operations strategy-a literature review

Running head: OPERATIONS STRATEGY: A LITERATURE REVIEW 1

Operations Strategy: A Literature Review

Matthew W. Morris

Liberty University

OPERATIONS STRATEGY: A LITERATURE REVIEW 2

Abstract

Operations strategy is a valuable resource that offers many advantages to organizations that fully

embrace and integrate the formation process with existing corporate strategy. In changing

environments where companies are looking for ways to increase their competitive edge while

decreasing operating expenditures, a successful formation of an operations strategy will provide

a stabilized long-term competitive advantage for the majority of organizations. Over the past 50

years, hundreds of articles have been written on the subject. These writings act to shape what we

know about the development of operations strategy, planning, and the opportunities for future

implementation and research. This paper examines the argument that exists throughout the

literature, that forming an operations strategy and integrating it with the organizations corporate

strategy can significantly improve the efficiency of an organization and reduce costs. The paper

concludes that the literature clearly supports the premise that implementing an operations

strategy is becoming increasingly important in a global business environment.



I. Introduction

A. Themes

B. Thesis

II. Operations Strategy Formation Methods

A. Top-Down Approach

B. Bottom-Up Approach

C. Integrated Process Model

D. Strategy Formation as a Continuous Process

III. Inequality Between Content and Process Literature

A. Operations Strategy Content Approach

1. Competing through manufacturing.

2. Strategic choices.

3. Best practices.

B. Operations Strategy Process Approach

C. How to Balance Content and Process

IV. The Synergy of Operations and Corporate Strategy

A. Barriers Preventing Synergy

B. Solutions to Barriers

C. Why the Integration of Operations and Corporate Strategy is Important

V. Conclusion and Recommendations

A. Strengths and Weaknesses

B. Next Steps for Future Research

C. Implications of Research

VI. References



Increased globalization, constant improvement of information technology, and the

evolving business environment has forced managers to take a strategic approach to operations

(Hayes, Pisano, Upton, & Wheelwright, 2005). Operations strategy is defined as “the pattern of

decisions which shape the long-term capabilities of any type of operations and their contribution

to overall strategy, through the reconciliation of market requirements with operations resources”

(Slack & Lewis, 2002, p. 16). The current competitive business environment has caused a shift in

the operations strategy and planning process and calls for updated research on the subject.

The term operations strategy has taken on two definitions in literature, and the current

form is often interchangeable with the term manufacturing strategy. The underlying theme that

exists within literature is the emphasis placed on developing an operations strategy that aligns

with the corporate strategy. The resulting strategy provides a framework for management to

utilize when creating the organizational design and structure that will be most effective within

the strategy.

The objective of this study is to provide a current literature review on operations strategy,

and identify common themes that exist in recent research. Three themes exist throughout the

literature, which will provide the organization for this review: (a) there are multiple accepted

methods to form an operations strategy, (b) the literature content of operations strategy vastly

outnumbers the available literature addressing the process, and (c) linking corporate strategy and

operations strategy improves company performance. Over the last ten years, operations strategy

has begun to play a more significant role in the overall strategies of organizations, with an

increase of process knowledge throughout the industry, and research with proven evidence of

improved efficiencies following implementation.


Operations Strategy Formation Methods

The process and methods used by an organization to develop an operations strategy have

varied throughout the literature, and no consensus exists supporting a singular method of

formation that is more effective than another. The process of operations strategy consists of the

action and intricacies of forming and implementing the strategy, while the content includes the

actual decisions made to address the priorities, objectives, and direction of the strategy (Kim,

Sting, & Loch, 2014). Most debates concerning the strategy formation process are split between

the formation and implementation from senior management or the on-going approach formed by

the actions and decisions of persons spread horizontally within an organization. Since Skinner

(1969) argued that manufacturing (operations) should support corporate strategy, the operations

strategy formation process has been dominated by a top-down approach that originates with

corporate leadership. The top-down approach has historically been the most studied method,

however, a bottom-up strategy has been documented as an alternative when a defined corporate

strategy does not exist (Slack & Lewis, 2011).

