mb0044 unit 03 slm
TRANSCRIPT
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Production and Operations Management Unit 3
Sikkim Manipal University Page No. 46
Unit 3 Operations Strategy
Structure:
3.1 Introduction
Objectives
3..2 Operations Strategy
3. 3 Competitive Capabilities and Core Competencies
3. 4 Operations Strategy as a Competitive Weapon
Product/service expertise
Quick delivery
Flexibility in production
Low cost production and processes
Product variety and product mixQuality
3.5 Linkage Between Corporate, Business, and Operations Strategy
3.6 Developing Operations Strategy
3.7 Elements or Components of Operations Strategy
Designing of the production system
Facilities for production and services
Product or service design and development
Technology selection and process development
Allocation of resources
Facility, capacity, and layout planning3.8 Competitive Priorities
Cost
Quality
Time
Flexibility
3.9 Manufacturing Strategies
Make-to-stock strategy
Assemble-to-order strategy
Make-to-order strategy
3.10 Service Strategies3.11 Global Strategies and Role of Operations Strategy
Strategic alliance
Locating the operations abroad and after sales support
3.12 Case-let 1
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3.13 Case-let 2
3.14 Summary3.15 Glossary
3.16 Terminal Questions
3.17 Answers
3.18 Answers to Caselets 1 & 2
3.1 Introduction
In the previous unit, we dealt with operations management and strategy,
tools for implementation of operations, and industry best practices. In this
unit, we will deal with operations strategy as a competitive weapon;
competitive capabilities and core competencies; linkage between corporate,business, and operations strategy; developing operations strategy; elements
or components of operations strategy; competitive priorities; manufacturing
strategies; service strategies; and global strategies and role of operations
strategy.
To succeed in a competitive business environment, organisations should
evolve sound strategies with which they can achieve their business
objectives. The strategies that are planned for implemention should be long
term and broad based to achieve the set of objectives. The normal practice
is to develop organisational strategies at three levels of operations namely
a) corporate level, b) business level, and c) functional level.
While the corporate strategy looks into organisational goals, developing the
core competence and achieving the competitive advantage for their
products, the business level strategy looks at market segmentation and
competitive priorities to be considered for their products or services. The
functional level strategy looks at operations to produce these products by
managing the capability, productivity, quality, flexibility, cost of production,
delivery, and finally after sales and services.
Organisations achieve competitive advanatge over its competitors by
providing products or services that meet the customer requirements of cost,quality, performance, durability, etc. The corporate strategy determines the
customers to be served, the new products or services to be produced, and
the suitable strategies to be met in competitions from both domestic and
international markets.
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Hence, the operations strategy is a set of decisions taken across the
organisation to help support the implementation of the competitive businessstrategies. The operations strategy links both its long-term and short-term
operational decisions to corporate strategy. Operations strategy is a process
by which the key operations decisions are made and should always be
consistent with the overall strategic objectives of the organisation.
Objectives:
Affter studying this unit, you should be able to:
explain why organisations formulate and develop startegies to gain
competitive advantage
describe the linkage that exists between corporate strategy, business
level strategy, and functional and operations strategy outline the role of operations strategy as a competitive weapon in
domestic and global markets
explain the formation and development of operations strategy
describe the elements of operations strategy and linking operations and
marketing strategy
explain how to set competitive priorities
identify the operations strategies in manufacturing and services
describe global strategies
3.2 Operations Strategy
Operations strategy is defined as the set of decisions that are warranted in
the operational processes in order to support the competitive strategies of
the business. The objectives stated above will give the firm a competitive
advanatage in the products or services that are served to the customers.
Operations strategy is a long-range business plan for the companys
products and will provide a road map for the operational functions to be
pursued. Therefore, the strategic decisions include the capacity to be built
into the production system, the type of processess and manufacturing
technology to be adopted, the nature of products to be produced, and thetype of material flow and other logistics required to achieve the level of
performance.
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Planning of operations strategy is very essentail as it will enable the
organisation to respond to the market needs in an effective manner. It alsogives the opportunity to align the resources and manufacturing activities to
produce and deliver the products and become successful in the market.
