chapter 2 operations strategy and performance management
Post on 30-Dec-2015
233 Views
Preview:
TRANSCRIPT
Chapter 2Chapter 2Operations Strategy and Operations Strategy and Performance ManagementPerformance Management
Corporate StrategyCorporate StrategyA set of objectives, plans, and policies for the
organization to successfully compete in its markets.
Long range (3 to 5 years) It specifies what organization’s competitive
advantage will be Focuses on few key areas
Corporate StrategyCorporate StrategyOutline of Corporate Strategy Specifies business(es) of the company (new
products/services) Identifies opportunities & threats of the
environment (environmental responses) Determines growth objectives (goals) Differentiates from others (core competencies) Global strategies (Strategic alliance, Locating
abroad)
A well formulated strategy helps to marshal and allocate an organization’s resources into a unique and viable posture based on its relative internal competencies and shortcomings, anticipated changes in the environment, and contingent moves by intelligent opponents
•Organizational resources:
•assets
•capabilities•functional strengths
•technology
•product development
•process & market expertise
•Posture:
•competitive priorities
Considerations…
•Responding to flexibility
•competition, manpower, volume, technology, etc.
•Adjusting to business environment
•through environmental assessment
•Identifying Core Competencies
•unique resources and strengths
Mission and Vision Statements
• Mission statements express organization’s purpose or reason for existence.
Includes: Products, technologies, market, customers, competencies
• Vision statements used to express organization’s values and aspirations - Solectron: “Be the best and continuously improve”.
Core Competencies
• Collective knowledge and skills an organization has that distinguish it from the competition.
• Typically center on an organization’s ability to integrate a variety of specific technologies and skills in the development of new products and services.
• Building blocks of core capabilities.
Core Competencies continued
• Are basis on which new outputs are developed.
• Better to think of organization in terms of its portfolio of core competencies than as a portfolio of products.
• Identifying and developing core competencies is one of top management’s most important roles.
Core Capabilities
• Organization practices and business processes
• Transferring out core processes could result in Hollowed Out and Creeping Breakeven Phenomenon effects
Core Competencies Used to Gain Access to Variety of
Markets• Cannon
– core competencies in optics, imaging, and electronic controls
– Products include copiers, laser printers, cameras, and image scanners.
• Boeing– integrating large scale systems– commercial jetliners, space stations,
missiles
Key Characteristics of Core Competencies/Capabilities
• Should be used to gain access to a variety of markets
• Should be strongly related to key benefits provides by products or services
• Should be difficult to imitate
Repercussions of Extensive Outsourcing Activities
• Hollowed Out Phenomenon
• Creeping Break-even Phenomenon
Hollowed Out
• The extent that most of a firm’s complex parts and production are outsourced
• Often when complex parts outsourced, engineering talent follows
• Supplier may become competitor
Creeping Breakeven Phenomenon
• Viscous cycle where products appear to become more expensive to produce in-house as others are outsourced.– Result from ways overhead is allocated
• Logical conclusion is organization ends up producing no outputs.
Market AnalysisMarket AnalysisCorporate strategy• goals• core competencies• environmental responses• new products/services• global strategies
Market analysis•segmentation
•needs assessment
Market AnalysisMarket Analysis
To understand what customers want and provide it better than the competitors do.