A third method of formation that integrated the top-down and bottom-up approach was

proposed following a study of the internal process of operations strategy in six German

manufacturing plants with 111 strategic action plans (Kim et al., 2014). This study consisted of

data collection and personal interviews focused on competitive priorities and organizational

structure to analyze the individual strategies of each manufacturing plant, and how the strategies

originated. The data provided a stark comparison between approach methods utilized by the

centralized and decentralized organizational structures included in the sample. The decentralized

organizations fostered a bottom-up approach with significant employee involvement, and the

centralized organizations imposed strict guidelines controlling daily operations. These results


support the claim that organizational theory and design influences the approach taken when

forming an operations strategy. The empirical studies and research on the three approaches to

operations strategy formation will be reviewed further in the following sections.

Top-Down Approach

This “macro-level” process is described as the planned coordination of intentions and

actions from upper level management to achieve specific outcomes and goals imposed by a

central authority (Kim & Arnold, 1996). Senior management within an organization determines

the long-term goals and how they intend to meet them prior to actions being taken, with little to

no discretion provided. Research shows a difference exists between the planned strategy and

what actually occurred, although some strategies have resulted in the desired outcome being

achieved upon implementation. Following the outcome results, management then reinforced or

adjusted the plan to meet desired goals. The trend of organizations in the current market is to

transition into more decentralized structures that offer the ability to remain flexible as the

business climate changes. A top-down approach with strict guidelines creates the potential for

incompatibility with other strategies within the organization such as marketing, and is a risky

proposition. The importance of adopting a strategy that has support from the workforce while

also aligning and integrating with other organizational strategies is paramount in the current

environment.

Bottom-Up Approach

Patterns of unplanned actions resulting in realized outcomes that were not originally

intended by senior management provide the basis of the bottom-up “micro-level” approach

process. Loose guidance and direction is provided by top management without specific details,

empowering middle managers to develop strategic initiatives that will serve their objectives


while also supporting the direction of leadership. Slack and Lewis (2011) described the principle

governing a bottom-up perspective of operations strategy as “shaping objectives and action, at

least partly by the knowledge it gains from day-to-day activities” (p. 13). A practical exercise

study demonstrated in Rytter, Boer, & Koch (2007) advanced the effectiveness of a bottom-up

approach to operations strategy formulation when collaboration is achieved from multiple

stakeholders using a constant flow of dialogue followed by action. The collaboration between

members of an organization towards a unified goal acts as motivation and positivity towards the

operations strategy formulation process. This subject, and future research on the advancement of

the bottom-up approach is important to the overall improvement of operations strategy processes.

A quality operations strategy is a key component to the success of an organization and the

improved viability of a smooth integration between operations strategy and corporate strategy.

Integrated Process Model

This model is a hybrid of the top-down and bottom-up approaches that provides a

strategy supporting the intentions of top management resulting from the actions of middle and

lower management in absence of, or despite top management intentions. Integration between the

two approaches provides guidelines for operations strategy development while also encouraging

creativity and input from middle management and individuals throughout the organization.

Barnes (2001) previously acknowledged the viability of a hybrid model of process formulation

when stating “it is the pattern of decisions actually made that constitutes a function’s strategy,

not what is said or written in annual reports or planning documents” (p. 1077). The integrated

model has garnered curiosity in recent literature despite the lack of a substantial amount of

research or data that supports or refutes its effectiveness. The integrated process model was


recently developed and lacks significant research or empirical studies to support whether the

method is effective or not. Future research must be completed to further develop this model

Strategy Formation as a Continuous Process

Recent contributions to the literature on operations strategy have continued to focus on

the top-down approach of formulate-then-implement in spite of the growing number of firms

transitioning to the learning organization principles of operation. Nielsen-Englyst (2003)

outlined a strategic management process that continuously managed strategy formation and how

it could be designed and communicated. The seven-year case study consisted of four overlapping

and iterative phases of learning, reviewing, aligning, and redirecting, and the results supported

the claim that a continuous strategy formation process is good practice. This study expanded

upon, and advanced the proposed manufacturing formulation processes of Platts, Mills, Neely,

Gregory, and Richards (1996), which called for an increased focus on how the process should be

organized and executed rather than the logic of the approach. This approach urged management

to assume a coaching role and empower others to take ownership of the mission and strategy

process. The increasing number of centralized hierarchal organizations that have transitioned into

an organic or learning organization structure will be attracted to the continuous process strategy

formation. This attraction is a result of how the strategy will allow the organization to remain

flexible while constantly improving operations strategy through a periodical assessment that will

consider fresh proposals and ideas from across the organization.