3.3 Competitive Capabilities and Core Competencies
The operations strategies are evolved based on the business strategies.
Some of the business strategies that has a direct bearing to manufacture
are:
To serve a defined product to the stable market
To provide high product variety and customise the design to meet the
specific requirements
To provide rapid response to the market through in-built flexibility and
produce different products to keep abreast with the environmental
changes
To serve these business strategies, the firm should emphasise on achieving
quality, productivity, flexibility, low cost, constant innovation in designs, and
short development cycle for introducing new products and being highly
responsive to the changes in that competitive environment.
Building core competencies and gaining competitive advantage for its
products are great strategies. The core competencies are the unique
resources and strengths that are required to be developed, practised, and
constantly improved upon. This competence becomes the capability when
the strategy is successful and the set objectives of competing is met.
To achieve the competitive advantage, the organisations must provide the
customers with what they want, know when they want, what quality they
prefer and what cost, and how better they serve the customer than their
competitors.
3.4 Operations Strategy as a Competitive Weapon
The important objective of any business is to occupy a position from where
the organisation is able to attract more customers than its competitors. For
this, they should identify the distictive competencies that will give the leading
position in the market segments.
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Competitiveness is one of the crucial factors that decides the survival and
growth of a firm. This competitiveness is how effectively an organisationmeets the needs of its consumers as compared to its immediate
competitors. For such competitions, the organisations look into their
operational strengths and equip themselves effectively to use their strengths
and opportunities as competitive weapons.
These competitive weapons are explained below in detail.
3.4.1 Product/services expertise
Expertise gained through operational strengths in the areas of functionalities
and process capabilities will make them the market leaders for such
products.
3.4.2 Quick delivery
The flexible capacity built into the production line and the process adopted
to produce and supply in time will all together provide the much desired
customer satisfaction. This strategy will help sustain the product and its
market lead.
3.4.3 Flexibility in production
The organisation has to develop a capability for change. The adaptation to
change begins with environmental scanning by which trends can be
monitored to suit the needs of the society. There may be a threat to the
product if competotors gain an edge over the broadening product lines,improved quality, or lowering costs. New entrants into the market or
competiitors offering substitute product may also throw challenges to the
dominant product. To counter this, the desired flexibilty in production must
be built in and operations strategy must be modified accordingly.
3.4.4 Low cost production and processes
The unit cost of each product is required to be lowered to meet the
competition. The cost review on labour, material, and overhead costs of
production lines are to be assessed. An organisation with an efficient and
effective production system will provide such feasibilities to reduce costs.
The operations strategy should also facilitate the processing of products at
lower costs.
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3.4.5 Product variety and product mix
The organisations are producing multiple products to provide variety tocustomers. Here the size of operations matters. Higher the volume, lower
the production costs. Accordingly, operational strategy is to be fine tuned to
suit the desired product mix.
3.4.6 Quality
The operations strategy should ensure that the desired quality level is
maintained, and it meets the customer needs. Competing in the quality of
the product is one of the most important corporate strategies.
3.5 Linkage Between Corporate, Business, and Operations
Strategy
The mission statement is unique to an organisation. It contains a set of long-
range goals. It details the kind of business the company wants to be in, the
type of customers they serve, the basic beliefs of their business, and the
expected goals and profitability.
Similarly, business strategy is a long-range plan and serves as a raod map
to achieve the above-said corporate mission. These plans encompass many
functional areas like production, marketing, finance, human resources, etc.
Operations strategy translates all the decision processes that supports the
business strategy. How these operating strategies work under the corporate
strategies and serve the business strategy is explained in Developing
Operations Strategy below.
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3.6 Developing Operations Strategy
Fig. 3.1: Developing Operations Strategy
Figure 3.1 above depicts how the operations strategy is developed under
the umbrella of the corporate strategy. It shows the factors that go into the
operations strategy and shows the link between the corporate, business,
and the competitive priorities under the operations strategy. Here, the long-
term operations strategic decisions are directly connected to developing
new products, determining production capacity, establishing facilities,
adopting new technologies, locating plants appropriately, and taking suitable
decisons on building and sustaining the quality of products.