How?– Market segmentation– Needs assessment for each segment
Competitive PrioritiesCompetitive PrioritiesCorporate strategy• goals• core competencies• environmental responses• new products/services• global strategies
Market analysis• segmentation• needs assessment
Competitive prioritiesOperationsMarketing•cost•quality Finance•time•flexibility Others
Competitive PrioritiesCompetitive PrioritiesCorporate strategy• goals• core competencies• environmental responses• new products/services• global strategies
These priorities can be grouped into 4 categories:
Cost 1. Low-cost operationsQuality 2. High-performance
design3. Consistent quality
Time 4. Fast delivery5. On-time delivery6. Development speed
Flexibility 7. Customization8. Volume flexibility
Competitive PrioritiesCompetitive PrioritiesCorporate strategy• goals• core competencies• environmental responses• new products/services• global strategies
Market analysis• segmentation• needs assessment
Competitive prioritiesOperations
Marketing• cost• quality Finance• time• flexibility Others
Functional Area StrategiesFunctional Area StrategiesCorporate strategy• goals• core competencies• environmental responses• new products/services• global strategies
Market analysis• segmentation• needs assessment
Competitive priorities
OperationsMarketing
• cost• quality
Finance• time• flexibility Others
Functional area strategies•finance•marketing•operations•others
•The means to implement Corporate Strategy
•Links ST and LT Operations decisions
•Cross-functional coordination
CapabilitiesCapabilities
Capabilities• current• needed• plans
Corporate strategy• goals• core competencies• environmental responses• new products/services• global strategies
Market analysis• segmentation• needs assessment
Competitive priorities
OperationsMarketing
• cost• quality
Finance• time• flexibility OthersFunctional area
strategies• finance• marketing• operations• others
Strategy and DecisionsStrategy and Decisions
Operations strategy
Market analysis
Competitive priorities
Corporate strategy
Services Manufacturing• Standardized services• Assemble-to-order• Customized services
• Make-to-stock• Assemble-to-order• Make-to-order
Operations StrategyCompetitive priorities
Standardized ServiceConsistent quality
On time delivery
Low cost
Assemble-to-order Customization
Fast Delivery
Customized services High performance Design
Customization
Strategy and DecisionsStrategy and Decisions
Operations strategy
Market analysis
Competitive priorities
Corporate strategy
Services Manufacturing• Standardized services• Assemble-to-order• Customized services
• Make-to-stock• Assemble-to-order• Make-to-order
Operations StrategyCompetitive priorities
Make to Stock Standardized Product
Accurate Forecast
Consistent quality
On time delivery
Low cost
Assemble-to-order Customization
Fast Delivery
Make-to-Order High performance Design
Customization
Strategy and DecisionsStrategy and Decisions
Operations strategy
Market analysis
Competitive priorities
Corporate strategy
Services Manufacturing• Standardized services• Assemble-to-order• Customized services
• Make-to-stock• Assemble-to-order• Make-to-order
• Process decisions• Quality decisions• Capacity, location, and layout decisions• Operating decisions
Strategy and DecisionsStrategy and Decisions
Operations strategy
• Process decisions• Quality decisions• Capacity, location, and layout
decisions• Operating decisions
Market analysis
Competitive priorities
Corporate strategy
Services Manufacturing• Standardized services• Assemble-to-order• Customized services
• Make-to-stock• Assemble-to-order• Make-to-order
Capabilities
Operations Strategy as:
•Rational•Product-Process Matrix
•Organizational•Strategy development & strategy deployment (“honshin kanri”)
•Political
Operations-Based Strategy
Strategy too often a high-level chess game Operations is foundation for strategy
– Attack larger, entrenched competitors– Buttress (support) existing competitive advantage– Inherently difficult to imitate
Examples– Australian Paper Manufacturers– Crown Equipment– Southwest Airlines, Wal-Mart– American Connector Company (counterattack)
Hayes and Upton, “Operations-Based Strategy,” California Mgmt. Review, Summer 1998.
Attacking through Operations
Appeal to different customer needs– Differentiate from current players
• Price, quality, flexibility, speed, innovation
– Build consistent operations infrastructure• Integrated values, skills, technologies, relationships, …• Difficult for competition to duplicate
Build experience and capabilities– Get down the learning curve– Means of building capabilities
• Process, systems, and/or organization-based
Hayes and Upton, “Operations-Based Strategy,” California Mgmt. Review, Summer 1998.
Defending through Operations
How to defend against ops-based attacks?
1. Exploit own internal strengthsReemphasize existing capabilities
2. Attack attacker’s ops-based weaknessesFocus on what attacker cannot do
3. Emulate attacker’s strategy, but fasterAcknowledge threat and respond rapidly
Hayes and Upton, “Operations-Based Strategy,” California Mgmt. Review, Summer 1998.
Ops Strategy Sustains Advantage
Operations-based strategies are robust Difficult to replicate, slow to diffuse
– Require substantial organizational change and realignment
– Impact management philosophy and corporate culture
Dynamic and unpredictable– Continuous improvement, ongoing invention– Learn and adapt quickly
Hayes and Upton, “Operations-Based Strategy,” California Mgmt. Review, Summer 1998.
Operations-Based Lessons Ops capabilities cannot be bought of shelf
– Ops capabilities take a long time to develop Develop rapid organizational learning
– Ops capabilities often recognized after the fact Quickly recognize latent threats
– Don’t ignore small or foreign competitors Don’t strive for “best practice,” search for
“new practice”– Push the envelope of the efficient frontier!
Focus! Do fewer things, but do them better…
Hayes and Upton, “Operations-Based Strategy,” California Mgmt. Review, Summer 1998.
top related