strategic management- slides, examples and graphs

8/3/2019 Strategic Management- Slides, Examples and Graphs

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Prof. Rushen Chahal

Prof. Rushen Chahal

Strategic Management

Slides, Examples and Graphs


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Prof. Rushen Chahal

Performance objective A

Performanceobje

ctiveB

Operations

Resources

Market

RequirementsOPERATIONS

STRATEGY

Strategic

Reconciliation

?

Topics in operations strategy treated in this chapter

Time, trade-offs and targeting


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Prof. Rushen Chahal

PRODUCT/SERVICE

TECHNOLOGY

MARKETING OPERATIONS

Where does the business get its competitive

advantage?

The technological

specification of its

product/service?

The way it positions

itself in its market?

The way it produces its

goods and services?


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Prof. Rushen Chahal

OPERATIONS

PRODUCT / SERVICE

TECHNOLOGY

MARKETING

OPERATIONS

PRODUCT / SERVICE

TECHNOLOGY

OPERATIONS

MARKETING

PRODUCTSERVICE

TECHNOLOGY

The contribution of each area

will change over time

MARKETING


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Prof. Rushen Chahal

STRATEGIES OF VOLKSWAGENWERK

1920 - 1992

BEFORE 1948

FERDINAND PORSHE - PEOPLES CAR 1920s

GOVERNMENT SUPPORT 1934 - PLANT ON STREAM

1939

1939 WAR - PLANT TURNED TO PRODUCTION OF WAR VEHICLES

1948 NORDHOFF PUT IN CHARGE

1948

NORDHOFF TAKES HALF A STRATEGY - PEOPLES CAR

ADDS EMHPASIS ON QUALITY, TECHNICAL, EXPORT, SERVICE STANDARDS

1949 - 1958INTENDED STRATEGY REALIZED

CAR IDEAL FOR POST WAR CONDITIONS

RAPID EXPANSION IN VOLUME

NO NEW MODELS (WORK ON NEW MODEL HALTED IN 1954)


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Prof. Rushen Chahal

1960 - 1964

1500 MODEL INTRODUCED

SALES INCREASED BUT PROFITS SQUEEZED

1965 - 1975PRESSURES OF COMPETITION BECOME SEVERE

NEW STRATEGY FROM AUDI - FRONT WHEELED DRIVE, STYLISH,

WATERCOOLED

OTHER LINES DROPPED

PRODUCTION RATIONALISED ON WORLD BASIS

MARKETING EMPHASISED PERFORMANCE, RELIABILITY AND SERVICE

1976 - 1989

GOLF ESTABLISHED AS MARKET LEADER

CONTINUED EMPHASIS ON TECHNICAL EXCELLENCE

OLD DESIGNS PERIODICALLY FASHIONABLE

MAIN EUROPEAN COMPETITOR SEEN AS FIAT

SOME PRESSURE FROM JAPANESE MANUFACTURING

1959

INCREASED COMPETITION AND CHANGES IN TASTES

RESPONSE - INCREASED ADVERTISING

- DESIGN STARTED FOR 1500ORIGINAL STRATEGY UNCHANGED IN ESSENTIALS


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1990 - 1996

INCREASING PRESSSURE ON COSTS FROM JAPANESE MANUFACTURERS

GERMAN LABOUR COSTS AND EXCHANGE RATE ARE DISADVANTAGEOUSLATTERLY EUROPEAN RECESSION INCREASES PRESSURE

COST CUTTING MEASURES - EAST EUROPEAN PLANT - AGGRESSIVE

PURCHASING

1997 - 2000

DEVELOPING SEPARATE BRANDING STRATEGIES TO OCCUPY DIFFERENT

MARKET SEGMENTSDEVELOP SEPARATE PRODUCTS FROM COMMON PLATFORMS TO

REDUCE COST

CONTINUE AGGRESSIVE COST REDUCTION AND PROCESS IMPROVEMENT


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Prof. Rushen Chahal

MINTZBERGS CONCEPT OF EMERGENT STRATEGIES

NOT ALL INTENDED STRATEGIES ARE REALISED

and ...

NOT ALL REALISED STRATEGIES ARE INTENDED

Emergent strategies derive from the shared understanding of managing the

resources of the organization

The concept of emergent strategies therefore has a particular significance

for operations strategy

DELIBERATIVE STRATEGIES

UNREALISED

STRATEGIES

EMERGENT

STRATEGIES


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Prof. Rushen Chahal

Market

Requirements

Strategic

Reconciliation

Operations

Resources

Emerging,

any

workingvehicle

Maturing,

simple

robust

vehicle

More

sophisticated

performance,

quality

Uncertain

rejection of

VW traditional

products

Building up

capacity and

capability

Systemisation

of resources

and

processes

Minor

reconfigura-

tion for new

model

Fragmented

acquisition

of new

resources

Multiple

new

designs

New

1500

model

Standardized

design

1946-1951

Implementing

strategy

1952-1958

Continuity

of strategy

1959-1964

Minor

change and

continuity

1965-1970

Searching

for viable

strategy

Simple

design

Market requirements, operations resources and strategic reconciliationat VW for half a centur