The operations strategy translates the product plans and competitive
priorities into decision making processes. The operation decisions
determine the processes required to handle the volume and variety to be
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produced for each market segement. Hence, these decisions govern the
design of the processes, systems, and the procedures that help theoperations strategy.
Selection of the market is another key element. To suit the market
requirements, operation managers develop appropriate processes and
designs to achieve the set objectives. The operations strategy should be
flexible enough to support a product or service throughout its life cycle and
for future changes in the market demand. The operations strategy should
also be consistent with the other functional strategies of marketing, finance,
and human resources.
3.7 Elements or Components of Operations Strategy
The six elements of operations strategy are:
1) Designing of the production system
2) Facilities for production and services
3) Product or service design and development
4) Technology selection, development, and process development
5) Allocation of resources
6) Focus on facilities planning
3.7.1 Designing of the production system
The designing of the production system involves the selection of the type ofproduct design, processing system, inventory plan for finished goods, etc.
The product design has two varieties. They are:
Customised product design The design is customised when the
volume is low and special features are inbuilt. Examples: Industrial
products like turbines, boilers, air compressors, etc.
Standard product design The designer adopt a universal design so
that the product will have wide acceptance across the customers. Also
the demand is more and quantity is high. Examples: Air conditioners,
TV, fans, etc.
There are two types of production systems. They are product focussed and
process focussed. Product-focussed system is adopted where there is mass
production by using a group of machines. For example, products like
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automobiles, computers, etc. In the process-focussed system, the design is
based on a single task like painting, packing, heat treatment, etc.3.7.2 Facilities for production and services
Certain specialisation in production allows the firm to provide the customers
with products of lower cost, faster delivery, on-time delivery, high product
quality, and flexibility. Here, overheads will be less and the firm can
outperform compared to the competitors. While planning the specialised
lines, the economies of scale and the continuous demand are to be looked
into. For example, Nikon Cameras plan and establish special lines for each
model and manufacture huge quantities for the global market. Here, the
economies of scale and the continuous demand matters.
3.7.3 Product or service design and development
The stages followed in developing a product are:
1. Generating the idea
2. Creating the feasiblity reports
3. Designing the prototype and testing
4. Preparing a production model
5. Evaluating the economies of scale for production
6. Testing the product in the market
7. Obtaining feedback
8. Creating the final design and starting the production.
Any product designed and introduced into the market has its own life cycle.
The various stages of life cycle are:
1) Introduction stage
2) Growth stage
3) Maturity stage
4) Decline stage
Let us now discuss these stages in brief.
In the introduction stage, the sales depends on promotion and marketing
efforts. The product which is successful at this stage will enter the next
stage of growth, where the organisation takes the decisions on the capacity
to be augmented and the investments to be made. During the maturity
stage, the organisation focuses on improving the efficiency of the
processes, minimising the costs, etc. At declining stage, the product may
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meet the obsolesence both in technology and in customer requirments, thus
warranting the stop of production. There are many products that lost itsmarket after going through athe above stages. For example, pagers, floppy
drives, tapes for recording and palying, click-type cameras, typewriters, etc.
3.7.4 Technology selection and process development
A product selected for production will be analysed for the process and the
applicable technology for optimal production. There are many challenges
faced by the operations managers in this decision as the alternatives are
many. The techno-economic analysis for each alternatives will help to
decide the required technology. Combining high technology production
equipments with conventional machines and using robotics, flexible
manufacturing systems, automated devices for material movements, etchave given an edge to the production units to excel in quality, flexibility,
production at economic costs, etc thus enabling the firm to meet the
competitions.
3.7.5 Allocation of resources
The production units face continuous problems of allocating the scarce
resources like capital, machines, equipments, materials, manpower,
services, etc. Allocation at the right time to the right place of production
indicates the efficiency of the production planners. Optimal use of resources
will enable economical production. Minimising waste, optimal utilisation of
resources, and the best quality product demand a sound operations
strategy.
