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COMPETITIVENESS COMPETITIVENESS AND AND

OPERATIONS STRATEGYOPERATIONS STRATEGY

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A COLD HARD FACTA COLD HARD FACT

Better quality, higher productivity, lower costs, and the ability to respond quickly to customer needs are more important than ever and…

the bar is getting higher

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CHAPTER FOCUSCHAPTER FOCUS

CompetitivenessStrategyProductivity

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COMPETITIVENESSCOMPETITIVENESS Competitiveness:

How effectively (the extent that) an organization

meets the wants and needs of customers relative to

others that offer similar goods or services Organizations compete through some combination of

their marketing and operations functionsWhat do customers want?How can these customer needs best be satisfied?

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MARKETING INFLUENCES MARKETING INFLUENCES COMPETITIVENESS BY:COMPETITIVENESS BY:

Identifiying consumer needs and desires PricingAdvertising and promotion

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OPERATIONS INFLUENCES OPERATIONS INFLUENCES COMPETITIVENESS THROUGH COMPETITIVENESS THROUGH (1 of (1 of 44):):

1. Product and Service Design

2. Cost

3. Location

4. Quality and Reliability

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OPERATIONS INFLUENCES OPERATIONS INFLUENCES COMPETITIVENESS THROUGH COMPETITIVENESS THROUGH (1 of (1 of 44):):

5. Quick or Reliable Response

a. New Product Introduction Speed

b. Delivery Speed

c. Delivery Reliability

6. Service

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OPERATIONS INFLUENCES OPERATIONS INFLUENCES COMPETITIVENESS THROUGH COMPETITIVENESS THROUGH (1 of (1 of 44):):

7. Flexibility

a. in making alterations in design

b. in coping with changes in volume

c. in new product introduction

8. Inventory Management

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OPERATIONS INFLUENCES OPERATIONS INFLUENCES COMPETITIVENESS THROUGH COMPETITIVENESS THROUGH (1 of (1 of 44):):

9. Supply Chain Management

10. Service and Service Quality

11. Managers and Workers

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WWHY SOME ORGANIZATIONS FAIL? HY SOME ORGANIZATIONS FAIL? (1 of 2)(1 of 2)

Too much emphasis on short-term financial performance

Failing to take advantage of strengths and opportunities

Failing to recognize competitive threats Neglecting operations strategy

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WWHY SOME ORGANIZATIONS FAIL (2 of 2)HY SOME ORGANIZATIONS FAIL (2 of 2)

Too much emphasis in product and service design and not enough on improvement

Neglecting investments in capital and human resources

Failing to establish good internal communications and cooperation

Failing to consider customer wants and needs

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HIERARCHICAL PLANNINGHIERARCHICAL PLANNING

Mission

Goals

Organizational Strategies

Tactics

Functional Strategies

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Mission

Goals

Organizational Strategies

Functional Goals

Finance Strategies

MarketingStrategies

OperationsStrategies

Tactics Tactics Tactics

Operatingprocedures

Operatingprocedures

Operatingprocedures

HIERARCHICAL PLANNINGHIERARCHICAL PLANNING

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MMISSIONISSION

Mission - where you are going?

The reason for the existence for an organization

Provides boundaries & focus

© 1995 Corel Corp.

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States the purpose of the organization

The mission statement should answer the question of “What business

are we in?”

MISSION STATEMENTMISSION STATEMENT

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MMISSION STATEMENT OF THE HARD ROCK ISSION STATEMENT OF THE HARD ROCK CAFECAFE

To spread the spirit of Rock ‘n’ Roll by delivering an exceptional entertainment

and dining experience. We are committed to being an important, contributing member

of our community and offering the Hard Rock family a fun, healthy, and nurturing

work environment while ensuring our long-term success.

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MMC’DONALD’S MISSION STATEMENTC’DONALD’S MISSION STATEMENT

McDonald's brand mission is to "be our customers' favorite place and way to eat." Our worldwide operations have been aligned around a global strategy called the Plan to Win centering on the five basics of an exceptional customer experience -- People, Products, Place, Price and Promotion. We are committed to improving our operations and enhancing our customers' experience.

