© 2006 Prentice Hall, Inc.2 – 1 Operations Management Chapter 2 – Operations Strategy in a Global Environment Chapter 2 – Operations Strategy in a Global Environment © 2006 Prentice Hall, Inc. PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 6e Operations Management, 8e

© 2006 Prentice Hall, Inc.2 – 2 Some Multinational Corporations % Sales% Assets OutsideOutside HomeHomeHome% Foreign CompanyCountryCountryCountryWorkforce CiticorpUSA3446NA Colgate-USA7263NA Palmolive Dow USA6050NA Chemical GilletteUSA6253NA HondaJapan6336NA IBMUSA574751

© 2006 Prentice Hall, Inc.2 – 3 Reasons to Globalize  Reduce costs (labor, taxes, tariffs, etc.)  Improve supply chain  Provide better goods and services  Understand markets  Learn to improve operations  Attract and retain global talent Tangible Reasons Intangible Reasons Figure 2.1

© 2006 Prentice Hall, Inc.2 – 4 Cultural and Ethical Issues  Cultures can be quite different  Attitudes can be quite different towards  Punctuality  Lunch breaks  Environment  Intellectual property  Thievery  Bribery  Child labor

© 2006 Prentice Hall, Inc.2 – 5 Power Distance Hi Low Power and Authority are facts of life Minimize social/class structures Those in power emphasize their position No set hierarchy, those in power minimize position Centralized authority Decentralized authority Respect for authority Respect for individuality Hofstede’s Cultural Dimensions

© 2006 Prentice Hall, Inc.2 – 6 Individualism Collectivism People take care of themselves Primary loyalty is to group Make decisions based on individual needs Make decisions based on group needs I mentality We mentality Individuals speak out, question and confront Dependence on organizations or institutions, people avoid conflict Hofstede’s Cultural Dimensions

© 2006 Prentice Hall, Inc.2 – 7 Uncertainty Avoidance Hi Low More formal rules, prefer details and specific plans Fewer rules, tolerate generalizations Less tolerant of deviant ideas, consensus seeking Tolerate deviance, seek individual opinions Minimize risk Approve of risk taking Ritualized/ceremonial, belief in absolute truth Accept relativity of belief Hofstede’s Cultural Dimensions

© 2006 Prentice Hall, Inc.2 – 8 Developing Missions and Strategies Mission statements tell an organization where it is going The Strategy tells the organization how to get there

© 2006 Prentice Hall, Inc.2 – 9 Mission  Mission - where are you going?  Organization’s purpose for being  Answers ‘What do we provide society?’  Provides boundaries and focus

© 2006 Prentice Hall, Inc.2 – 10 Strategy  Action plan to achieve mission  Functional areas have strategies  Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses

© 2006 Prentice Hall, Inc.2 – 11 Strategic Process MarketingOperations Finance/ Accounting Functional Area Missions Organization’s Mission

© 2006 Prentice Hall, Inc.2 – 12 Strategies for Competitive Advantage  Differentiation – better, or at least different  Cost leadership – cheaper  Quick response – more responsive

© 2006 Prentice Hall, Inc.2 – 13 Elements of Operations Management Strategy  Low-cost product  Product-line breadth  Technical superiority  Product characteristics/differentiation  Continuing product innovation  Low-price/high-value offerings  Efficient, flexible operations adaptable to consumers  Engineering research development  Location  Scheduling

© 2006 Prentice Hall, Inc.2 – 14 Product Life Cycle Product design and development critical Frequent product and process design changes Short production runs High production costs Limited models Attention to quality IntroductionGrowthMaturityDecline OM Strategy/Issues Forecasting critical Product and process reliability Competitive product improvements and options Increase capacity Shift toward product focus Enhance distribution Standardization Less rapid product changes – more minor changes Optimum capacity Increasing stability of process Long production runs Product improvement and cost cutting Little product differentiation Cost minimization Overcapacity in the industry Prune line to eliminate items not returning good margin Reduce capacity Figure 2.5

© 2006 Prentice Hall, Inc.2 – 15 Product Life Cycle Best period to increase market share R&D engineering is critical Practical to change price or quality image Strengthen niche Poor time to change image, price, or quality Competitive costs become critical Defend market position Cost control critical IntroductionGrowthMaturityDecline Company Strategy/Issues Internet Flat-screen monitors Sales DVD CD-ROM Drive-through restaurants Fax machines 3 1/2” Floppy disks Color printers Figure 2.5

© 2006 Prentice Hall, Inc.2 – 16 Strategy Development and Implementation  Identify critical success factors  Build and staff the organization  Integrate OM with other activities The operations manager’s job is to implement an OM strategy, provide competitive advantage, and increase productivity