module-1 - op strategies in global economy
TRANSCRIPT
-
8/9/2019 Module-1 - Op Strategies in Global Economy
1/78
1
Module 1 (Chapter 2)Module 1 (Chapter 2)Module 1 (Chapter 2)Module 1 (Chapter 2)
Operations StrategiesOperations Strategies
in a Global Economyin a Global Economy
-
8/9/2019 Module-1 - Op Strategies in Global Economy
2/78
2
OverviewOverviewOverviewOverview
Introduction to Operations ManagementIntroduction to Operations Management
Todays Global Business ConditionsTodays Global Business Conditions
Operations StrategyOperations Strategy
Forming Operations StrategiesForming Operations Strategies WrapWrap--Up: What WorldUp: What World--Class Producers DoClass Producers Do
-
8/9/2019 Module-1 - Op Strategies in Global Economy
3/78
3
Introduction to Operations ManagementIntroduction to Operations ManagementIntroduction to Operations ManagementIntroduction to Operations Management
Operations managementOperations managementis the management of anis the management of an
organizations productive resources or its productionorganizations productive resources or its production
system.system.
AAproduction systemproduction system takes inputs and converts themtakes inputs and converts theminto outputs.into outputs.
TheThe conversion processconversion process is the predominant activity ofis the predominant activity of
a production system.a production system.
The primary concern of anThe primary concern of an operations manageroperations manageris theis theactivities of the conversion process.activities of the conversion process.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
4/78
4
Organizational Model : Importance of OMOrganizational Model : Importance of OMOrganizational Model : Importance of OMOrganizational Model : Importance of OM
MarketingMarketing
MISMISEngineeringEngineering
HRMHRM
QAQA
AccountingAccounting
SalesSales
FinanceFinance
OMOM
-
8/9/2019 Module-1 - Op Strategies in Global Economy
5/78
5
Historical Milestones in OMHistorical Milestones in OM
The Industrial RevolutionThe Industrial Revolution
PostPost--Civil War PeriodCivil War Period
Scientific ManagementScientific Management
Human Relations and BehaviorismHuman Relations and Behaviorism Operations ResearchOperations Research
The Service RevolutionThe Service Revolution
-
8/9/2019 Module-1 - Op Strategies in Global Economy
6/78
6
Operations as a SystemOperations as a SystemOperations as a SystemOperations as a System
InputsInputs OutputsOutputsConversionConversion
SubsystemSubsystem
Production SystemProduction System
ControlControl
SubsystemSubsystem
-
8/9/2019 Module-1 - Op Strategies in Global Economy
7/78
7
Outputs of an Operations SystemOutputs of an Operations SystemOutputs of an Operations SystemOutputs of an Operations System
DirectDirect
ProductsProducts
ServicesServices IndirectIndirect
WasteWaste
PollutionPollution
Technological AdvancesTechnological Advances
-
8/9/2019 Module-1 - Op Strategies in Global Economy
8/78
8
Production as an Organization FunctionProduction as an Organization FunctionProduction as an Organization FunctionProduction as an Organization Function
Indian companies cannot compete with marketing,Indian companies cannot compete with marketing,finance, accounting, and engineering alone.finance, accounting, and engineering alone.
We focus on OM as we think of globalWe focus on OM as we think of globalcompetitiveness, because that is where the vastcompetitiveness, because that is where the vastmajority of a firms workers, capital assets, andmajority of a firms workers, capital assets, andexpenses reside.expenses reside.
To succeed, a firm must have a strong operationsTo succeed, a firm must have a strong operationsfunction teaming with the other organizationfunction teaming with the other organizationfunctions.functions.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
9/78
9
Strategic DecisionsStrategic Decisions
These decisions are of strategic importance andThese decisions are of strategic importance andhave longhave long--term significance for theterm significance for the
organization.organization.
ExamplesExamples include deciding:include deciding: the design for a new products productionthe design for a new products production
processprocess
where to locate a new factorywhere to locate a new factory whether to launch a newwhether to launch a new--productproduct
development plandevelopment plan
-
8/9/2019 Module-1 - Op Strategies in Global Economy
10/78
10
IntroductionIntroduction to Operations Strategiesto Operations Strategies
Operational effectivenessOperational effectiveness is the ability tois the ability toperform similar operations activities better thanperform similar operations activities better thancompetitors.competitors.
It is very difficult for a company to competeIt is very difficult for a company to competesuccessfully in the long run based just onsuccessfully in the long run based just onoperational effectiveness.operational effectiveness.
A firm must also determine how operationalA firm must also determine how operational
effectiveness can be used to achieve aeffectiveness can be used to achieve asustainablesustainable competitive advantagecompetitive advantage..
An effectiveAn effective competitive strategycompetitive strategy is critical.is critical.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
11/78
11
Factors Affecting TodaysFactors Affecting Todays
Global Business ConditionsGlobal Business Conditions
Factors Affecting TodaysFactors Affecting Todays
Global Business ConditionsGlobal Business Conditions
Reality of global competitionReality of global competition
Quality, customer service, and costQuality, customer service, and cost
challengeschallenges
Rapid expansion of advancedRapid expansion of advanced
technologiestechnologies
Continued growth of the service sectorContinued growth of the service sector Scarcity of operations resourcesScarcity of operations resources
Social responsibility issuesSocial responsibility issues
-
8/9/2019 Module-1 - Op Strategies in Global Economy
12/78
12
Reality of Global CompetitionReality of Global CompetitionReality of Global CompetitionReality of Global Competition
Changing nature of world businessChanging nature of world business
International companiesInternational companies
Strategic alliances and productionStrategic alliances and productionsharingsharing
Fluctuation of international financialFluctuation of international financial
conditionsconditions
-
8/9/2019 Module-1 - Op Strategies in Global Economy
13/78
13
Changing Nature of World Business : US ViewChanging Nature of World Business : US ViewChanging Nature of World Business : US ViewChanging Nature of World Business : US View
The US gross domestic product (GDP) is, at $10The US gross domestic product (GDP) is, at $10
trillion, the largest in the world.trillion, the largest in the world.
