1. COMPETITIVENESS AND OPERATIONS STRATEGY

2. the bar is getting higher
A COLD HARD FACT
Better quality, higher productivity, lower costs, and the ability to respond quickly to customer needs are more important than ever and…
the bar is getting higher

3. CHAPTER FOCUS
Competitiveness
Strategy

4. COMPETITIVENESS Competitiveness:
The extent that an organization meets the wants and needs of customers relative to others that offer similar goods or services
Organizations compete through some combination of their marketing and operations functions
What do customers want?
How can these customer needs best be satisfied?

5. MARKETING INFLUENCES COMPETITIVENESS BY:
Identifiying consumer needs and desires
Pricing
Advertising and promotion

6. OPERATIONS INFLUENCES COMPETITIVENESS THROUGH (1 of 4):
1. Product and Service Design
2. Cost
3. Location
4. Quality and Reliability

7. OPERATIONS INFLUENCES COMPETITIVENESS THROUGH (2 of 4):
5. Quick or Reliable Response
a. New Product Introduction Speed
b. Delivery Speed
c. Delivery Reliability
6. Service

8. OPERATIONS INFLUENCES COMPETITIVENESS THROUGH (3 of 4):
7. Flexibility
a. in making alterations in design
b. in coping with changes in volume
c. in new product introduction
8. Inventory Management

9. OPERATIONS INFLUENCES COMPETITIVENESS THROUGH (4 of 4):
9. Supply Chain Management
10. Service and Service Quality
11. Managers and Workers

10. WHY SOME ORGANIZATIONS FAIL? (1 of 2)
Too much emphasis on short-term financial performance
Failing to take advantage of strengths and opportunities
Failing to recognize competitive threats
Neglecting operations strategy

11. WHY SOME ORGANIZATIONS FAIL (2 of 2)
Too much emphasis in product and service design and not enough on improvement
Neglecting investments in capital and human resources
Failing to establish good internal communications and cooperation
Failing to consider customer wants and needs

12. DEALING WITH TRADE-OFFS
For example, if we reduce costs by reducing product quality inspections, we might reduce product quality.
For example, if we improve customer service problem solving by cross-training personnel to deal with a wider-range of problems, they may become less efficient at dealing with commonly occurring problems.
Cost
Quality
Delivery
Flexibility

13. HIERARCHICAL PLANNING
Mission
Goals
Organizational Strategies
Tactics
Functional Strategies

14. HIERARCHICAL PLANNING
Mission
Goals
Organizational Strategies
Functional Goals
Finance Strategies
Marketing Strategies
Operations Strategies
Tactics
Tactics
Tactics
Operating procedures
Operating procedures
Operating procedures

15. MISSION Mission - where you are going?
The reason for the existence for an organization
Provides boundaries & focus
© 1995 Corel Corp.

16. FACTORS AFFECTING MISSION
Philosophy &
Values
Profitability
Environment
& Growth
Mission
Customers
Public Image
One can obviously discuss the impact of each of these factors on a company mission. An alternative is to have each student take a company mission and identify the connection to each of the factors. In particular, ask students if the connection is uni- or bi-directional, i.e., “The environment within which a company operates may impact its mission, can the mission also impact the environment?”
Benefit to
Society

17. MISSION STATEMENT States the purpose of the organization
The mission statement should answer the question of “What business are we in?”

18. MISSION STATEMENT OF THE HARD ROCK CAFE
To spread the spirit of Rock ‘n’ Roll by delivering an exceptional entertainment and dining experience. We are committed to being an important, contributing member of our community and offering the Hard Rock family a fun, healthy, and nurturing work environment while ensuring our long-term success.

19. MC’DONALD’S MISSION STATEMENT
McDonald's brand mission is to "be our customers' favorite place and way to eat." Our worldwide operations have been aligned around a global strategy called the Plan to Win centering on the five basics of an exceptional customer experience -- People, Products, Place, Price and Promotion. We are committed to improving our operations and enhancing our customers' experience.