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Prof. Rushen Chahal

Clarifying

around

style,

quality andvariety

Segmentation

around

performance,

style and variety

Increasingly

competitive

around price

Branding

with

price,

quality,

and style

Adapt best

practices from

enlargedgroup

Accommodate

new models

and

acquisitions

Drastic

reconfiguration to

increase

efficiency, reduce

costs

Continuous

process

improvement

and cost

reduction

Common

product

platforms

Design for

low-cost

manufacture

Product

development

paths

Defined

range

1971-1975

Emergentstrategy

1976-1989

Continuing

with minor

changes

1990-1996

Major

change

(internal)

1997-2000

Implementing

strategy

Market

Requirements

Strategic

Reconciliation

Operations

Resources

Market requirements, operations resources and strategic reconciliationat VW for half a century


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Prof. Rushen Chahal

Intended

Strategy

Realised

Strategy

Deliberate

Strategy

Mintzbergs concept of emergentstrategy

Unrealized

Strategy

Emergent

Strategy


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Prof. Rushen Chahal

Order winners and qualifiers

Low High

Negative

Order Winners

Qualifiers

Positive

Neutral

Achieved Performance

CompetitiveBenefit


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Prof. Rushen Chahal

Adding Delights

Low High

Negative

Order Winners

Qualifiers

Positive

Neutral


CompetitiveBenefit

Delights


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Prof. Rushen Chahal

Low High

Negative

Order Winners

Qualifiers

Positive

Neutral


CompetitiveBenefit

Delights

Delights become order winners and orderwinners become qualifiers


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Prof. Rushen Chahal

What service dimensions are delight, order

winners and qualifiers now, and in the future?

Delights

Order Winners

Qualifiers

Today Tomorrow


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Prof. Rushen Chahal

Delights

Order Winners

Qualifiers

Today Tomorrow

Budget Hotel Chain

Central reservation

Location (autoroutes)

Location (restaurants)

Price

Loyalty cards

Central reservation



Price

Loyalty cards

Cleanliness

Dcor

Cleanliness

Dcor

Service

?


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Prof. Rushen Chahal

Delights

Order Winners

Qualifiers

Today Tomorrow

Central reservation Price



Price

Loyalty cards

Central reservation




Price

Loyalty cards

Cleanliness

Dcor

Cleanliness

Dcor

Service

?

Budget Hotel Chain


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Prof. Rushen Chahal

Delights

Order Winners

Qualifiers

Central reservation




Price

Loyalty cards

Cleanliness

Decor

Price

What aspects of service

will form tomorrowsdelights, order winners

and qualifiers?

What new capabilities

will operations need todevelop to deliver

these?

More, smaller sites

Cheap landcosts

Build at lowcost

Operate atlow cost

Search processesFlexible design

Low fixed costsStandardization

Low overheads

Low labor costsNew technology

Partnership deals withrestaurants

Budget Hotel Chain


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Prof. Rushen Chahal

Trade-offs

Do you want it good, or do you want it

Tuesday?

No such thing as a free lunch.

You cant have an aircraft which flies at the

speed of sound, carries 400 passengers and

lands on an aircraft carrier. Operations are just

the same. (Skinner)

Trade-offs in operations are the way we arewilling to sacrifice one performance objective to

achieve excellence in another.


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Prof. Rushen Chahal

Competitive

Objective

A

Competitive

Objective

B

Model II: Pivot and Function(Slack, 1991)

Competitive

ObjectiveA

Competitive

Objective

B

Model I: Function(Skinner, 1992:

Hayes and Pisano, 1996)

Two ways of illustrating the trade-off concept


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Prof. Rushen Chahal

Performance measure AP

erformancemeas

ureB


erformancemeasureB


erformancemeasureB

Natural Frontier

of Performance

X

Y

Three schools of trade-off thought

Its all about positioning

(e.g. Skinner)

Must aim to be good at

everything

(e.g. Schonberger)

You have to choose when

to reposition and when to

overcome trade-offs

through improvement

(e.g. Hayes and Pisano)

Y1Y2

Y3

X3X2

X1

X

Z

Y


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Prof. Rushen Chahal

Trade-off changed because improved

system attributes have enabled both A

and B to be improved without

changing their relative position

Pivot

Base +

Base

A B

Trade-off changed because improved

system attributes have enabled A to

be improved without reduction in B

Pivot

Base +

Base

A

B

Trade-off changed because A is now

required to have higher performance but

system attributes have not improved so

performance of B is lower.