3.7.6 Facility, capacity, and layout planning
The location, layout, and facilities creation for the production are the key
decision areas for the operations manager. These are critical for achieving
the competitiveness. The decision also influences the future expansion of
the plant. While evaluating the aternatives, the operations manager will
consider the availbility of raw materials, access to market, etc. Enormous
capital requirement is required and the planning is always long range. Here,
the production process adopted and the technology pursued dictates thevolume, quality, and cost of production.
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3.8 Competitive Priorities
Operations stategy reflects the long-term goals of an organisation in itscorporate strategy. To achive good results, a clear understanding of the
operating advantages and a good cross functional coordination between
functional areas of marketing, production, finance, and human resources
departments are required. Operating advantages depend on its processes
and competitive priorities considered while establishing the capabilities. The
basic competitive priorities are:
Cost
Quality
Time
Flexibility
3.8.1 Cost
Cost is one of the primary considerations while marketing a product or a
service. Being a low cost producer, the product accepted by the customer
offers sustainability and can outperform competitors. Lower price and better
quality of a product will ensure higher demand and higher profitability. To
estimate the actual cost of production, the operations manager must
address labour, materials, scrap generations, overhead and other initial cost
of design and development, etc.
3.8.2 QualityQuality is defined by the customer. The operations manager looks into two
important aspects namely high performance design and consisitent quality.
High performance design includes superior features, greater durability,
convenience to services, etc where as consistent design measures the
frequency with which the product meets its design specifications and
performs best.
3.8.3 Time
Faster delivery time, on-time delivery, and speedy development cycle are
the time factors that operations strategy looks into. Faster delivery time is
the time lapsed between the customer order and the delivery. On-time
delivery is the frequecy with which the product is delivered on time. The
developemnt speed is the elapsed time from the idea generation up to the
final design and production of products.
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3.8.4 Flexibility
Flexibility is the ability to provide a wide variety of products, and it measureshow fast the manufacturer can convert its process line used for one product
to produce another product after making the required changes. The two
types of flexibilities are:
Customisation
Volume flexibility
While customisation is the ability of the firm to satisfy the specific needs of
each its customer, the volume flexibility is the ability to accelerate or
decelerate the rate of production to handle the fluctuations in demand. For
example, the production of fertilisers of different specifications and
applications.
3.9 Manufacturing Strategies
There are many types of competitive priorities for processes used in the
manufacturing of products. The manufacturing industry adopts systems
based on demand. The production systems practised are:
Batch production
Mass production
Customised production
Assemble products, test them, and supply
For these, the manufacturing strategies adopted are decided by the
operations manager. The manufacturing strategies differ from industry to
industry and the applicable situations demand and supply. The following are
the three dominant manufacturing strategies:
Make-to-stock
Assemble-to-order
Make-toorder
Let us now discuss these strategies in detail.
3.9.1 Make-to-stock strategy
The manufacturing firms adopt this strategy to ensure immediate delivery of
the products, thereby minimising the delivery times. This straegy is feasible
for standardised products with high volumes and where forecast is
reasonably accurate. To accomplish this, the production units should hold
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good inventory of stocks. For example, chemicals, soft drinks, electronic
components, etc.3.9.2 Assemble-toorder strategy
This strategy serves as a competitive priority of customisation and ensures
fast delivery. This goes with the apporoach to produce customised products
from sub-assemblies and components after the customer orders are
received. This involves assembly processes, fabrication processes, painting,
cleaning, etc. Here, the appropriate inventory of parts and aggregates are
created for smooth functioning of processes. The operations manager
should ensure that the optimal finsihed goods inventory is mainatained as
excess inventory increases the inventory carrying cost and less finished
goods inventory may hamper the delivery of products in time to thecustomers. For example, paints to colours, furnitures, fabricated structures,
etc.
3.9.3 Make-to-order strategy
When products are manufactured to the customer specification, the
tendency is to follow the strategy of make-to-order. The firms evolve a set
of processes that suits the manufacture based on the customer
requirements. This strategy gives a higher degree of customisation, one of
the major competitive priority. The firm can accommodate flexibility and
offer variety. For example, special medical equipments, forgings and
castings, house construction, etc.