Companies all over the globe are aggressivelyCompanies all over the globe are aggressively
exporting their products/services to the USexporting their products/services to the US Many US companies are targeting foreign markets toMany US companies are targeting foreign markets to
shore up profits.shore up profits.
The global economy that interconnects the economiesThe global economy that interconnects the economies
of all nations has been termed theof all nations has been termed the global villageglobal village.. One of the most important new markets is China.One of the most important new markets is China.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
14/78
14
Changing Nature of World Business : Indian ViewChanging Nature of World Business : Indian ViewChanging Nature of World Business : Indian ViewChanging Nature of World Business : Indian View
The India gross domestic product (GDP) is, at USThe India gross domestic product (GDP) is, at US
$1.141 trillion (2007), the 12th in the world.$1.141 trillion (2007), the 12th in the world.
Indian GDP Growth in billions of US $ :Indian GDP Growth in billions of US $ :
19801980 200, 1990200, 1990 370, 2000370, 2000 560, 2007560, 2007--11411141 Many foreign companies are aggressively investing inMany foreign companies are aggressively investing in
India.India.
Many Indian companies are targeting foreign marketsMany Indian companies are targeting foreign markets
and foreign companies to shore up profits.and foreign companies to shore up profits.
One of the most important new markets is China. ItOne of the most important new markets is China. It
is the biggest competitor to Indiais the biggest competitor to India
-
8/9/2019 Module-1 - Op Strategies in Global Economy
15/78
15
International CompaniesInternational CompaniesInternational CompaniesInternational Companies
International companiesInternational companies are those whose scope ofare those whose scope of
operations spans the globe as they buy, produce, andoperations spans the globe as they buy, produce, and
sell.sell.
International firms search out opportunities for profitsInternational firms search out opportunities for profits
relatively unencumbered by national boundaries.relatively unencumbered by national boundaries.
Operations managers must coordinate geographicallyOperations managers must coordinate geographicallydispersed operations.dispersed operations.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
16/78
16
International CompaniesInternational CompaniesInternational CompaniesInternational Companies
Worlds Largest CorporationsWorlds Largest Corporations1. General Motors1. General Motors USUS
2. Wal2. Wal--Mart StoresMart Stores USUS
3. Exxon Mobil3. Exxon Mobil USUS
4. Ford Motor4. Ford Motor USUS
5. DaimlerChrysler5. DaimlerChrysler GermanyGermany
6. Mitsui6. Mitsui JapanJapan
7. Mitsubishi7. Mitsubishi JapanJapan
8. Toyota8. Toyota JapanJapan
9. General Electric9. General Electric USUS
10. Itochu10. Itochu JapanJapan
-
8/9/2019 Module-1 - Op Strategies in Global Economy
17/78
17
Strategic AlliancesStrategic AlliancesStrategic AlliancesStrategic Alliances
Strategic alliancesStrategic alliances are joint ventures amongare joint ventures amonginternational companies to exploit global businessinternational companies to exploit global business
opportunities.opportunities.
Alliances are often motivated by :Alliances are often motivated by :
Product or production technologyProduct or production technology
Market accessMarket access
Production capabilityProduction capability
Pooling of capitalPooling of capital
-
8/9/2019 Module-1 - Op Strategies in Global Economy
18/78
18
Strategic AlliancesStrategic Alliances
General Motors (US) &General Motors (US) &
Kia Motor Corp. (S.K.)Kia Motor Corp. (S.K.)
Kia might help sellKia might help sell
and market GM carsand market GM cars
in South Koreain South Korea
Renault (France) &Renault (France) &
City of MoscowCity of Moscow
Manufacture 100,000Manufacture 100,000vehicles annuallyvehicles annually
near Moscownear Moscow
Sino Aerospace InvestSino Aerospace Invest--ment Corp. (Taiwan) &ment Corp. (Taiwan) &
Swearingen Aircraft (US)Swearingen Aircraft (US)
Forming TexasForming Texas--basedbasedSino SwearingenSino Swearingen
Aircraft Co.Aircraft Co.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
19/78
19
Strategic AlliancesStrategic AlliancesStrategic AlliancesStrategic Alliances
Japanese companies have long practicedJapanese companies have long practicedkeiretsukeiretsu, the linking of companies into, the linking of companies into
industrial groups.industrial groups.
AAfinancialkeiretsufinancialkeiretsu links companieslinks companiestogether with crosstogether with cross--holding of shares, salesholding of shares, sales
and purchases within the group, andand purchases within the group, and
consultation.consultation.
AAproduction keiretsuproduction keiretsu is a web ofis a web of
interlocking relationships between a biginterlocking relationships between a big
manufacturer (Toyota) and its suppliers.manufacturer (Toyota) and its suppliers.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
20/78
20
Production SharingProduction SharingProduction SharingProduction Sharing
Production sharingProduction sharingmeans that a productmeans that a product
might be designed and financed in onemight be designed and financed in one
country, its materials produced in othercountry, its materials produced in other
countries, assembled in another country, andcountries, assembled in another country, andsold in yet other countries.sold in yet other countries.