Inequality Between Content and Process Literature

Throughout the operations strategy literature, researchers tend to distinguish between

content and process approaches. Rytter et al. (2007) explains how content approaches are

concerned with how operations can design a competitive advantage. This is achieved by


providing normative guidelines on what to include when creating an operations strategy. Process

approaches focus on how to conduct operations strategy formulation and implementation

processes. The overwhelming majority of operations strategy publications are focused on content

instead of process. A recent review by Dangayach and Deshmukh (2001) revealed that out of the

260 papers reviewed on manufacturing strategy, only 23 (9 percent) addressed process issues.

The lack of process-focused literature was reiterated by Boyer, Swink, and Rosenzweig (2005),

when an examination of operations strategy literature in the Production and Operations

Management Journal revealed that out of thirty-one articles, only eight were process focused. An

analysis of differences between content and process is necessary to answer the question

concerning why there is such an imbalance between the two approaches, and how the issue may

be rectified. Research and understanding of the process surrounding a proper formulation of an

operations strategy is essential in the current volatile global business environment.

Operations Strategy Content Approach

Given its role in supporting corporate strategy, an operations strategy is designed to make

strategic choices concerning the development of the structure, infrastructure, and capabilities to

support competitive priorities. The content dimension consists of strategic choices in structure

(technology process, plant capacity and location) and infrastructure (human resources,

organizational design, information technology, management systems) that directly impact the

ability of a firm to successfully achieve their competitive priorities (cost, quality, delivery

dependability, delivery speed, flexibility) (Garrido, Martín-Peña, & García-Muiña, 2007).

Content has been described in literature as the strategic choices in process and infrastructure, and

Voss (2005) introduced a concept recognizing three different paradigms of choice and content

that exists in manufacturing strategy: (a) competing through manufacturing, (b) strategic


choices, and (c) best practices. Garrido et al. (2007) agrees with the concept of three paradigms

existing of choice and content in operations strategy, but also contents that none of the paradigms

can individually explain how to develop an effective operations strategy.

Competing through manufacturing. Skinner (1969) was the first to observe that the

manufacturing function of a company plays a more significant role than just producing and

shipping products. Wheelwright and Hayes (1985) introduced the business strategy concept of

competing through manufacturing when they recognized the strongest competitors in the

manufacturing industry had the greatest manufacturing capabilities. This approach contends that

firms should align their capabilities with identified key success factors, corporate and marketing

strategies, and marketplace demands (Voss, 2005). Researchers have become increasingly

interested in the study of the relationship that exists between operations strategy and competitive

advantage. Firms that attempt to implement a strategy of competing through manufacturing place

a much greater focus on operations strategy, and take a bottom-up approach to the formation

process which unites employees and management around a common vision for the organization.

Five competitive priorities are recognized in literature as: (a) cost targets the production

and distribution of product at low cost, (b) quality ensures that products are manufactured with

the highest quality and standards, (c) delivery dependability reassures customers and clients that

products will be received, (d) delivery speed adds to the competitive edge when customer orders

are processed and delivered expediently, and (e) flexibility is essential in to remaining

competitive by reacting to changes in product, changes in product mix, modifications to design,

fluctuations in materials, changes in sequence (Koste & Malhotra, 1999). The importance of

these five competitive priorities is that they represent focus of the overall strategy of the


organization, and how support for the recognized priorities must be included in the operational

strategy formation and implementation process.