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GOALSGOALS

The mission statement serves as the basis for organizational goals

Goals They provide detail and the scope of the mission

Goals can be viewed as organizational destinations

They serve as the basis for organizational strategies

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STRATEGIESSTRATEGIESStrategy

A plan for achieving organizational goalsServes as a roadmap for reaching the

organizational destinations

Mission: Where you are going?Strategy: How you are going to get there; an

action plan (shows how mission will be achieved)

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STRATEGIESSTRATEGIESOrganizations have

Organizational (business) strategiesOverall strategies that relate to the

entire organizationSupport the achievement of

organizational goals and missionFunctional level strategies

Strategies that relate to each of the functional areas and that support achievement of the organizational strategy

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TACTICS AND OPERATIONSTACTICS AND OPERATIONS

TacticsThe methods and actions taken to

accomplish strategiesThe “how to” part of the processAnswers the question: “How to reach the

destination, following the strategy road map”Operations

The actual “doing” part of the process

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SSTRATEGY EXAMPLETRATEGY EXAMPLE

Rita is a high school student. She would like to have a career in business, have a good job, and earn enough income to live comfortably

Mission: Live a good lifeGoal: Successful career, good

incomeStrategy: Obtain a college educationTactics: Select a college and a majorOperations: Register, buy books, take

courses, study, graduate, get job

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CORE COMPETENCIESCORE COMPETENCIES

Core CompetenciesThe special attributes or abilities that give

an organization a competitive edgeTo be effective core competencies and

strategies need to be aligned

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SAMPLE STRATEGIESSAMPLE STRATEGIESOrganizational Strategy Operations Strategy Examples of Companies or Services

Low Price Low Cost U.S. first-class postageWal-Mart

High Quality High performance design and/or high quality processing

Consistent Quality

Sony TVLexus, Cadillac,

Coca-Cola; Kodak, Motorola

Short Time Quick Response(rapid delivery)

On-time delivery

McDonald’s RestaurantsExpress mailFedEx; One-hour photo

Newness Innovation 3MExpress mail

Flexibility VarietyVolume

Burger King (Have it your way”)McDonald’s (“Buses Welcome”)

Service Superior customer service DisneylandIBM

Location Convenience Supermarkets, Banks, ATMsMall Stores

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STRATEGY FORMULATIONSTRATEGY FORMULATION

Effective strategy formulation requires taking into account:Core competenciesEnvironmental scanning (SWOT)

Successful strategy formulation also requires taking into account:Order qualifiersOrder winners

© 1995 Corel Corp.

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IDENTIFICATION OF CORE IDENTIFICATION OF CORE COMPETENCIESCOMPETENCIES

The special attributes or abilities that give an organization a competitive edge. What the firm does better than anyone else (critical success factors, distinctive competencies) Price Quality Time Flexibility Service Location

Develop Distinctive Competencies based on customer needs and on what the competitors doing

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The consideration of events and trends that present threats or opportunities for a company

Environmental Scanning is necessary to identifyInternal Factors

Strengths and WeaknessesExternal Factors

Opportunities and Threats

ENVIRONMENTAL SCANNINGENVIRONMENTAL SCANNING

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ENVIRONMENTAL SCANNING: ENVIRONMENTAL SCANNING: KEY EXTERNAL FACTORSKEY EXTERNAL FACTORS

Economic conditionsPolitical conditionsLegal environmentTechnologyCompetitionCustomers and MarketsSuppliersDistributors

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ENVIRONMENTAL SCANNING:ENVIRONMENTAL SCANNING:KEY INTERNAL FACTORSKEY INTERNAL FACTORS

Resources available (human resources, facilities and equipment, financial resources)

Existing and potential products and services

TechnologyStages of life cycles of current products

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SWOT SWOT ANALYSIS TO STRATEGY ANALYSIS TO STRATEGY FORMULATIONFORMULATION

Strategy

Mission

ExternalOpportunities

InternalStrengths

InternalWeaknesses

ExternalThreats

CompetitiveAdvantage

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OORDER QUALIFIERS: DEFINEDRDER QUALIFIERS: DEFINED

Order qualifiers are the basic criteria that permit the firm’s products to be considered as candidates for purchase by customers.

These are the characteristics that customers perceive as minimum standards of acceptability to be considered as a potential purchase.

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ORDER WINNERS: DEFINEDORDER WINNERS: DEFINED

Order winners are the criteria that differentiate the products and services of the firm from others’.