The country that is the highestThe country that is the highest--quality, lowestquality, lowest--cost producer for a particular activity wouldcost producer for a particular activity would
perform that portion of the production of theperform that portion of the production of the
product.product.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
21/78
21
Pros and Cons of GlobalizationPros and Cons of GlobalizationPros and Cons of GlobalizationPros and Cons of Globalization
Pros (Pluses)Pros (Pluses) Productivity grows more quickly (living standardsProductivity grows more quickly (living standards
can go up faster)can go up faster)
Global competition and cheap imports keep a lidGlobal competition and cheap imports keep a lidon prices (inflation less likely to derail economicon prices (inflation less likely to derail economicgrowth)growth)
Open economy spurs innovation (with fresh ideasOpen economy spurs innovation (with fresh ideasfrom abroad)from abroad)
Export jobs often pay more than other jobsExport jobs often pay more than other jobs
India has more access to foreign investment (keepsIndia has more access to foreign investment (keepsinterest rates low)interest rates low)
-
8/9/2019 Module-1 - Op Strategies in Global Economy
22/78
22
Pros and Cons of Globalization (US View)Pros and Cons of Globalization (US View)Pros and Cons of Globalization (US View)Pros and Cons of Globalization (US View)
Cons (Minuses)Cons (Minuses)
Millions of Americans have lost jobs due toMillions of Americans have lost jobs due to
imports or production shifts abroadimports or production shifts abroad
Most displaced workers find new jobs that pay lessMost displaced workers find new jobs that pay less Workers face payWorkers face pay--cuts demands from employerscuts demands from employers
Service and whiteService and white--collar jobs are increasinglycollar jobs are increasingly
vulnerablevulnerable
US employees lose their comparative advantageUS employees lose their comparative advantage
when companies buildwhen companies build advancedadvancedfactories abroadfactories abroad
-
8/9/2019 Module-1 - Op Strategies in Global Economy
23/78
23
International Financial ConditionsInternational Financial ConditionsInternational Financial ConditionsInternational Financial Conditions
International financial conditions are complexInternational financial conditions are complex
due to:due to:
inflationinflation
fluctuating currency exchange ratesfluctuating currency exchange rates
turbulent interest ratesturbulent interest rates
volatility of international stock marketsvolatility of international stock markets
huge national debts of some countrieshuge national debts of some countries
enormous trade imbalances betweenenormous trade imbalances between
countriescountries
-
8/9/2019 Module-1 - Op Strategies in Global Economy
24/78
24
International Financial ConditionsInternational Financial ConditionsInternational Financial ConditionsInternational Financial Conditions
The Dollar Versus the Yen, Mark and RsThe Dollar Versus the Yen, Mark and Rs
YearYear Yen per DollarYen per Dollar Mark per DollarMark per Dollar Rs per DollarRs per Dollar
19751975 305305 2.72.7
19801980 215215 2.02.019851985 210210 2.42.4 1313
19901990 135135 1.61.6
19951995 8585 1.41.4
20002000 108108 2.22.2
-
8/9/2019 Module-1 - Op Strategies in Global Economy
25/78
25
International Financial ConditionsInternational Financial ConditionsInternational Financial ConditionsInternational Financial Conditions
Example of Currency Exchange Rate ChangesExample of Currency Exchange Rate Changes
A product produced and sold in the US forA product produced and sold in the US for
$1 would have sold in Japan for 135 yen in$1 would have sold in Japan for 135 yen in
1990 and 85 yen in 1995, a price decrease of1990 and 85 yen in 1995, a price decrease of37%.37%.
A product produced and sold in Japan forA product produced and sold in Japan for
135 yen in 1990 and sold for $1 in the US135 yen in 1990 and sold for $1 in the USwould have sold in the US for $1.57 inwould have sold in the US for $1.57 in
1995, a 57% price increase.1995, a 57% price increase.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
26/78
26
International Financial ConditionsInternational Financial Conditions
Due, in part, to the fall in the value of theDue, in part, to the fall in the value of thedollar between 1975 and 1995, thedollar between 1975 and 1995, the
following occurred:following occurred:
Prices of US products/services abroadPrices of US products/services abroadfell and demand increasedfell and demand increased
Japan and other countries builtJapan and other countries built
factories in USfactories in US
Japanese manufacturers moved upscaleJapanese manufacturers moved upscale
toward higher priced productstoward higher priced products
-
8/9/2019 Module-1 - Op Strategies in Global Economy
27/78
27
International Financial ConditionsInternational Financial ConditionsInternational Financial ConditionsInternational Financial Conditions
Companies must be ready to move quickly toCompanies must be ready to move quickly toshift strategies as world financial conditionsshift strategies as world financial conditions
change.change.
Opportunities are usually available to reduceOpportunities are usually available to reducerisk :risk :
Building smaller, more flexible factoriesBuilding smaller, more flexible factories
Using foreign suppliers for materials, parts,Using foreign suppliers for materials, parts,
or productsor products
Carefully planning and forecasting so thatCarefully planning and forecasting so that
changing conditions can be anticipatedchanging conditions can be anticipated
-
8/9/2019 Module-1 - Op Strategies in Global Economy
28/78
28
Quality, Service, and Cost ChallengesQuality, Service, and Cost ChallengesQuality, Service, and Cost ChallengesQuality, Service, and Cost Challenges
Quality :Quality :
The goal of adequate quality must be replaced withThe goal of adequate quality must be replaced with
the objective of perfect product and servicethe objective of perfect product and service
quality.quality.
The entire corporate culture must be redirected andThe entire corporate culture must be redirected and
committed to the ideal of perfect quality.committed to the ideal of perfect quality.
All employees must be empowered to act.All employees must be empowered to act.
A commitment to continuous improvement has toA commitment to continuous improvement has tobe organizationbe organization--widewide..
-
8/9/2019 Module-1 - Op Strategies in Global Economy
29/78
29
Quality, Service, and Cost ChallengesQuality, Service, and Cost ChallengesQuality, Service, and Cost ChallengesQuality, Service, and Cost Challenges
Customer ServiceCustomer Service :: Companies must quickly develop innovativeCompanies must quickly develop innovative
products and respond quicklyproducts and respond quickly to customers needs.to customers needs.
Organizational structures must be made moreOrganizational structures must be made more
horizontal to quickly accommodate change.horizontal to quickly accommodate change. Multidisciplinary teams must have decisionMultidisciplinary teams must have decision--
making authority, responding better to themaking authority, responding better to themarketplace.marketplace.