Strategic choices. This paradigm was narrowed down to two areas, process and

infrastructure, recognized as contingency-based approaches because the decisions made are

contingent on the current context and strategy of the environment. The contingent factor that is

present with the strategic choice paradigm has raised the claim that it is the most powerful of the

strategy approaches because of how it enables companies to align the operations strategy directly

with the marketing positioning. Specific structural and infrastructure criteria involves

organizational design structure that has the potential ability to impact the choices made by the

organization based upon which approach is used when forming the operations strategy

Best practices. The third and final paradigm recently entered the operations strategy

process as a result of three recognized factors. The superior performance of the Japanese

manufacturing industry was recognized by Western nations, who then focused on reproducing

the Japanese practices. The expansion of business process-based approaches, and the increase of

national and global awards and recognition for best practices (Voss, 2005). Advanced

manufacturing technologies and better manufacturing management practices like Just-In-Time

systems are widely researched areas within operations strategy. Extensive research supports the

link between firms that operate on a best practice approach with proper implementation

consistently exceed operating performance standards (Moran & Meso, 2008). The positive

aspects of a best practice approach have also proven to be negative when organizations do not

properly implement the practice, resulting in significant failure rates during implementation of

each practice.


The three paradigms of competing through manufacturing, strategic choices, and best

practices have been completely vetted by numerous studies, and are established as essential

pieces of the operations strategy content. The significant importance of the three paradigms that

make up the content in the success of business and operations strategy is recognized through the

majority of research and literature material available compared to the process of actually forming

an operations strategy. The constantly changing global business environment that exists along

with recent literature reviews have raised concern from researchers that the process of forming

an operations strategy is not being adequately studied or developed.

Operations Strategy Process Approach

The process approach aspects of formulation are the design, development, and

implementation of the operations strategy (Dangayach & Deshmukh, 2001). Hill (1989)

developed the original foundation for formulation by designing a step-by-step procedure to

utilize when developing an operations strategy. Platts (1993) introduced a second approach to

strategy formulation that he described as a three-stage audit-based approach. The three stages

were: (a) creating the process, (b) testing and refining in a small number of companies, and (c)

investigating wider applicability by means of a survey. The progress of operations strategy

development continued when Mohanty and Deshmukh (1999) introduced a strategic model for

selecting and evaluating process in a learning organization. Current researchers are seeking an

understanding of what workers do when they produce strategy, and are uninterested in the

strategy itself (Jarzabkowski, 2005). Orlikowski and Scott (2008) addressed the growing use of

technology in the workplace and the lack of research that has been conducted on the role of

technology in organizational environments. The process approach is slowly increasing in


popularity in literature as researchers seek to understand what how strategist think and operate

when developing strategy.

How to Balance Content and Process

As the interest in how strategy is developed increases, the available literature using a

process approach is poised to increase. The content approach will absolutely maintain relevance,

and may possibly grow as researchers apply what they learn from process studies to the

mechanics of the operations strategy itself. Research studies have applied social practice theory

and ANT theory to the process approach to attempt to understand how individuals think and act

while developing strategies (Papadopoulos, Randor, & Merali, 2011). This successful research

into the minds of strategist has acted as a catalyst for an increase in literature and research on the

process of developing operations strategy. The successful research and growth in available

research on the process approach is important to the study of operations strategy because of how

it provides insight to the mind and human element of strategy development and has the potential

to create a trainable system that is able to be taught to individuals in a variety of different

environments within their particular industry.

The Synergy of Operations and Corporate Strategy

Skinner (1969) established the importance of integrating operations and corporate

strategy, and formed the foundation for continued research on the subject. Despite originating in

1969, empirical studies on the results of linking business strategy and operations strategy were

scarce until recently. A consistent line of literature from multiple researchers contends that the

business strategy must be supported by the operations strategy through a concentration on value-

added work flows that target a short list of objectives influenced by customers, competition, and

change in the environment (Mohanty & Deshmukh, 1999). The synergy of operations and


corporate strategy is the most important piece of organizational operations, and current research

(Adamides, 2015; Kiridena, Hasan & Kerr, 2009) emphasizes the advantages a company has

over the competition when these two strategies are aligned and working together. There are

barriers that exist within current organizations that create conflict in the process and need to be

remedied (Krause, Youndahl, & Ramaswamy, 2014).

The original focus of literature on operations strategy had a large focus on the repetitive

manufacturing aspect of operations rather than the constraints a poor operations strategy could

place on the overall competitiveness of an organization (Maylor, Turner, & Murray-Webster,

2015). Organizations that take on an operations strategy perspective that focuses on the decisions

being made that will impact the relationship between organizational strategy and the actual

operations of that organizations will maintain constant awareness of the operational environment.