20. GOALS
The mission statement serves as the basis for organizational goals
Goals
They provide detail and the scope of the mission
Goals can be viewed as organizational destinations
They serve as the basis for organizational strategies

21. STRATEGIES Strategy Plans for achieving organizational goals
Serves as a roadmap for reaching the organizational destinations
Mission: Where you are going?
Strategy: How you are going to get there; an action plan (shows how mission will be achieved)

22. STRATEGIES Organizations have Organizational (business) strategies
Overall strategies that relate to the entire organization
Support the achievement of organizational goals and mission
Functional level strategies
Strategies that relate to each of the functional areas and that support achievement of the organizational strategy

23. TACTICS AND OPERATIONS
The methods of actions taken to accomplish strategies
The “how to” part of the process
Answers the question: “How to reach the destination, following the strategy road map”
Operations
The actual “doing” part of the process

24. STRATEGY EXAMPLE Mission: Live a good life
Rita is a high school student. She would like to have a career in business, have a good job, and earn enough income to live comfortably
Mission: Live a good life
Goal: Successful career, good income
Strategy: Obtain a college education
Tactics: Select a college and a major
Operations: Register, buy books, take courses, study, graduate, get job

25. SAMPLE STRATEGIES Organizational Strategy Operations Strategy
Examples of Companies or Services
Low Price
Low Cost
U.S. first-class postage
Wal-Mart
High Quality
High performance design and/or high quality processing
Consistent Quality
Sony TV
Lexus, Cadillac,
Coca-Cola; Kodak, Motorola
Short Time
Quick Response(rapid delivery)
On-time delivery
McDonald’s Restaurants
Express mail
FedEx; One-hour photo
Newness
Innovation 3M
Flexibility
Variety
Volume
Burger King (Have it your way”)
McDonald’s (“Buses Welcome”)
Service
Superior customer service
Disneyland
IBM
Location
Convenie
Supermarkets, Banks, ATMs
Mall Stores

26. © 1995 Corel Corp.
STRATEGY FORMULATION
Effective strategy formulation requires taking into account the competitive arena (what the firm is in the business of doing)
Strategy formulation process:
Identification of core (distinctive) competencies
Environmental scanning and SWOT Analysis
Identification of the order qualifiers
Identification of the order winners
Positioning the firm

27. IDENTIFICATION OF CORE COMPETENCIES
The special attributes or abilities that give an organization a competitive edge. What the firm does better than anyone else (critical success factors, distinctive competencies)
Price
Quality
Time
Flexibility
Service
Location

28. Develop Distinctive Competencies based on customer needs and on what the competitors doing
To be effective core competencies and strategies need to be aligned

29. ENVIRONMENTAL SCANNING
The consideration of events and trends that present threats or opportunities for a company
Environmental Scanning is necessary to identify
Internal Factors
Strengths and Weaknesses
External Factors
Opportunities and Threats

30. ENVIRONMENTAL SCANNING: KEY EXTERNAL FACTORS
Economic conditions
Political conditions
Legal environment
Technology
Competition
Customers and Markets
Suppliers
Distributors

31. ENVIRONMENTAL SCANNING: KEY INTERNAL FACTORS
Resources available (human resources, facilities and equipment, financial resources)
Existing and potential products and services
Technology
Stages of life cycles of current products

32. SWOT ANALYSIS TO STRATEGY FORMULATION
Mission
Internal
External S
trengths O
pportunities
Strategy
Internal
External W
eaknesses T
hreats
Competitive
Advantage

33. ORDER QUALIFIERS: DEFINED
Order qualifiers are the basic criteria that permit the firm’s products to be considered as candidates for purchase by customers.
These are the characteristics that customers perceive as minimum standards of acceptability to be considered as a potential purchase.

34. ORDER WINNERS: DEFINED
Order winners are the criteria that differentiate the products and services of the firm from others’.
These are the characteristics of an organization’s goods or services that cause it to be perceived as better than competitors’ products

35. A brand name car can be an “order qualifier”
Repair services can be “order winners”
Examples: Warranty, Roadside Assistance, Leases, etc

36. LAST STEP IN STRATEGY FORMULATION: POSITIONING THE FIRM
The firm’s positioning strategy defines how it will compete in the marketplace, ie. what unique value it will deliver to the customer.
Choosing one or two important things on which to concentrate and doing them extremely well.