3.10 Service Strategies
Here too, the standardised services, customised services, and assemble-to-
order strategies are used for processing as in the case of manufacturing.
The service strategy is the use of processes that provides little variety in
high volumes and mostly customised. For example, FedEx, postal servcies,
etc.
The strategy adopted for designing the operations is to include the
processes that produce a set of standardised services to specific customers.For example, credit cards, Internet, etc.
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3.11 Global Strategies and Role of Operations Strategy
A global strategy pursued by organisations at the corporate level mayinclude buying foriegn parts or servcies and combat traditional domestic
competitions. The firms should also ward off threats from foreign markets as
they can directly supply to the domestic customers. Hence, identifying the
opportunities and threats and evolving the operations strategy require a
global perspective. The other factors to be analysed are the market
segmentation like demographic factors, psychological factors, industry
factors, etc and also identify the needs of product, delivery, volume, and any
other need of the customer.
While evolving the business strategy, the business units considers the
prevailing global conditions along with their existing strengths, weaknesses,
and competencies. The global conditions include factors like market
potential; existing competitions; and economic, political, technological, and
social developments across the countries being considered for their
business strategy.
Two effective strategies adopted by the firms exposed to products being
marketed world over are strategic alliance and locating operations abroad
and after sales service.
3.11.1 Strategic alliance
A strategic alliance is an agreement between the two parties as jointpartners to promote the products. This alliance may be in any form, but
widely accepted are 1) collaboration, 2) joint venture, and 3) technology
transfer and licencing.
Collaboration
A collaboration arrangement beween two parties arises when one firm is
having core competency in a particular product which the other firm wants to
promote in its country. Instead of duplicating the product with their own
design, the local firm and the collobarator join together for their mutual
interest and promote the product. Invariably, the operations strategy
followed by the collaborated company is followed by the domestic company
to keep up the reputation of products. For example, Nikon, IBM, HP, etc.
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Joint venture
Joint venture is an agreement between the two firms to produce jointly. Thisapproach is used to gain access to foreign markets and quickly promote
their interest. Here, the outside firm supplies the technology and expertise
and the local firm provide the required resources for the operations,
processing, human resoucres, infrastructure, etc. For example, Maruti
Suzuki, Hero Honda, etc.
Technology transfer and licencing
Technology transfer is the term used to describe the processes by which
technological knowledge moves within or between organisations. The
technological knowledge that is transferred can assume various forms. It
can be embodied in goods (including physical goods, plant and animalorganisms), services and people, and organisational arrangements, or
codified in blueprints, designs and technical documents.
Licensing is a business arrangement in which one company gives another
company permission to manufacture its product for a specified payment.
While licensing agreements are mainly used in commercialization of a
technology, they are also used by franchisers to promote sales of goods and
services.
3.11.2. Locating the operations abroad and after sales support
Locating the manufacturing operation in a foreign country is another way ofpenetrating the new markets. Since economical and political environment
will be different and the customers needs vary, it is essential for firms to
have a detailed techno-economic survey before planning the entry. The
operations strategy will be different from what the company is presently
practising. If it is a standardised product to be sold in the foriegn country, the
methodology and operational strategy could be the same. For example,
McDonalds, Dominos Pizza, etc.
Self Assessment Questions
1. Select correct answer out of the alternatives given
i. While formulating the corporate objectives, the manager considersa) Market conditions
b) Political and social environments
c) Economic environment
d) all the above
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ii. Nirma manufactures different varieties of soaps for the market and