Maylor et al. (2015) presented a study concluding that focusing operations on specific goals and

strategies was beneficial for establishing stability within an organization in order to begin the

process of strategic consensus of an operations strategy that is appropriate and properly

communicated within the organization. Krause et al. (2014) also supports this claim that

establishing stability and clear communication with a focused approach is essential to a

successful integration of operations and corporate competitive strategies.

Barriers Preventing Synergy

Krause et al. (2014) cited multiple examples of organizations in a variety of industries

that owed their competitive dominance to their excellent operational abilities such as Reliance

Industries, Wal-Mart, Procter and Gamble, and Apple Inc. Operations leadership has been

proven through a variety of qualitative studies (Kiridena et al., 2009) to reduce costs and increase

competitive power within the organizational industries, but researchers are conducting studies


into why so many companies will not work to synchronize their operational and corporate

strategies. Skinner (2007) noted that 95 percent of the companies he meets with are having a

conflict or issue between the manufacturing policies and strategies and the competitive strategy.

Krause et al. (2014) contends that an issue with successful integration within organizations is not

from a lack of effort but a disconnect in education where management and company leadership

does not completely understand how to integrate the operations function with the corporate or

competitive strategy.

Adimades (2015) cited internal politics as an additional source of disconnect within

organizations between operations and corporate strategy. Individuals in power positions and

status refused to cooperate or answer questions regarding the internal strategic process. These

players were further examined and a trend in the study showed the tendencies of certain

individuals within a transitional process who attempt to promote their personal agenda to disrupt

the creation of a new strategy within the organization. The impact these particular individuals

have on the strategizing process has the potential to be extremely negative, especially if the

individual is a part of top management. Boyer, Swink, and Rozenweig (2005) also supported the

results showing the negative effects individuals in political or power positions may have of the

transitional process. Boyer et al. (2005) identified a missing aspect of research that needed to be

completed to address the possibility of different groups within a company being realigned in

order to achieve the overall organizational goals and also the process that would support a

positive alignment not only within the internal strategies but also with external supply chain

partners.

Slack (2005) argues that although there has been an increase in awareness throughout the

business environment concerning the importance of operations strategy is has still not reached its


full potential of effectiveness. Slack (2005) provides a contrasting view to a majority of research

and literature that is available concerning operations strategy by contending that the process and

practice is irrelevant at this time. The reason for low recognition of operational strategy was a

result of the subject not necessarily representing ‘operations’ as they existed in practice within

the business industry. Further research is cited regarding the confusion caused by the

interchangeable usage of the terms manufacturing strategy and operations strategy. This

argument continues into 2015 and calls for additional research and clarification of the two terms

and their meanings. Krause et al. (2014) also made the claim to support the lack of knowledge

and understanding within organizations regarding the two terms that have often been utilized

interchangeably in both practice and in literature.

Solutions to Barriers

The trend towards decentralized organizations is increasing, and a bottom-up approach to

strategy formation is becoming a more common practice. This trend creates an opportunity for

organizations to adopt a culture where the formation of operations strategy is a collaborative

effort centered on the processes of the organization. Integrating the operations strategy with the

corporate strategy is then accomplished by knowledge and input spread horizontally through the

firm until the practice of formulating operations strategies with the competitive strategy process

becomes routine (Adamides, 2015). Incorporation of this strategy adds emotional levels of

accountability within the organization by placing direct responsibility on individuals in a social

environment. Cultural and social pressures are then applied to facilitate cooperation and a sense

of ownership in the process. Gomez (2010) further supports the claim that individuals who are

involved in the development process who have their ideas heard and appreciated by management


and their peers are more likely to develop a sense of pride and ownership of the work they

perform for the organization, result in an increase in overall efficiencies.

A variety of studies exist that investigate the science of operations strategy formation and

the social practice theory (Gomez, 2010; Jarzabkowski & Spee, 2009) in an attempt to

understand the acts of strategy production, and if they are influenced by inscribed material such

as operating standards and visual charts that exist in their working and strategizing environment.

