1. © 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.

2. 2 – 2 Outline  Global Company Profile: Boeing  A Global View of Operations  Developing Missions And Strategies  Achieving Competitive Advantage Through Operations  Ten Strategic OM Decisions  Issues In Operations Strategy  Strategy Development And Implementation  Global Operations Strategy Options

3. © 2006 Prentice Hall, Inc.2 – 3 Boeing’s Global Strategy

4. © 2006 Prentice Hall, Inc.2 – 4

5. © 2006 Prentice Hall, Inc.2 – 5 © 2011 Pearson Education Some Boeing Suppliers (787) FirmCountryComponent LatecoereFrancePassenger doors LabinelFranceWiring DassaultFranceDesign and PLM software Messier-BugattiFranceElectric brakes ThalesFranceElectrical power conversion system and integrated standby flight display Messier-DowtyFranceLanding gear structure DiehlGermanyInterior lighting

6. © 2006 Prentice Hall, Inc.2 – 6 © 2011 Pearson Education Some Boeing Suppliers (787) FirmCountryComponent CobhamUKFuel pumps and valves Rolls-RoyceUKEngines Smiths AerospaceUKCentral computer system BAE SYSTEMSUKElectronics Alenia AeronauticsItalyUpper center fuselage & horizontal stabilizer Toray IndustriesJapanCarbon fiber for wing and tail units

7. © 2006 Prentice Hall, Inc.2 – 7 Global Strategies  Boeing – sales and production are worldwide  Benetton – moves inventory to stores around the world faster than its competition by building flexibility into design, production, and distribution  Sony – purchases components from suppliers in Thailand, Malaysia, and around the world

8. © 2006 Prentice Hall, Inc.2 – 8 Global Strategies  Volvo – considered a Swedish company but it is controlled by an American company, Ford. The current Volvo S40 is built in Belgium and shares its platform with the Mazda 3 built in Japan and the Ford Focus built in Europe.  Haier – A Chinese company, produces compact refrigerators (it has one-third of the US market) and wine cabinets (it has half of the US market) in South Carolina

9. © 2006 Prentice Hall, Inc.2 – 9 Global Strategies  Rapid growth in world trade and emerging markets  need to extend operations globally.  Making a product only in the US and then exporting it is no longer guarantees success of even survival  There are new standards of global competitiveness that include quality, variety, customization, timeliness, and cost.

10. © 2006 Prentice Hall, Inc.2 – 10 Some Multinational Corporations % Sales% Assets OutsideOutside HomeHomeHome% Foreign CompanyCountryCountryCountryWorkforce CiticorpUSA3446NA Colgate-USA7263NA Palmolive Dow USA6050NA Chemical GilletteUSA6253NA HondaJapan6336NA IBMUSA574751

11. © 2006 Prentice Hall, Inc.2 – 11 Some Multinational Corporations % Sales% Assets OutsideOutside HomeHomeHome% Foreign CompanyCountryCountryCountryWorkforce ICIBritain7850NA NestleSwitzerland989597 PhilipsNetherlands948582 Electronics SiemensGermany51NA38 UnileverBritain &957064 Netherlands

12. © 2006 Prentice Hall, Inc.2 – 12 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

13. © 2006 Prentice Hall, Inc.2 – 13 Reduce Costs  Foreign locations with lower wage rates can lower direct and indirect costs  Maquiladoras (Free Trade Zones in Mexico)  only pay tax on the value added by Mexican workers  Shifting low-skilled jobs to another country  Reduce costs  Free higher cost workers for more valuable tasks  Allow investing savings in improved products and facilities

14. © 2006 Prentice Hall, Inc.2 – 14 Improve the Supply Chain  Locating facilities closer to unique resources (expertise, labor, or raw material)  Auto design to California  Athletic shoe production to China  Perfume manufacturing in France

15. © 2006 Prentice Hall, Inc.2 – 15 Provide Better Goods and Services  Objective and subjective characteristics of goods and services  On-time deliveries  Cultural variables  Improved customer service

16. © 2006 Prentice Hall, Inc.2 – 16 Understand Markets  Interacting with foreign customer and suppliers can lead to new opportunities  Cell phone design from Europe  Cell phone fads from Japan  Extend the product life cycle

17. © 2006 Prentice Hall, Inc.2 – 17 Learn to Improve Operations  Learning does not take place in isolation.  Remain open to the free flow of ideas  General Motors partnered with a Japanese auto manufacturer to learn  Scandinavian design ideas have been used to improve equipment design and layout

18. © 2006 Prentice Hall, Inc.2 – 18 Attract and Retain Global Talent  Offer better employment opportunities  Better growth opportunities and insulation against unemployment  Relocate unneeded personnel to more prosperous locations  Incentives for people who like to travel

19. © 2006 Prentice Hall, Inc.2 – 19 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

20. © 2006 Prentice Hall, Inc.2 – 20 Match Product & Parent  Braun Household Appliances  Firestone Tires  Godiva Chocolate  Haagen-Dazs Ice Cream  Jaguar Autos  MGM Movies  Lamborghini Autos  Alpo Petfoods 1.Volkswagen 2.Bridgestone 3.Campbell Soup 4.Ford Motor Company 5.Gillette 6.Nestlé 7.Pillsbury 8.Sony