Large, unwieldy companies are spinning off wholeLarge, unwieldy companies are spinning off wholebusiness units making them autonomousbusiness units making them autonomousbusinesses that can compete with small, aggressivebusinesses that can compete with small, aggressivecompetitorscompetitors..
-
8/9/2019 Module-1 - Op Strategies in Global Economy
30/78
30
Quality, Service, and Cost ChallengesQuality, Service, and Cost ChallengesQuality, Service, and Cost ChallengesQuality, Service, and Cost Challenges
Cost :Cost : There is continuing pressure to reduce direct costsThere is continuing pressure to reduce direct costs
(of producing and selling) and overhead costs.(of producing and selling) and overhead costs.
It cost the US automakers $1,500 more per autoIt cost the US automakers $1,500 more per autofor labor in 1980 than it cost the Japanese autofor labor in 1980 than it cost the Japanese auto--makers. By the 1990s the difference was almostmakers. By the 1990s the difference was almostzero.zero.
Giant retailers (like WalGiant retailers (like Wal--Mart) squeezed weakerMart) squeezed weaker
competitors out of the market, giving the retailerscompetitors out of the market, giving the retailersthe leverage to force their suppliers to streamlinethe leverage to force their suppliers to streamlineoperations and reduce costs/prices.operations and reduce costs/prices.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
31/78
31
Quality, Service, and Cost ChallengesQuality, Service, and Cost ChallengesQuality, Service, and Cost ChallengesQuality, Service, and Cost Challenges
Cost :Cost : CostCost--cutting measurescutting measuresbeing used include:being used include:
Moving production to lowMoving production to low--laborlabor--costcost
countriescountries Negotiating lower labor rates with unionsNegotiating lower labor rates with unions
and workersand workers
Automating processes to reduce theAutomating processes to reduce theamount of labor needed, particularlyamount of labor needed, particularly
processes that areprocesses that are labor intensive.labor intensive.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
32/78
32
Advanced TechnologiesAdvanced TechnologiesAdvanced TechnologiesAdvanced Technologies
The use ofThe use ofautomationautomation is one of the most faris one of the most far--reaching developments to affect manufacturing andreaching developments to affect manufacturing and
services in the past century.services in the past century.
TheThe initial costinitial cost of these assets is high.of these assets is high.
TheThe benefitsbenefits go far beyond a reduction in labor costs.go far beyond a reduction in labor costs.
Increased product/service qualityIncreased product/service quality
Reduced scrap and material costsReduced scrap and material costs
Faster responses to customer needsFaster responses to customer needs Faster introduction of new products and servicesFaster introduction of new products and services
-
8/9/2019 Module-1 - Op Strategies in Global Economy
33/78
33
Advanced TechnologiesAdvanced TechnologiesAdvanced TechnologiesAdvanced Technologies
Companies cannot use automated productionCompanies cannot use automated productiontechnology as a longtechnology as a long--term competitiveterm competitive
advantage.advantage.
Automation systems are available to anyAutomation systems are available to anycompany in the world today, although the pricecompany in the world today, although the price
is prohibitive for some companies.is prohibitive for some companies.
Not investing, or delaying investing in thisNot investing, or delaying investing in thistechnology could be disastrous for a company.technology could be disastrous for a company.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
34/78
34
Continued Growth of Service SectorContinued Growth of Service SectorContinued Growth of Service SectorContinued Growth of Service Sector
A robust service sector helps support theA robust service sector helps support themanufacturing sector.manufacturing sector.
There is much opportunity for quality improvementThere is much opportunity for quality improvementin Indian service firms.in Indian service firms.
Many operations managers are being employed inMany operations managers are being employed inservices.services.
Planning, analyzing, and controlling approaches fromPlanning, analyzing, and controlling approaches frommanufacturing are being adapted to service systems.manufacturing are being adapted to service systems.
The Indian service sector, like the manufacturingThe Indian service sector, like the manufacturingsector, must streamline and improve operations if it issector, must streamline and improve operations if it isto survive and grow.to survive and grow.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
35/78
35
Scarcity of Operations ResourcesScarcity of Operations ResourcesScarcity of Operations ResourcesScarcity of Operations Resources
Raw materials like titanium, nickel, coal,Raw materials like titanium, nickel, coal,natural gas, water, and petroleum products arenatural gas, water, and petroleum products are
periodically unavailable or in short supply.periodically unavailable or in short supply.
A shortage of any necessary input to aA shortage of any necessary input to aconversion subsystem, including skilledconversion subsystem, including skilled
personnel, can be a challenge for an operationspersonnel, can be a challenge for an operations
manager.manager.
An important issue in the formation ofAn important issue in the formation of
business strategy is how to allocate scarcebusiness strategy is how to allocate scarce
resources among business opportunities.resources among business opportunities.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
36/78
36
SocialSocial--Responsibility IssuesResponsibility IssuesSocialSocial--Responsibility IssuesResponsibility Issues
Corporate attitudes are evolving from doing whatCorporate attitudes are evolving from doing whatcompanies have a legal right to do, tocompanies have a legal right to do, to doing what isdoing what is
right to do.right to do.
Factors influencing this evolution include:Factors influencing this evolution include:
Consumer attitudeConsumer attitude ---- Consumers are expressingConsumers are expressingtheir likes/dislikes by such means as stockholdertheir likes/dislikes by such means as stockholder
meetings, liability suits, and buying preferences.meetings, liability suits, and buying preferences.
RegulationRegulation The EPF, Pollution Act, andThe EPF, Pollution Act, and
Maternity Leave Act etc place constraints onMaternity Leave Act etc place constraints on
businesses.businesses.