37. ORGANIZATION STRATEGY/ OPERATIONS STRATEGY
The organization strategy provides the overall direction for the organization. It is broad in scope covering the entire organization
Operations strategy is the approach consistent with organization strategy that is used to guide the operations function. It is narrower in scope, dealing with the operations aspect of the organization.

38. Organization Strategy
Relates to growth rate, market share
Operations Strategy
Relates to product design; choice of location, technology, new facilities

39. STRATEGIC PLANNING Mission and Vision Corporate Strategy Voice of the
Business
Customer
Marketing Strategy
Operations Strategy
Financial Strategy

40. OPERATIONS ROLE IN CORPORATE STRATEGY
Provide support for overall strategy of a firm
Serve as firm’s distinctive competence
Must be consistent
Must be consistent with overall strategy

41. IMPETUS FOR STRATEGY CHANGE
Changes in the organization
Stages in the product life cycle
Changes in the environment

42. TYPES OF OPERATIONS STRATEGIES
Cost leadership strategy
Differentiation strategy
Quick response strategy (requires institutionalization within the firm of the ability to respond)
Flexibility
Reliability
Speed, Timeliness

43. Does not imply low value or low quality
COMPETING ON COST
Eliminate all waste
Provide the maximum value as perceived by the customer
Does not imply low value or low quality
Invest in
Updated facilities & equipment
Streamlining operations
Training & development

44. COMPETING BY DIFFERENTIATION
Please the customers by offering unique goods or services that make them feel special
Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perception of value

45. COMPETING ON RESPONSE Flexibility Speed Reliability, Timeliness
Requires institutionalization within the firm of the ability to respond
Most students readily acknowledge that competing on the basis of response involves the notion of quickness or speed, so the discussion should probably concentrate on the other three elements. The concept of and need for “institutionalization” will likely require significant discussion. Here you might point out that “response” is seldom the prerogative of any, single, individual - appropriate response is often the outcome of the work of many.

46. COMPETING ON SPEED
Fast moves
Fast adaptations
Tight linkages

47. COMPETING ON FLEXIBILITY
Produce wide variety of products
Introduce new products
Modify existing products quickly
Respond to customer needs

48. AGILE OPERATIONS Agile operations
A strategic approach for competitive advantage that emphasizes the use of flexibility to adapt and prosper in an environment of change
Involves the blending of several core competencies:
Cost
Quality
Reliability
Flexibility

49. TYPES OF OPERATIONS STRATEGIES
Quality Based Strategies
Time Based Strategies

50. QUALITY-BASED STRATEGIES
Strategy that focuses on quality in all phases of an organization
Focuses on maintaining or improving the quality of an organization’s products or services
Understand customer attitudes toward and expectations of quality
Quality at the source
Pursuit of such a strategy is rooted in a number of factors:
Trying to overcome a poor quality reputation
Desire to maintain a quality image
A part of a cost reduction strategy

51. TIME-BASED STRATEGIES
Strategies that focus on the reduction of time needed to accomplish tasks
Competing on speed: fast moves, fast adaptations, tight linkages
It is believed that by reducing time, costs are lower, quality is higher, productivity is higher, time-to-market is faster, and customer service is improved

52. TIME-BASED STRATEGIES
Areas where organizations have achieved time reductions:
Planning time
Product/service design time
Processing time
Changeover time
Delivery time
Response time for complaints

53. EFFECTIVE STRATEGY CAN BE ACHIEVED:
by performing different activities from those of competitors or
by performing the same activities better

54. STRATEGIC DECISIONS IN OPERATIONS
Products
Processes, Technology
Capacity
Job design
Quality
Facilities
Sourcing
Services
Inventory

55. THE BALANCED SCORECARD APPROACH FOR TRANSFORMING STRATEGY INTO ACTION
A top-down management system that organizations can use to clarify their vision and strategy and transform them into action
Develop objectives
Develop metrics and targets for each objective
Develop initiatives to achieve objectives
Identify links among the various perspectives
Finance
Customer
Internal business processes
Learning and growth
Monitor results

56. BALANCED SCORECARD Finance — How should we look to our shareholders?
Customer — How should we look to our customers?
Processes — At which business processes must we excel?
Learning and Growing — How will we sustain our ability to change and improve?