the production system followed is aa) Customised production
b) Standardised production
c) Stock-to-order
d) Assemble-to-order
iii. When products are produced well in advance and stored for
marketing, the operations strategy is known as
a) Produce-to-stock
b) Produce-to-order
c) Custom-to-order
2. Which of these is not an operation strategy?a) Production systems
b) Product plans
c) Collaboration for production
d) Process decisions
e) Capacity decisions
3. Fill up the blanks with appropriate word/words
i. Operations strategy is defined as the set of decisions that are
warranted in the operational processes, which supports the
_____________of the business.
ii. The six elements of operations strategy that has a direct bearing on
the corporate strategy are:
1) Designing of the production system
2) Facilities for production and services
3) ________________________________
4) Technology selection, development, and process development
5) Allocation of resources
6) Focus on facilities planning
iii. The following three manufacturing strategies are dominant inindustries:
1) Make-to-stock strategy
2) ____________________
3) Make-to-order strategy
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iv. A strategic alliance is an agreement betwen the two parties as joint
partners to promote the products. This alliance may be in any of theforms, but widely accepted are:
1) Collaboration
2) ______________
3) Technology transfer and licencing
3.12 Case-let 1
Strategic Decisions of Microsoft
Microsoft operates in a very competitive industry. It was dominating in theDOS and held almost 90% of the market in PC operating system. It
invested futher in developing the next generation OS like Windows 95,
Windows NT, etc to keep the lead and to take advantage of the
profitability in this evergreen DOS segment. Before the competition builds
up for DOS, Microsoft had two thoughts whether to harvest the existing
DOS as it is like a cash cow or bring in different systems to keep away
the competitors. Bill Gates, the co-founder and CEO of Microsoft realised
that if his company is not replacing its own product with a better product,
some other company like IBM would come out and they may loose the
market leadership position. They decided to go forward aggressively tothe next competitive advantage before any other competitors does and
introduced many new products. Microsoft still enjoys the market
leadership position in the operating system.
Discussion Questions:
a) The strategic decision to develop new products to keep the market
leadership - is it a corporate strategy or a business strategy? Discuss
b) The strategy of developing new products to counter the anticipated
competition instead of harvesting their existing cash cow product - is
this correct and in this decision, what is the strategy that is involved?c) Explain briefly why Bill Gates believed in the aggressive strategy to
gain the competitive advantage and how has it benefitted the
company?
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3.13 Case-let 2
Tata Motors-Development of New Products to Gain Competitive
Advantage
Designing indegenously, building and marketing a new car is a very
complex process and very few corporates take such a decision. Tata
motors, one of the leading manufacturers of automobiles in India, took
this drive forward in developing the first indegenously designed and
developed car in Indica as a competing model to the then prevailing cars
like Maruti 800 and Zen. This strategy by Tata was a tradeoff between
the price and the features.
Indica car was a success story, and it did give the desired competition toMaruti Suzuki. The target audiance for Tata was the middle class and
fuel efficiency and price were the other primary considerations to woo the
customers. After the design and test runs were satisfactorily done,
benchmarking Indica car for final pricing and positioning in the market
was again a big challenge. Here, the operations strategy adopted was to
offer the first indigenous car at the lowest price possible and with the best
quality. Hence the investment, processes, systems, and procedures for
manufacture of such a car required a total relook by their operations
manager, it was a really big task for the entire Tata Motors.
With the confidence reposed after the success of designing, developing,and marketing Indica cars to Indian roads, Tata Motors embarked on
another ambitious project of their chairman in bringing the prestigious
peoples car, Nano, to Indian roads. Here, the decision to bring out a
peoples car from Tata Motors stable was purely based on the sale price
of Rs. one lakh per car. This challenge was taken up seriously by the
operations managers and the task was accomplished successfully by
offering Nano cars at the declared price.
In the above two success stories,
a) What do you feel are the corporate strategies?
b) What manufacturing priorities might have been pursued by the
operation managers?
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3.14 Summary
Let us recapitulate the important concepts discussed in this unit: Operations strategy is a decision making process of selecting the
suitable manufacturing strategies and manufacturing priorities. This
exercise will enable the organisation to respond to the market needs in
the most effective manner by aligning the resources and activities of the
organisation to deliver the products that are likely to succeed in the
market.
Operations strategy involves planning, organising, and allocating of all
the resources to gain the competitive advantage.
Operations strategy is defined as the set of decisions that are warranted
in the operational processes which supports the competitive strategiesof the business. It is a long-range business plan for the companys
products and will provide a road map for the operational functions to be
pursued for achieving business strategies.