SelfSelf--interestsinterests ---- Companies realize that profits willCompanies realize that profits will
be greater if they act responsibly.be greater if they act responsibly.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
37/78
37
SocialSocial--Responsibility IssuesResponsibility IssuesSocialSocial--Responsibility IssuesResponsibility Issues
Environmental ImpactEnvironmental Impact
ProductProduct--Safety ImpactSafety Impact
Employee ImpactEmployee Impact
-
8/9/2019 Module-1 - Op Strategies in Global Economy
38/78
38
SocialSocial--Responsibility IssuesResponsibility Issues
Environmental Impact :Environmental Impact :
Concerns about the global environment include:Concerns about the global environment include:
Landfill waste reductionLandfill waste reduction
RecyclingRecycling Energy conservationEnergy conservation
Chemical spillsChemical spills
Acid rainAcid rain Radioactive waste disposalRadioactive waste disposal
and more and more
-
8/9/2019 Module-1 - Op Strategies in Global Economy
39/78
39
SocialSocial--Responsibility IssuesResponsibility IssuesSocialSocial--Responsibility IssuesResponsibility Issues
Environmental Impact :Environmental Impact :
There is a need for standardizing governmentThere is a need for standardizing government
regulations of the environment.regulations of the environment.
Otherwise, companies will gravitate to the lessOtherwise, companies will gravitate to the less--regulated countries.regulated countries.
The International Organization for StandardizationThe International Organization for Standardization
has developed a set of environmental guidelineshas developed a set of environmental guidelines
called ISO 14000.called ISO 14000.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
40/78
40
SocialSocial--Responsibility IssuesResponsibility IssuesSocialSocial--Responsibility IssuesResponsibility Issues
ProductProduct--Safety Impact :Safety Impact :
Harm to people or animals that results from poorHarm to people or animals that results from poor
product design can :product design can :
Damage a companys reputationDamage a companys reputation
Require a large expense to remedyRequire a large expense to remedy
Cause governments to impose more regulationsCause governments to impose more regulations
-
8/9/2019 Module-1 - Op Strategies in Global Economy
41/78
41
SocialSocial--Responsibility IssuesResponsibility IssuesSocialSocial--Responsibility IssuesResponsibility Issues
Employee Impact :Employee Impact :Employee benefits and policies include:Employee benefits and policies include:
Safety and health programsSafety and health programs
Fair hiring and promotion practicesFair hiring and promotion practices DayDay--carecare
Family leaveFamily leave
Health careHealth care
Retirement benefitsRetirement benefits Educational assistanceEducational assistance
and more and more
-
8/9/2019 Module-1 - Op Strategies in Global Economy
42/78
42
SocialSocial--Responsibility IssuesResponsibility IssuesSocialSocial--Responsibility IssuesResponsibility Issues
Employee Impact :Employee Impact :
Employee benefits and policies impact longEmployee benefits and policies impact long--
term profitability due to their effect on:term profitability due to their effect on:
Employee morale and productivityEmployee morale and productivity Recruitment and retention of employeesRecruitment and retention of employees
Demand for a companys productsDemand for a companys products
Cost of defending against lawsuits andCost of defending against lawsuits andboycottsboycotts
-
8/9/2019 Module-1 - Op Strategies in Global Economy
43/78
43
Developing Operations StrategyDeveloping Operations StrategyDeveloping Operations StrategyDeveloping Operations Strategy
Corporate MissionCorporate Mission
Business StrategyBusiness Strategy
Product/Service PlansProduct/Service Plans
Competitive PrioritiesCompetitive Priorities
Operations StrategyOperations Strategy
AssessmentAssessment
of Globalof Global
BusinessBusiness
ConditionsConditions
DistinctiveDistinctive
CompetenciesCompetencies
oror
WeaknessesWeaknesses
-
8/9/2019 Module-1 - Op Strategies in Global Economy
44/78
44
Corporate MissionCorporate MissionCorporate MissionCorporate Mission
AA corporate missioncorporate mission is a set of longis a set of long--rangerangegoals and including statements about:goals and including statements about:
the kind of business the company wants tothe kind of business the company wants to
be inbe in who its customers arewho its customers are
its basic beliefs about businessits basic beliefs about business
its goals of survival, growth, andits goals of survival, growth, andprofitabilityprofitability
-
8/9/2019 Module-1 - Op Strategies in Global Economy
45/78
45
Business StrategyBusiness StrategyBusiness StrategyBusiness Strategy
Business strategyBusiness strategy is a longis a long--range game plan ofrange game plan ofan organization and provides a road map ofan organization and provides a road map of
how to achieve the corporate mission.how to achieve the corporate mission.
