources for the purpose of achieving a particular end result. Capability is not observable (hence intangible), can not be valued and changes hands only as part of its entire unit. Capability : Use of organization competencies (know-how, experience, innovation, unique information) Capabilities are enacted by a combination of people and practices.

Competitive strategy : Resource-Based View:

Competitive strategy : Resource-Based View Types of capabilities Process-based McDonald’s : invested in developing a process of making low cost food System or coordination-based Indigo : coordinates the activities to provide low cost air travel Organization-based Toyota : developed organization wide skills to master new technologies, product design, processes Network-based Zara : coordinates its supply chain, a tight integration of its network of WH, production centers, transport and retail

Competitive strategy : Integrating the Positioning and Resource-Based Views:

Competitive strategy : Integrating the Positioning and Resource-Based Views Positioning Cost Leadership Differentiation Focus Capabilities Process Coordination Organization Network Strategy comes through an iterative process that employs both perspectives.

Operations Strategy:

Operations Strategy The process of developing the Operations Strategy involves Corporate Strategy : identifies industries and markets in which firm will compete – investment, divestment Business Strategy : focused at the level of business unit – best product, total customer service Functional Strategy, and Customer goals Cost Quality Availability/Speed Flexibility Dependability

Planning and Decision Making:

2- 15 Planning and Decision Making Mission Goals Organizational Strategies Functional Goals Finance Strategies Marketing Strategies Operations Strategies Tactics Tactics Tactics Operating procedures Operating procedures Operating procedures

PowerPoint Presentation:

Operations management and strategy requires analysis at three levels Flow between operations Analysis at the level of the supply network Analysis at the level of the operation Flow between processes Analysis at the level of the process Flow between resources Strategic analysis Operational analysis

Operations management and strategy requires analysis at three levels:

Operations management and strategy requires analysis at three levels Management of resources and networks at all levels of operations can contribute to the success of any organization by providing what the business needs to survive on and prosper - higher margin, new products (innovations), unique competencies and by delighting customers. And the objectives are Reduce cost of operations Improve revenue through customer delight Reduce investment by improving effective capacity and through innovative methods Future innovation by developing skills, capabilities and knowledge

Operations Strategy:

Operations Strategy What is operations strategy? Major decisions about and strategic management of core competencies, capabilities and processes, technologies, resources and key tactical activities necessary in the function, chain of functions or any supply network in order to create and deliver product and service combinations and the value demanded by a customer. The approach consistent with the organization strategy, that is used to guide the operations function.

PowerPoint Presentation:

Operations strategy is … ‘… the total pattern of decisions … … whilst managing the risks of misalignment’. … through the on-going reconciliation of market requirements and operations resources … … and their contribution to overall strategy… … of any type of operation ... … that shape the long-term capabilities … … so as to achieve a sustainable fit between the two …

Operations Strategy:

Operations Strategy Operations Strategy helps organisations to get Higher margins New products through innovation Unique competencies The above results in Reduction in cost Increase in revenue Investment optimisation Innovation

PowerPoint Presentation:

How is operations strategy different from operations management? Timescale e.g. capacity decisions Demand 1 – 12 months Short-term Operations management Long-term Demand 1 – 10 years Operations strategy Level of analysis Concerned with the macro operation (level of the firm) Micro Macro

PowerPoint Presentation:

How is operations strategy different from operations management? Level of aggregation (Concerned with resources at an aggregated level) Detailed Operations management Aggregated Operations strategy ‘Can we give tax services to the small business market in Antwerp?’ ‘What is overall business advice capability compared with other capabilities?’ Detailed ‘Can we increase production of low end segment in the festive season for the rural market?’ Aggregated ‘What is overall manufacturing capacity for all segments put together?’

PowerPoint Presentation:

How is operations strategy different from operations management? Level of abstraction (Concerned with the conceptual) Concrete Operations management Philosophical Operations strategy ‘How do we improve our purchasing procedures?’ ‘Should we develop strategic alliances with suppliers?’

PowerPoint Presentation:

Operations strategy must reflect four perspectives – top-down, bottom-up, market requirements, and operations resources Top-down Bottom-up Corporate strategy Business strategy Emergent sense of what the strategy should be Operational experience Operations resources Capacity Supply networks Process technology Development and organisation Market requirements Quality Speed Dependability Flexibility Cost Market requirement Operations strategy should satisfy the organisation’s markets Operations resources Operations strategy should build operations capabilities Top-down Operations strategy should interpret higher level strategy Operations strategy should learn from day-to-day experiences Bottom-up

PowerPoint Presentation:

Operations must have fast and flexible technology, supply relationships, process and staff Modular strategy provides flexibility and innovation at relatively low cost Group building corporate capability in high technology products and services Metrology division competes on ‘fast-to-market’ innovations Experiment with ‘modular’ design of key products and components Customers confused by continual product innovation and costs are increasing Corporate objectives impact on business objectives which, in turn, influence Operations Strategy Bottom up Top down Day-to-day experience of providing products and services to the market reveals problems and potential solutions which become formalised into Operations Strategy Top-down and bottom-up perspectives of strategy for the Metrology Company Operations strategy Emergent sense of what the strategy should be Corporate strategy Business strategy

Top Down and Bottom Up perspective:

Top Down and Bottom Up perspective Top down – Operations strategy is one of the functional strategies governed by top management, which set the overall strategic direction of the organization. What types of business Which parts of the world What to acquire What to divest How to allocate finance etc. Bottom up – Operations strategy ideas, many, emerge from actual experiences, over time. Strategy being shaped by experience over time is known as emergent strategies. Shape the operations objectives and actions by the knowledge it gains from its day to day activities

PowerPoint Presentation:

Operations strategy is the strategic reconciliation of market requirements with operations resources Tangible and intangible resources Operations capabilities Operations processes Operations strategy decision areas Customer needs Market positioning Competitors’ actions Performance objectives Understanding resources and processes Strategic decisions Capacity Supply networks Process technology Development and organisation Required performance Quality Speed Dependability Flexibility Cost Understanding markets Operations resources Market requirements Strategic reconciliation What we have? What should we do? Market segmentation to understand customers’ needs

PowerPoint Presentation:

The ‘market requirements’ and ‘operations resource’ analysis of a Lighting Company Resources Equipment Staff Reputation Relationships (internal and external) Experience Capabilities Application of leading edge lighting and sound technology Articulation of client requirements Processes Integration of equipment supply and client requirements Design process Supplier liaison process Operations strategy decisions Location Virtual reality technology Supplier development Equipment racking system Organisational structure Staff meetings Customers Professional theatres (static, low margins) Exhibitions (slow growth, low margins) Conferences etc. (fast growth, higher margins Market position Traditionally differentiated on high service level in theatre and exhibition markets, innovation and service in conference market Competitors Big groups dominating professional theatres In-house operations growing in exhibitions market Conference market still fragmented Performance objectives Aesthetically innovative designs Presentation advice High customisation of lighting solutions Fast and dependable supply

PowerPoint Presentation:

The market perspective analysis of a Fashion Apparel Company PERFORMANCE OBJECTIVES MARKET POSITION D ifferentiation on : CUSTOMERS Segmentation on : Age – youth Purpose – general COMPETITORS Traditionally weak in : Innovative products Time to market Product range Coordinated launches promotion design innovation Dependability Speed of delivery Product mix flexibility Speed to market New items

PowerPoint Presentation:

Capabilities Resources Design team Factories / Equipment Staff Processes Reputation Brand Experience - Knowledge of Apparel production - Apparel designing expertise Designing process Production process Supplier liaison process Operations strategy decisions New Design / Innovation Designers on Board Supply Network Fast replenishment to Stores Organisational structure The operations resource perspective analysis of Fashion Apparel Company Continuous Market Feedback Distribution Network - Understanding fashion requirement Procurement process Distribution process

PowerPoint Presentation:

What you HAVE in terms of operations capabilities What you NEED to ‘compete’ in the market Operations resources Market requirements What you WANT from your operations to help you ‘compete’ What you DO to maintain your capabilities and satisfy markets Strategic reconciliation

PowerPoint Presentation:

Operations strategy is ….. ‘… the decisions which shape the long-term capabilities of the company’s operation s and their contribution to overall strategy through the on-going reconciliation of market requirements and operations resources … ’

PowerPoint Presentation:

Profit Total assets Output Total assets Profit Output = × Decomposing the ratio profit/total assets to derive the four strategic decision areas of operations strategy Output Total assets Output Capacity Fixed assets Total assets Capacity Fixed assets Utilisation Working capital Productivity of fixed assets = × × Profit Output Revenue Output Cost Output Average revenue Average cost = Operations strategy decision areas Capacity Supply network Process technology Development and organisation Utilisation : Close to 1 Reduce inventory Invest wisely in process technology Quality, Speed, Dependability & Reliability Cost Efficiency

PowerPoint Presentation:

Operations strategy Performance objectives Quality Speed Dependability Flexibility Cost Development and organisation Capacity Supply network Process technology Decision areas Market competitiveness The operations strategy matrix Resource usage

PowerPoint Presentation:

7-Eleven Japan Sells 15.X as much per store as nearest rival History of cautious expansion and technical and service innovation ‘Field Counsellors’ spread operations knowledge (also distance training) Expansion by territory to reduce distribution costs Early use of TIS (Total Information System) TIS controls stock replenishment by twice a day delivery (sales analysed twice a day) New systems not Internet-based New service includes: Bank terminals Downloading games Downloading music to MD Internet ordering and collection Largest retailer in Japan

PowerPoint Presentation:

COST in terms of minimising… operating cost capital cost working capital QUALITY of products and services Speed and dependability combined to indicate AVAILABILITY FLEXIBILITY of response to sales and customer trends Area dominance reduces distribution and advertising costs  Location of stores Size of stores Distribution centre grouping by temperature  Distribution centres and inventory management systems give fast stock replenishment  TIS allows trends to be forecast and supply adjustments made  Common distribution centers give small frequent deliveries from fewer sources  Number and type of distribution centres Order and stock replenishment TIS gives comprehensive and sophisticated analysis of sales & supply patterns daily  The Total Information System (TIS) Information sharing and parenting system spreads service ideas  Field counsellors with sales data help stores to minimise waste and increase sales  Franchisee relationships New product/service development Approach to operations improvement DEVELOPMENT AND ORGANISATION PROCESS TECHNOLOGY SUPPLY NETWORKS CAPACITY RESOURCE DEPLOYMENT Market Competitiveness  Pivotal  Critical  Secondary 7-11 JAPAN

authorStream Live Help