The social practice theory research focused on individuals, their practices, and the activities

performed that contributed to the change in their strategic orientation resulting from the outcome

of strategizing compared to the ANT theory that is designed to assist in the understanding of how

practices/routines are associated to each other and changed operationally (Papadopoulos et al.,

2011). The study concluded that the necessary link for aligning operations and corporate

strategies within an organization is by properly institutionalizing the operations strategy and

processes with the corporate and competitive strategy process so the practice become an integral

and routine part of the organizational practices (Adamides, 2015).

Why the Integration of Operations and Corporate Strategy is Important

Recent studies and research conducted to investigate the impact of operations and

manufacturing success on the business success have demonstrated an overwhelmingly positive

result. The study recognized the relationship between manufacturing strategy and manufacturing

success, and concluded that the contributions of manufacturing strategies correlated directly with

an improvement in manufacturing performance. A solid manufacturing strategy plays an integral

role in a firm’s business strategies that integrates to form clear objectives and actionable items to

secure a long-term advantage over competitors that is sustainable (Moran & Meso, 2008). An

organization that successfully executes an integration of operational and competitive strategies is


scientifically proven to have a significantly greater chance of success than organizations that do

not pursue the viability of integration within their own operations.

Conclusion and Recommendations

The purpose of this study was to provide a current analysis and review of scholarly

articles and literature that covered the subject of operations strategy, and identify common

themes that existed throughout recent research. Following an exhaustive review of over 30

articles and scientific studies, the review supported each of the three main themes that were

recognized in the initial study. There are multiple accepted methods to form an operations

strategy. The literature published addressing the content of operations strategy vastly

outnumbered the available literature addressing the process approach. Linking/integrating

corporate strategy and operations strategy vastly improved company performance, and stabilized

the long-term competitive advantages of organizations that successfully completed the

integration. The articles and studies also supported the thesis statement made in the introduction,

which stated: over the last ten years, operations strategy has begun to play a more significant role

in the overall strategies of organizations, with an increase of process knowledge throughout the

industry, and research with proven evidence of improved efficiencies following implementation.

Strengths and Weaknesses

The strengths of the literature included the research that presented scientific studies in an

attempt to further increase the available knowledge on the psychology involved in the formation

of strategies by individuals in an attempt to understand how strategies are actually formed.

Another scientific study that stood out during the review was an analysis that applied the social

practice theory and the ANT theory to investigate the behavioral tendencies of employees in a

variety of situations within an organization. The results of the behavioral study provided a


significant insight into organizational structures and designs that provided the most ideal

circumstances to allow for a successful integration of the operations strategy with the corporate

strategy while also receiving buy-in from a majority of the workforce. The final strength was the

quantity of available literature concerning the content of operations strategy and how important

operations strategy is to the long-term health of any organization.

The weaknesses of the literature reviewed included the lack of available research with in

depth analysis addressing the specific step-by-step process of forming an operations strategy for

an organization. Outdated studies existed, but current research was non-existent. There was also

a general lack of current research or scientific studies that was performed over the last three

years. This lack of current research did present a challenge in citing recent sources throughout

the review, but a significant amount of information was available from sources dated in the late

90s and early 2000s. A final weakness was that many of the research studies that were available

were based on a single case instead of a broader study.

Next Steps for Future Research

The next steps for future research and scientific studies of operations strategy need to be

increasingly focused on the process involved in the strategy formation process instead of the

content after the strategy has already been created. There is a general lack of knowledge

concerning the operations strategy formation process, and also research analyzing different firms

that went through the integration process and were successful. The methods and steps taken for

firms that failed in the integration is also important to study so that the mistakes are not made by

another firm in the future. The creation of a set of guidelines for different scenarios and steps for

operations strategy development designed by an authority in the industry, such as a major


consulting firm, would significantly increase the understanding of operations strategy by both

academics and organizations.

Implications of Research

Future improvement of knowledge and understanding of operations strategy and its

implementation within an organizations processes is important for our economy in the United

States and around the globe. An increase in efficiencies due to streamlined processes and

manufacturing strategies frees up capital for investment, lowers shipping costs for consumers,

and provides increased job opportunities along with many other daily enhancements as a result of

efficient processes throughout the environment around us.


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operations strategy-a literature review

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