1. Operation Strategy & Competitiveness
Chapter #2

2. Relationship between Corporate Strategy & Operation Strategy
Strategic Direction, Resources
Organizational Process & Coordination to Produce Good & Services
Operations Strategy

3. Corporate Strategy
Corporate Strategy consists of the decision made by the Top management regarding issues that effect the long-term survival and growth of the firm.
It describes the future course of action the firm needs to adopt for long term success.
Corporate strategy provides an overall direction that serves as the framework for carrying out all the organization's functions.

4. Operations Strategy
Specifies the means by which operations implements corporate strategy and helps build a customer-driven firm.
Operations strategy links long term and short term operations decisions to corporate strategy.
Operations strategy helps the firm to be competitive and to improve its performance and profitability.

5. Operations strategy & Corporate strategy
Environmental scanning
Core competencies
Core processes
Global strategies
Market Analysis
Market segmentation
Needs assessment
Competitive Priorities
Cost
Quality
Time
Flexibility
New Service/
Product Development
Design
Analysis
Development
Full launch
Operations Strategy
Decisions
Managing processes
Managing supply chains
Competitive Capabilities
Current
Needed
Planned
Performance Gap? No
Yes
Figure 1.5

6. Formulating Corporate Strategy
Please see page 50 (book-1)for details
Formulating Corporate Strategy
Environmental scanning (SWOT)
Developing core competencies
Core competencies refer to unique resources and strengths that an organization’s management consider when formulating strategies. These competencies include:
Workforce
Facilities
Market and financial know-how
Systems and technologies
Developing core processes
Global strategies
Strategic Alliances

7. Market Analysis Market Definition – STP decisions Needs assessment
Service or product needs
Delivery system needs
Volume needs
Other needs

8. Competitive Priorities
Please see page (book-1)for details
TABLE | DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE PRIORITIES
COST
Definition
Process Considerations
Example
Low-cost operations
Delivering a service or a product at the lowest possible cost
Processes must be designed and operated to make them efficient
Costco
QUALITY
Top quality
Delivering an outstanding service or product
May require a high level of customer contact and may require superior product features
Ferrari
Consistent quality
Producing services or products that meet design specifications on a consistent basis
Processes designed and monitored to reduce errors and prevent defects
McDonald’s
TIME
Delivery speed
Quickly filling a customer’s order
Design processes to reduce lead time
Dell
On-time delivery
Meeting delivery-time promises
Planning processes to increase percent of customer orders shipped when promised
United Parcel Service (UPS)
Development speed
Quickly introducing a new science or a product
Cross-functional integration and involvement of critical external suppliers
Toyota

9. Competitive Priorities
TABLE | DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE PRIORITIES
FLEXIBILITY
Definition
Process Considerations
Example
Customization
Satisfying the unique needs of each customer by changing service or products designs
Low volume, close customer contact, and easily reconfigured
Ritz Carlton
Variety
Handling a wide assortment of services or products efficiently
Capable of larger volumes than processes supporting customization
Amazon.com
Volume flexibility
Accelerating or decelerating the rate of production of service or products quickly to handle large fluctuations in demand
Processes must be designed for excess capacity
Coca cola

10. New Service/Product Development stages
Design
Analysis
Development
Full Launch
Please see page 62 (book-1)for details

11. Operation Strategy (Example)
TABLE | OPERATIONS STRATEGY ASSESSMENT OF THE BILLING AND PAYMENT PROCESS
Competitive Priority
Measure
Capability
Gap
Action
Low-cost operations
Cost per billing statement
$0.0813
Target is $0.06
Eliminate microfilming and storage of billing statements
Weekly postage
$17,000
Target is $14,000
Develop Web-base process for posting bills
Consistent quality
Percent errors in bill information
0.90%
Acceptable
No action
Percent errors in posting payments
0.74%
Delivery speed
Lead time to process merchant payments
48 hours
Volume flexibility
Utilization
98%
Too high to support rapid increase in volumes
Acquire temporary employees
Improve work methods

12. Operation Strategy at South West Airlines
Organizational processes:
Point-to-point route system rather than hub-and-spoke design used by others.
Service to 57 cities in 29 states with average trip of 500 miles
Operating costs kept low through the use of 737 aircrafts, and limited services (no meals).
Minimizing time span from landing to departure.
Operating business at very low costs.
Coordination of Activities
Simplification of functions
Coordination among various dept. to deliver on-time service.
Customer facilitation and easy access.

13. Operations Strategy at Zara Boutique
Organizational processes:
$2 billion company with 924 stores in 31 countries
Production of 12,000 apparel styles each year.
Each is available in store in four weeks.
Renews nearly half their stock every two weeks.
Have more than 200 designer and produce two third of it’s clothes in company-owned facility in Spain.
Hi-tech computer guided manufacturing and facilities.
Skills of unique design team.
Coordination of Activities
Cross functional coordination in new product development.
Short time span between idea and their transformation into stores.

14. Operations Strategy at Starbucks
Organizational processes:
More than10,000 store in 28 countries with average growth in profits is 30% per year.
Secrets is their operations & service strategy.
Supply of world famous coffee powder comes directly from Java, Indonesia through an effective supply chain.
Quality is maintained in all stores worldwide with standardized procedures and strong customer feed back system.
Wide range of products including a variety of exotic coffee, cappuccino, espresso as well as sandwiches, pastries, desserts even a music CDs of pop stars and internet facilities.
Services include order and payment via phone and Starbucks web site and automated espresso machines.
Company uses cluster store strategy in populated areas, e.g. there are 124 stores in just Manhattan area, New York.