Strategic decisions include capacity building; evolving production
systems, type of processes, manufacturing technology to be adopted,
nature of products to be produced, type of material flow and other
logistics, and the means to achieve the required level of performance.
Corporate strategy involves monitoring and making changes to suit the
external environment and exploiting the core competencies.
Competitiveness is one of the crucial factors that decides the survival
and growth of a firm. Organisations will look into their operational
strengths and use them effectively as competitive weapons.
There are six elements of operations. They are designing of the
production system; facilities for production and services; product or
service design and development; technology selection, development,
and process development; allocation of resources; and focus on facilities
planning.
Operating strategy should also analyse the competitive priorities like
cost, quality, time, and flexibility which are the capabilities to be built in
to meet the market expectations.
The three dominant manufacturing strategies are make-to-stock
strategy, assemble-to-order strategy, and make-to-order strategy. These
systems are practised for categories of batch production; mass
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production; customised production; and assemble the product, test it,
and supply. A global strategy pursued at the corporate level may include buying
foriegn parts or servcies and combat traditional domestic competitions.
Other factors analysed here are the market segmentation like
demographic factors, psychological factors, industry factors, etc and
identify the needs of product, delivery, volume, and any other
requirement of the customer.
3.15 Glossary
Cash cow products: Cash cow products provide lots of cash for the
firms. They have high market share, and they are always in the growing
market.
Competitive advantages: Organisations achieve competitive
advantages by providing their customers what they want and better or
more effective products than their competitors and take the lead
Core competence: The organisations resources and capabilities are
the sources of their unique competencies
Customisation: Customisation is the ability of a firm to satisfy the
specific needs of each customer.
3.16 Terminal Questions
1. What is meant by operations strategy? How is it related to corporate
strategy?
2. What is meant by core competence and competitive advantage?
3. What are the types of competitive weapons that a firm can use to meet
the objectives of the operations strategy?
4. How do you develop operations strategy? Explain briefly the relationship
that exists between corporate strategy, business strategy, and
operations strategy.
5. Explain briefly the elements of operations strategy.6. Explain the basic competitive priorities considered while formulating
operations strategy by a firm?
7. What are the manufacturing strategies that can be applied by a firm to
meet the operations strategy?
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8. Under global strategies, explain the salient features of the collaboration
arrangement and the joint venture policies for gaining competitiveadvantage.
3.17 Answers
Self Assessment Questions
1. (i) d. All the above
(ii) b. Standardised production
(iii) a. Produce-to-stock
2. c. Collaboration for production3. (i) Competitive strategies
(ii) 3. Product design and development
(iii) 2. Assemble-to-order
(iv) 2. Joint venture
Terminal Questions
1. Refer section 3.2
2. Refer section 3.3
3. Refer section 3.4
4. Refer section 3.5 & 3.6
5. Refer section 3.7
6. Refer section 3.8
7. Refer section 3.9
8. Refer section 3.11
3.18 Answers to Caselets 1 & 2
Caselet-1 a It is a corporate strategy, planned with a long-term
vision, not only to sustain the existing business but also
to keep the competitive advantage.
b Todays cash cow product may not be so in the future.
The development lead time required to immediately
bring new product should be borne in mind. Hence, the
decision taken to bring new versions made Microsoft to
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keep the competitive edge over its competitors.
c Bill Gates aggressive policy of keeping the competitive
advantage has benefitted the company as they are,
even today, the front runners and has many first-mover
products to their credit.
Caselet-2 a The vital decision to indigenously design and develop a
new car, Indica and compete with the existing models
and also bringing out similarly the Nano as the peoplescar with the price band fixed at Rs. one lakh per car
are the corporate strategies.
b Low cost, high volume production of cars to suit the
Indain roads, and also build with many features for
satisfying the customer, that too, within the price band
fixed were all the challenges faced by the operations
manager. To achieve this, they created facilities,
production systems, and all other procedures.
Reference:
Frazier, G., and Gaither, N. (2002. Operations Management South
Western/Thomson Learning.
Ronald, E. J. And Everett, A.E. (2009). Production & Operations
Management Phi Learning.