57. OPERATIONS STRATEGY AT WAL-MART
Provide value for our customers
Low prices, everyday
Low inventory levels
Linked communications between stores
Short flow times
Fast transportation system
Cross-docking
Focused locations
EDI/satellites
Wal-Mart
Mission
Competitive Priority
Operations Strategy
Operations Structure
Enabling Process and Technologies

58. ACTIVITY MAPPING: SOUTWEST AIRLINE’S LOW COST COMPETITIVE ADVANTAGE
Courteous, but limited passenger service
Lean, productive employees
Short haul, point-to-point routes, often to secondary airports
High aircraft utilization
Standardized fleet of Boeing 737 aircraft
Frequent, reliable schedules
Competitive Advantage:
Low Cost
Discuss how the individual strategies combine to achieve the overall company mission.

59. ACTIVITY MAPPING: SOUTWEST AIRLINE’S LOW COST COMPETITIVE ADVANTAGE
Courteous, but limited passenger service
No seat assignments
No baggage transfers
Automated ticketing machines
No meals

60. ACTIVITY MAPPING: SOUTWEST AIRLINE’S LOW COST COMPETITIVE ADVANTAGE
Short haul, point-to-point routes, often to secondary airports
Lower gate costs at secondary airports
High number of flights, reduces employee idle time between flights

61. ACTIVITY MAPPING: SOUTWEST AIRLINE’S LOW COST COMPETITIVE ADVANTAGE
Frequent, reliable schedules
High number of flights reduces employee idle time between flights
Saturate a city with flights lowering administrative costs per passenger for that city

62. ACTIVITY MAPPING: SOUTWEST AIRLINE’S LOW COST COMPETITIVE ADVANTAGE
Standardized fleet of Boeing 737 aircraft
Pilot training on only one type of aircraft
Reduced maintenance inventory required because of only one type of aircraft
Excellent supplier relations with Boeing has aided financing

63. ACTIVITY MAPPING: SOUTWEST AIRLINE’S LOW COST COMPETITIVE ADVANTAGE
High aircraft utilization
Flexible employees and standard planes aids scheduling
Flexible union contracts
Maintenance personnel trained on only one type of aircraft
20 minute gate turnarounds

64. ACTIVITY MAPPING: SOUTWEST AIRLINE’S LOW COST COMPETITIVE ADVANTAGE
Lean, productive employees
High level of stock ownership
Hire for attitude, then train
High employee compensation
Empowered employees
Automated ticket machines

65. ACTIVITY MAPPING: SOUTWEST AIRLINE’S LOW COST COMPETITIVE ADVANTAGE
Courteous, but limited passenger service
Lean, productive employees
Short haul, point-to-point routes, often to secondary airports
High aircraft utilization
Standardized fleet of Boeing 737 aircraft
Frequent, reliable schedules
Competitive Advantage:
Low Cost

66. ACTIVITY MAPPING: SOUTWEST AIRLINE’S LOW COST COMPETITIVE ADVANTAGE

67. OPERATIONS STRATEGY FRAMEWORK
Customer Needs
New product : Old product
Competitive
dimensions & requirements
Quality, Dependability, Speed, Flexibility, and Price
Enterprise capabilities
Operations and Supplier Capabilities
R&D
Distribution
Technology
Systems
People
Support Platforms
Financial management
Human resource management
Information management

68. THE CHANGING CORPORATION
20TH CENTURY 21ST CENTURY
CHARACTERISTIC CORPORATION CORPORATION
Organization The Pyramid The Web
Focus Internal External
Style Structures Flexible
Source of strength Stability Change
Structure Self-sufficient Interdependencies
Resources Physical assets Information
Operations Vertical integration Virtual integration
Products Mass production Mass customization
Reach Domestic Global
Financials Quarterly Real-time
Inventories Months Hours
Strategy Top-down Bottom-up
Leadership Dogmatic Inspirational
Workers Employees Employees, free agents
Job expectations Security Personal growth
Motivation To compete To build
Improvements Incremental Revolutionary
Quality Affordable best No compromise