Inputs to the business strategy are :Inputs to the business strategy are :
Assessment of global business conditionsAssessment of global business conditions --
social, economic, political, technological,social, economic, political, technological,
competitivecompetitive
Distinctive competencies or weaknessesDistinctive competencies or weaknesses --
workers, sales force, R&D, technology,workers, sales force, R&D, technology,
managementmanagement
-
8/9/2019 Module-1 - Op Strategies in Global Economy
46/78
46
Competitive PrioritiesCompetitive PrioritiesCompetitive PrioritiesCompetitive Priorities
Low Production Costs :Low Production Costs : DefinitionDefinition
Unit cost (labor, material, and overhead) of eachUnit cost (labor, material, and overhead) of eachproduct/serviceproduct/service
Some Ways of CreatingSome Ways of Creating
Redesign of product/serviceRedesign of product/service
New technologyNew technology
Increase in production ratesIncrease in production rates Reduction of scrap/wasteReduction of scrap/waste
Reduction of inventoryReduction of inventory
-
8/9/2019 Module-1 - Op Strategies in Global Economy
47/78
47
Competitive PrioritiesCompetitive PrioritiesCompetitive PrioritiesCompetitive Priorities
Delivery PerformanceDelivery Performance Definition :Definition :
a) Fast deliverya) Fast delivery b) Onb) On--time deliverytime delivery
Some Ways of Creating :Some Ways of Creating :
a) larger finisheda) larger finished--goods inventorygoods inventory
b) faster production ratesb) faster production rates
c) quicker shipping methodsc) quicker shipping methods
d) mored) more--realistic promisesrealistic promisese) better control of production of orderse) better control of production of orders
f) better information systemsf) better information systems
-
8/9/2019 Module-1 - Op Strategies in Global Economy
48/78
48
Competitive PrioritiesCompetitive PrioritiesCompetitive PrioritiesCompetitive Priorities
HighHigh--Quality Products/Services :Quality Products/Services :
DefinitionDefinition ::
Customers perception of degreeCustomers perception of degree of excellenceof excellence
exhibited by products/servicesexhibited by products/services Some Ways of Creating :Some Ways of Creating :
Improve product/servicesImprove product/services
AppearanceAppearance
Performance and functionPerformance and function
Wear, endurance abilityWear, endurance ability
AfterAfter--sales servicesales service
-
8/9/2019 Module-1 - Op Strategies in Global Economy
49/78
49
Competitive PrioritiesCompetitive PrioritiesCompetitive PrioritiesCompetitive Priorities
Customer Service and FlexibilityCustomer Service and Flexibility
Definition :Definition :
Ability to quickly change production to otherAbility to quickly change production to other
products/services. Customer responsiveness.products/services. Customer responsiveness. Some Ways of Creating :Some Ways of Creating :
Change in type of processes usedChange in type of processes used
Use of advanced technologiesUse of advanced technologies
Reduction in WIP through lean manufacturingReduction in WIP through lean manufacturing
Increase in capacityIncrease in capacity
-
8/9/2019 Module-1 - Op Strategies in Global Economy
50/78
50
Operations StrategyOperations StrategyOperations StrategyOperations Strategy
Operations strategyOperations strategy is a longis a long--range game plan for therange game plan for the
production of a companysproduction of a companysproducts/services, and provides aproducts/services, and provides a
road map for the productionroad map for the production
function in helping to achieve thefunction in helping to achieve thebusiness strategy.business strategy.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
51/78
51
Elements of Operations StrategyElements of Operations StrategyElements of Operations StrategyElements of Operations Strategy
Positioning the production systemPositioning the production system
Product/service plans (Module 2)Product/service plans (Module 2)
Outsourcing plans (Module6
)Outsourcing plans (Module6
) Process and technology plansProcess and technology plans (Modules 2 & 3)(Modules 2 & 3)
Strategic allocation of resourcesStrategic allocation of resources ( 2( 2ndnd Semester)Semester)
Facility plans: capacity, location, and layoutFacility plans: capacity, location, and layout(studied in 2(studied in 2ndnd semester)semester)
-
8/9/2019 Module-1 - Op Strategies in Global Economy
52/78
52
Positioning the Production SystemPositioning the Production SystemPositioning the Production SystemPositioning the Production System
Select the type ofSelect the type of product designproduct design StandardStandard
CustomCustom
Select the type ofSelect the type of production processing systemproduction processing system Product focusedProduct focused
Process focusedProcess focused
Select the type ofSelect the type of finishedfinished--goods inventory policygoods inventory policy
ProduceProduce--toto--stockstock ProduceProduce--toto--orderorder
-
8/9/2019 Module-1 - Op Strategies in Global Economy
53/78
53
Product / Service PlansProduct / Service PlansProduct / Service PlansProduct / Service Plans
As a product is designed, all the detailedAs a product is designed, all the detailed
characteristics of the product are established.characteristics of the product are established.
Each product characteristic directlyEach product characteristic directly
affects how the product can be made.affects how the product can be made.
How the product is made determinesHow the product is made determines
the design of the production system.the design of the production system.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
54/78
54
Stages in a Products Life CycleStages in a Products Life CycleStages in a Products Life CycleStages in a Products Life Cycle
IntroductionIntroduction-- Sales begin, production and marketingSales begin, production and marketingare developing, profits are negative.are developing, profits are negative.
GrowthGrowth -- sales grow dramatically, marketing effortssales grow dramatically, marketing efforts
intensify, capacity is expanded, profits begin.intensify, capacity is expanded, profits begin.
MaturityMaturity -- production focuses on highproduction focuses on high--volume,volume,
efficiency, low costs; marketing focuses onefficiency, low costs; marketing focuses on
competitive sales promotion; profits are at peak.competitive sales promotion; profits are at peak.
DeclineDecline -- declining sales and profit; product might bedeclining sales and profit; product might bedropped or replaced.dropped or replaced.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
55/78
55
Stages of a Products Life CycleStages of a Products Life CycleStages of a Products Life CycleStages of a Products Life Cycle
Introduction Growth Maturity DeclineIntroduction Growth Maturity Decline
B&W TVB&W TV
AutomobileAutomobile
Video RecorderVideo Recorder
CD PlayerCD PlayerColor CopierColor Copier
Cell PhoneCell Phone
Internet RadioInternet Radio
Fax MachineFax MachineDotDot--MatrixMatrix
PrinterPrinter
-
8/9/2019 Module-1 - Op Strategies in Global Economy
56/78
56
Outsourcing PlansOutsourcing PlansOutsourcing PlansOutsourcing Plans
OutsourcingOutsourcingrefers to hiring out or subcontractingrefers to hiring out or subcontractingsome of the work that a company needs to do.some of the work that a company needs to do.
This strategy is being used more and more asThis strategy is being used more and more as
companies strive to operate more efficiently.companies strive to operate more efficiently.
Outsourcing has many advantages and disadvantages.Outsourcing has many advantages and disadvantages.
Companies try to determine the best level of outCompanies try to determine the best level of out--
sourcing to achieve their operations & business goals.sourcing to achieve their operations & business goals.