These are the characteristics of an organization’s goods or services that cause it to be perceived as better than competitors’ products

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A brand name car can be an “order qualifier”

Repair services can be “order winners”

Examples: Warranty, Roadside Assistance, Leases, etc

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ORGANIZATION STRATEGY/ORGANIZATION STRATEGY/OPERATIONS STRATEGYOPERATIONS STRATEGY

The organization strategy provides the overall direction for the organization. It is broad in scope covering the entire organization

Operations strategy is the approach consistent with organization strategy that is used to guide the operations function. It is narrower in scope, dealing with the operations aspect of the organization.

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Organization Strategy

Relates to growth rate, market share

Operations Strategy

Relates to product design; choice of location, technology, new facilities

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STRATEGIC PLANNINGSTRATEGIC PLANNING

Mission and Vision

Corporate Strategy

Voice of the Business

Voice of the Customer

Marketing Strategy

Operations Strategy

Financial Strategy

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OOPERATIONS ROLE IN CORPORATE PERATIONS ROLE IN CORPORATE STRATEGYSTRATEGY

Provide support for overall strategy of a firm

Serve as firm’s distinctive competence Must be consistent Must be consistent with overall strategy

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IMPETUS FOR STRATEGY CHANGEIMPETUS FOR STRATEGY CHANGE

Changes in the organizationStages inthe product life cycleChanges in the environment

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GLOBAL STRATEGYGLOBAL STRATEGY

Strategic decisions must be made with respect to globalization

What works in one country may not work in another

Strategies must be changed to account for these differences

Other issuesPolitical, social, cultural, and economic

differences

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STRATEGIC DECISIONS IN OPERATIONS STRATEGIC DECISIONS IN OPERATIONS

Products Processes, Technology

Capacity

Job designQuality

Facilities Sourcing

Services

Inventory

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STRATEGIC OM DECISION AREASSTRATEGIC OM DECISION AREASDecision Area 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

Inventory Costs, shortages

Maintenance Costs, equipment reliability, productivity

Scheduling Flexibility, efficiency

Supply chains Costs, quality, agility, shortages, vendor relations

Projects Costs, new products, services, or operating systems

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TRADITIONAL STRATEGIESTRADITIONAL STRATEGIES

Cost minimizationProduct differentiation

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CCOMPETING ON COSTOMPETING ON COST

Eliminate all waste Invest in

Updated facilities & equipment Streamlining operations Training & development

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CCOMPETING BY DIFFERENTIATIONOMPETING BY DIFFERENTIATION

Please the customers by offering unique goods or services that make them feel special

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QUALITY-BASED STRATEGIESQUALITY-BASED STRATEGIES Quality-based strategy

Strategy that focuses on quality in all phases of an organization Focuses on maintaining or improving the quality of an

organization’s products or services Understand customer attitudes toward and expectations of quality Quality at the source

Pursuit of such a strategy is rooted in a number of factors: Trying to overcome a poor quality reputation Desire to maintain a quality image A part of a cost reduction strategy

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TIME-BASED STRATEGIESTIME-BASED STRATEGIES

Time-based strategies Strategies that focus on the reduction of time

needed to accomplish tasks Competing on speed: fast moves, fast adaptations,

tight linkagesIt is believed that by reducing time, costs are

lower, quality is higher, productivity is higher, time-to-market is faster, and customer service is improved

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TIME-BASED STRATEGIESTIME-BASED STRATEGIES

Areas where organizations have achieved time reductions:Planning timeProduct/service design timeProcessing timeChangeover timeDelivery timeResponse time for complaints

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COMPETING ON FLEXIBILITYCOMPETING ON FLEXIBILITY

Produce wide variety of products

Introduce new products Modify existing products

quickly Respond to customer needs

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AGILE OPERATIONSAGILE OPERATIONS Agile operations

A strategic approach for competitive advantage that emphasizes the use of flexibility to adapt and prosper in an environment of changeInvolves the blending of several core

competencies: Cost Quality Reliability Flexibility

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THE BALANCED SCORECARD THE BALANCED SCORECARD APPROACHAPPROACH

A top-down management system that organizations can use to clarify their vision and strategy and transform them into action Develop objectives Develop metrics and targets for each objective Develop initiatives to achieve objectives Identify links among the various perspectives

Finance Customer Internal business processes Learning and growth

Monitor results

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THE BALANCED SCORECARDTHE BALANCED SCORECARD