21. © 2006 Prentice Hall, Inc.2 – 21 Match Product & Parent  Braun Household Appliances  Firestone Tires  Godiva Chocolate  Haagen-Dazs Ice Cream  Jaguar Autos  MGM Movies  Lamborghini Autos  Alpo Petfoods 1.Volkswagen 2.Bridgestone 3.Campbell Soup 4.Ford Motor Company 5.Gillette 6.Nestlé 7.Pillsbury 8.Sony

22. © 2006 Prentice Hall, Inc.2 – 22 Match Product & Country  Braun Household Appliances  Firestone Tires  Godiva Chocolate  Haagen-Dazs Ice Cream  Jaguar Autos  MGM Movies  Lamborghini Autos  Alpo Petfoods 1.Great Britain 2.Germany 3.Japan 4.United States 5.Switzerland

23. © 2006 Prentice Hall, Inc.2 – 23 Match Product & Country  Braun Household Appliances  Firestone Tires  Godiva Chocolate  Haagen-Dazs Ice Cream  Jaguar Autos  MGM Movies  Lamborghini Autos  Alpo Petfoods 1.Great Britain 2.Germany 3.Japan 4.United States 5.Switzerland

24. © 2006 Prentice Hall, Inc.2 – 24 Developing Missions and Strategies Mission statements tell an organization where it is going The Strategy tells the organization how to get there

25. © 2006 Prentice Hall, Inc.2 – 25 Mission  Mission - where are you going?  Organization’s purpose for being  Answers ‘What do we provide society?’  Provides boundaries and focus

26. © 2006 Prentice Hall, Inc.2 – 26 Hard Rock Café Our Mission: 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. Figure 2.2

27. © 2006 Prentice Hall, Inc.2 – 27 Benefit to Society Mission Factors Affecting Mission Philosophy and Values Profitability and Growth Environment CustomersPublic Image

28. © 2006 Prentice Hall, Inc.2 – 28 Sample Missions Sample Company Mission To manufacture and service an innovative, growing, and profitable worldwide microwave communications business that exceeds our customers’ expectations. Sample Operations Management Mission To produce products consistent with the company’s mission as the worldwide low-cost manufacturer. Figure 2.3

29. © 2006 Prentice Hall, Inc.2 – 29 Sample Missions Figure 2.3 Sample OM Department Missions Product designTo design and produce products and services with outstanding quality and inherent customer value. Quality managementTo attain the exceptional value that is consistent with our company mission and marketing objectives by close attention to design, procurement, production, and field service operations Process designTo determine and design or produce the production process and equipment that will be compatible with low-cost product, high quality, and good quality of work life at economical cost.

30. © 2006 Prentice Hall, Inc.2 – 30 Strategic Process MarketingOperations Finance/ Accounting Functional Area Missions Organization’s Mission

31. © 2006 Prentice Hall, Inc.2 – 31 Strategy  Action plan to achieve mission  Functional areas have strategies  Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses

32. © 2006 Prentice Hall, Inc.2 – 32 Strategies for Competitive Advantage  Differentiation – better, or at least different  Cost leadership – cheaper  Quick response – more responsive

33. © 2006 Prentice Hall, Inc.2 – 33 Competing on Differentiation Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perception of value  Safeskin gloves – leading edge products  Walt Disney Magic Kingdom – experience differentiation  Hard Rock Cafe – theme experience

34. © 2006 Prentice Hall, Inc.2 – 34 Competing on Cost Provide the maximum value as perceived by customer. Does not imply low quality.  Southwest Airlines – secondary airports, no frills service, efficient utilization of equipment  Wal-Mart – small overheads, shrinkage, distribution costs  Franz Colruyt – no bags, low light, no music, doors on freezers

35. © 2006 Prentice Hall, Inc.2 – 35 Competing on Response  Flexibility is matching market changes in design innovation and volumes  Institutionalization at Hewlett-Packard  Reliability is meeting schedules  German machine industry  Timeliness is quickness in design, production, and delivery  Johnson Electric, Bennigan’s, Motorola

36. © 2006 Prentice Hall, Inc.2 – 36 OM’s Contribution to Strategy Product Quality Process Location Layout Human resource Supply-chain Inventory Scheduling Maintenance FLEXIBILITY Sony’s constant innovation of new products………………………………....Design HP’s ability to follow the printer market………………………………Volume Southwest Airlines No-frills service……..…..LOW COST DELIVERY Pizza Hut’s five-minute guarantee at lunchtime…………………..…..……..Speed Federal Express’s “absolutely, positively on time”………………………..….Dependability QUALITY Motorola’s automotive products ignition systems…………………………......Conformance Motorola’s pagers………………………..….Performance IBM’s after-sale service on mainframe computers……....AFTER-SALE SERVICE Fidelity Security’s broad line of mutual funds………….BROAD PRODUCT LINE Figure 2.4 OperationsSpecificCompetitive DecisionsExamplesStrategy UsedAdvantage Response (Faster) Cost leadership (Cheaper) Differentiation (Better)