Pivot

Base

A

B

Pivot

Base

AB

Original trade-off

ImproveNet improvement in performance because trade-off is overcome

Reposition

Changeinrelativeperform

anceofcompetit

ive

objectives

Repositioning vs.improvement


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Prof. Rushen Chahal

vs.

vs.

vs.

Service Cost

good

bad

good

bad

Degree and

number of

service checks

Cost of

providing

service

Average

waiting timefor service

Cost of

providingservice

Ability to keep

waiting time short

even in peak periods

vs.Cost of

providing

service

Range of

servicesoffered

Cost of

providingservice

Examples of services vs. cost trade-offs

at an auto quick fit center


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Prof. Rushen Chahal

vs.

vs.

vs.

ServiceCapital

expenditure

good

bad

good

bad

vs.

Examples of services vs. capital

expenditure at an auto quick fit center

Degree and

number of

service checks

Average

waiting timefor service

Ability to keep

waiting time short

even in peak periods

Range of

servicesoffered

Capital cost of

purchasing computer

diagnostics equipment

Capital cost of providing

extra physical capacity orautomated processes

Capital cost of providing

extra capacity for peak

loading

Capital cost of

purchasing widerrange of equipment


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Prof. Rushen Chahal

Capital

expenditure

good

bad

good

bad

Service

vs.Capital cost of

providing computerdiagnostic equipment

Cost of providing

service

Examples of cost vs. capital

expenditure at an auto quick fit center


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Prof. Rushen Chahal

Working

capital

good

bad

good

bad

Service

vs.Level of parts

inventory kept in

stock

Ability to replacepart without any

delay

Working

capital

good

bad

good

bad

Cost

vs.Level of parts

inventory kept in

stock

Cost of arranging for

out of stock part to be

delivered

Workingcapital

good

bad

good

bad

Capital

expenditure

vs.Level of parts

inventory kept in

stock

Capital

expenditure on

storage space

Examples of working capital related trade-offs at an auto quick fit center


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Prof. Rushen Chahal

Capital

expenditure

CostService

Workingcapital

versus

versusversus

versus versus

versus

Trade-off categories


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Prof. Rushen Chahal

Performance objective A

Performan

ceobjectiveB

Y

X

Extended

performance

frontier

Natural

performance

frontier

Area Q

Area P

Z

Reconciliation as improvement by pushing back

the performance frontier of a trade-off


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Prof. Rushen Chahal

Cost performance

Variety

Normal operation

trade-off frontier zone

Trade-off curve of operation

designed for narrow range of

activities only

Trade-off curves are (a) broad representations of a performance frontier

zone; (b) dependent on how the operations have been designed

B

A


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Prof. Rushen Chahal

Market

segment

A

Market

segment

B

Operation

A

Operation

B

Operation

C

Marketsegment

A

Market

segment

B

Market

segment

C

Operation

A

OperationB

Operation

C

Market and operationssegmentation matched

Market and operationssegmentation not matched

Segmentation of markets and operations resources

Market

segment

C


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Prof. Rushen Chahal

IslandArmy 1

Army 2

Burning bridges behind you increases

commitment but reduces flexibility


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Prof. Rushen Chahal

Learning and

improvement

Structural

vulnerability

but butbut

Operations Resources Market RequirementsStrategic reconciliation

Clearly

focused

resources

Appropriate

resources

Limited

capabilities

Risk of

market

change

Clearly

targeted

market

Clarity of

objectives

Focused operations can exhibit positive and negative

characteristics in both market and operations perspectives


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Prof. Rushen Chahal

1st trade-off

Staff scheduling in

retail loans

Response

timeUtilisation

of staff

2nd trade-off

Level of service purchased

from credit agency

Operational

cost of credit

informationSpeed and

quality ofinformation

3rd trade-off

Retail loans on-site

investment

Operations cost

and speed of

serviceCapital

investment in

retail system4th trade-off

Insurance IT system

investment

Range of

services

possibleInvestment in

multi-function

system

Three trade-offs in the Call Center example


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Prof. Rushen Chahal

B

A Ideal

performance

Qualityo

fservice

Limited BroadSuperficial

Specific

Range of services

B

A

Qualityo

fservice

High LowSuperficial

Specific

Cost of providing services

Ideal

performance


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Prof. Rushen Chahal

A Ideal

performance

Qualityo

fservice


Specific

Range of services

A

Qualityo

fservice

High LowSuperficial

Specific


Ideal

performance

CC

A Ideal

performance

Qualityo

fservice

Limited Broad

Range of services

A

Qualityo

fservice

High Low


Ideal

performance


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Prof. Rushen Chahal

A Ideal

performance

Qualityo

fservice


Specific

Range of services

A

Qualityo

fservice

High LowSuperficial

Specific


Ideal

performance

A Ideal

performance

Qualityo

fservice

Limited Broad

Range of services

A

Qualityo

fservice

High Low


Ideal

performance

C C

DD

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