More outsourcing requires a company to have lessMore outsourcing requires a company to have lessequipment, fewer employees, and a smaller facility.equipment, fewer employees, and a smaller facility.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
57/78
57
Outsourcing PlansOutsourcing PlansOutsourcing PlansOutsourcing Plans
A company might outsource any of theA company might outsource any of thefollowingfollowing manufacturing related functionsmanufacturing related functions::
Designing the productDesigning the product
Purchasing the basic raw materialsPurchasing the basic raw materials
Processing the subcomponents,Processing the subcomponents,
subassemblies, major assemblies, andsubassemblies, major assemblies, and
finished productfinished product Distributing the productDistributing the product
-
8/9/2019 Module-1 - Op Strategies in Global Economy
58/78
58
Outsourcing PlansOutsourcing PlansOutsourcing PlansOutsourcing Plans
Many companies even outsource someMany companies even outsource some serviceservicefunctionsfunctions such as:such as:
PayrollPayroll
BillingBilling Order processingOrder processing
Developing/maintaining a websiteDeveloping/maintaining a website
Employee recruitmentEmployee recruitment
Facility maintenanceFacility maintenance
-
8/9/2019 Module-1 - Op Strategies in Global Economy
59/78
59
Process and Technology PlansProcess and Technology PlansProcess and Technology PlansProcess and Technology Plans
An essential part of operationsAn essential part of operationsstrategy is the determination of howstrategy is the determination of how
products/services will be produced.products/services will be produced.
The range of technologies availableThe range of technologies available
to produce products/services is greatto produce products/services is greatand is continually changing.and is continually changing.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
60/78
60
Strategic Allocation ofResourcesStrategic Allocation ofResourcesStrategic Allocation ofResourcesStrategic Allocation ofResources
For most companies, the vast majority ofFor most companies, the vast majority ofthe firms resources are used inthe firms resources are used in
production/operations.production/operations.
Some or all of these resources are limited.Some or all of these resources are limited.
The resources must be allocated toThe resources must be allocated to
products, services, projects, or profitproducts, services, projects, or profit
opportunities in ways that maximize theopportunities in ways that maximize the
achievement of the operations objectives.achievement of the operations objectives.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
61/78
61
Facility PlansFacility PlansFacility PlansFacility Plans
How to provide theHow to provide the longlong--range capacityrange capacity totoproduce the firms products/services is aproduce the firms products/services is a
critical strategic decision.critical strategic decision.
TheThe locationlocation of a new facility may need to beof a new facility may need to be
decided.decided.
The internal arrangement (The internal arrangement (layoutlayout) of workers,) of workers,
equipment, and functional areas within aequipment, and functional areas within a
facility affects the ability to provide thefacility affects the ability to provide thedesired volume, quality, and cost ofdesired volume, quality, and cost of
products/services.products/services.
Characteristics of ServicesCharacteristics of ServicesCharacteristics of ServicesCharacteristics of Services
-
8/9/2019 Module-1 - Op Strategies in Global Economy
62/78
62
Characteristics of ServicesCharacteristics of Services
and Manufactured Productsand Manufactured Products
Characteristics of ServicesCharacteristics of Services
and Manufactured Productsand Manufactured Products
ServicesServices ProductsProducts
OutputOutput IntangibleIntangible TangibleTangible
Output InventoriedOutput Inventoried NoNo YesYes
Customer ContactCustomer Contact ExtensiveExtensive LittleLittleLead TimeLead Time ShortShort LongLong
IntensityIntensity LaborLabor CapitalCapital
QualityQuality SubjectiveSubjective ObjectiveObjective
-
8/9/2019 Module-1 - Op Strategies in Global Economy
63/78
63
Competitive Priorities for ServicesCompetitive Priorities for ServicesCompetitive Priorities for ServicesCompetitive Priorities for Services
TheThe competitive prioritiescompetitive priorities listed earlier forlisted earlier formanufacturers apply to service firms as well :manufacturers apply to service firms as well :
Low production costsLow production costs
Fast and onFast and on--time deliverytime delivery
HighHigh--quality products/servicesquality products/services
Customer service and flexibilityCustomer service and flexibility
Providing all the priorities simultaneously toProviding all the priorities simultaneously to
customers is seldom possible.customers is seldom possible.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
64/78
64
Positioning Strategies for ServicesPositioning Strategies for ServicesPositioning Strategies for ServicesPositioning Strategies for Services
Type of Service DesignType of Service Design Standard or custom productsStandard or custom products
Amount of customer contactAmount of customer contact
Mix of physical goods and intangible servicesMix of physical goods and intangible services
Type ofProduction ProcessType ofProduction Process
Quasi manufacturingQuasi manufacturing
CustomerCustomer--asas--participantparticipant CustomerCustomer--asas--productproduct
-
8/9/2019 Module-1 - Op Strategies in Global Economy
65/78
65
Positioning Strategies for ServicesPositioning Strategies for ServicesPositioning Strategies for ServicesPositioning Strategies for Services
Example:Example: McDonaldsMcDonalds
Highly standardized service designHighly standardized service design
Low amount of customer contactLow amount of customer contact
Physical goods dominating intangiblePhysical goods dominating intangible
servicesservices
QuasiQuasi--manufacturing approach to backmanufacturing approach to back--room production processroom production process
-
8/9/2019 Module-1 - Op Strategies in Global Economy
66/78
66
Forming Operations StrategiesForming Operations StrategiesForming Operations StrategiesForming Operations Strategies
Support the product plans andSupport the product plans andcompetitive priorities defined in thecompetitive priorities defined in the
business strategy.business strategy.
Adjust to the evolving positioningAdjust to the evolving positioningstrategies.strategies.
Link to the marketing strategies.Link to the marketing strategies.
Look at alternative operations strategies.Look at alternative operations strategies.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
67/78
67
Evolution ofPositioning StrategiesEvolution ofPositioning StrategiesEvolution ofPositioning StrategiesEvolution ofPositioning Strategies
The characteristics of production systems tendThe characteristics of production systems tendto evolve as products move through theirto evolve as products move through their
product life cycles.product life cycles.
Operations strategies must include plan forOperations strategies must include plan for
modifying production systems to a changingmodifying production systems to a changing
set of competitive priorities as productsset of competitive priorities as products
mature.mature.
The capital and production technologyThe capital and production technologyrequired to support these changes must berequired to support these changes must be
provided.provided.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
68/78
68
Evolution ofPositioning StrategiesEvolution ofPositioning StrategiesEvolution ofPositioning StrategiesEvolution ofPositioning Strategies
VolumeVolumeVeryVery
LowLowLowLow HighHigh
VeryVery
HighHigh
FocusFocus ProcessProcess ProcessProcess ProductProduct ProductProduct
Fin.Gds.Fin.Gds. ToTo--OrderOrder ToTo--OrderOrder ToTo--StockStock ToTo--StockStock
BatchBatch
SizeSize
VeryVery
SmallSmallSmallSmall LargeLarge
VeryVery
LargeLarge
ProductProduct CustomCustomSlightlySlightly
StandardStandardStandardStandard
HighlyHighly
StandardStandard
LifeLife
StageStageIntro.Intro.
EarlyEarly
GrowthGrowth
LateLate
GrowthGrowthMaturityMaturity
-
8/9/2019 Module-1 - Op Strategies in Global Economy
69/78
69
Linking Operations and Marketing StrategiesLinking Operations and Marketing StrategiesLinking Operations and Marketing StrategiesLinking Operations and Marketing Strategies
Operations StrategyOperations Strategy ProductProduct--focusedfocused
MakeMake--toto--stockstock
Standardized productsStandardized products
High volumeHigh volume Marketing StrategyMarketing Strategy
Low production costLow production cost
Fast delivery of productsFast delivery of products
QualityQuality
Example:Example: TV setsTV sets
-
8/9/2019 Module-1 - Op Strategies in Global Economy
70/78
70
Linking Operations and Marketing StrategiesLinking Operations and Marketing StrategiesLinking Operations and Marketing StrategiesLinking Operations and Marketing Strategies
Operations StrategyOperations Strategy ProductProduct--focusedfocused
MakeMake--toto--orderorder
Standardized productsStandardized products
Low volumeLow volume Marketing StrategyMarketing Strategy
Low production costLow production cost
Keeping delivery promisesKeeping delivery promises
QualityQuality
Example:Example: School busesSchool buses
-
8/9/2019 Module-1 - Op Strategies in Global Economy
71/78
71
Linking Operations and Marketing StrategiesLinking Operations and Marketing StrategiesLinking Operations and Marketing StrategiesLinking Operations and Marketing Strategies
Operations StrategyOperations Strategy ProcessProcess--focusedfocused
MakeMake--toto--stockstock
Custom productsCustom products
High volumeHigh volume Marketing StrategyMarketing Strategy
FlexibilityFlexibility
QualityQuality
Fast delivery of productsFast delivery of products
Example:Example: Medical instrumentsMedical instruments
-
8/9/2019 Module-1 - Op Strategies in Global Economy
72/78
-
8/9/2019 Module-1 - Op Strategies in Global Economy
73/78
73
No Single Best StrategyNo Single Best StrategyNo Single Best StrategyNo Single Best Strategy
StartStart--up and Small Manufacturersup and Small ManufacturersUsually prefer positioning strategies with:Usually prefer positioning strategies with:
Custom productsCustom products
ProcessProcess--focused productionfocused production ProduceProduce--toto--order policiesorder policies
These systems are more flexible and require lessThese systems are more flexible and require less
capital.capital.
-
8/9/2019 Module-1 - Op Strategies in Global Economy
74/78
74
No Single Best StrategyNo Single Best StrategyNo Single Best StrategyNo Single Best Strategy
StartStart--up and Small Servicesup and Small ServicesSuccessfully compete with large corporations by:Successfully compete with large corporations by:
Carving out a specialty nicheCarving out a specialty niche
Emphasizing close, personal customer serviceEmphasizing close, personal customer service Developing a loyal customer baseDeveloping a loyal customer base
-
8/9/2019 Module-1 - Op Strategies in Global Economy
75/78
75
No Single Best StrategyNo Single Best StrategyNo Single Best StrategyNo Single Best Strategy
TechnologyTechnology--Intensive BusinessIntensive Business Production systems must be capable of producingProduction systems must be capable of producing
new products and services in high volume soonnew products and services in high volume soon
after introductionafter introduction
Such companies must have two key strengths:Such companies must have two key strengths:
Highly capable technical peopleHighly capable technical people
Sufficient capitalSufficient capital
-
8/9/2019 Module-1 - Op Strategies in Global Economy
76/78
76
WrapWrap--Up: WorldUp: World--Class PracticeClass Practice
Put customers firstPut customers first Get new products/services to market fasterGet new products/services to market faster
Are high quality producersAre high quality producers
Have high labor productivity & low production costsHave high labor productivity & low production costs Carry little excess inventoryCarry little excess inventory
. . . more. . . more
-
8/9/2019 Module-1 - Op Strategies in Global Economy
77/78
77
WrapWrap--Up: WorldUp: World--Class PracticeClass Practice
Think more globally in purchasing and sellingThink more globally in purchasing and selling Quickly adopt and develop new technologiesQuickly adopt and develop new technologies
Trim organizations to be lean and flexibleTrim organizations to be lean and flexible
Are less resistant to strategic alliances/joint venturesAre less resistant to strategic alliances/joint ventures Consider relevant social issues when setting strategiesConsider relevant social issues when setting strategies
E d f M d l 1 (Ch 2)E d f M d l 1 (Ch 2)E d f M d l 1 (Ch 2)E d f M d l 1 (Ch 2)
-
8/9/2019 Module-1 - Op Strategies in Global Economy
78/78
78
End of Module 1 (Chapter 2)End of Module 1 (Chapter 2)End of Module 1 (Chapter 2)End of Module 1 (Chapter 2)