1. egekwu_20041 Chapter 2 Business Strategy and Global Competitiveness

2. egekwu_20042 Manor Care 4 Operates Sleep Inns 4 Labor Shortage 4 Designed rooms to minimize housekeeping staff needed –attached nightstands to walls –no doors on closets –rounded shower stalls –advanced security system

3. egekwu_20043 Manor Care Results 4 Rooms can be cleaned in 20 minutes versus 30 minute industry standard. 4 92-room hotel operated with equivalent of 11 full-time workers.

4. egekwu_20044 American Steel Industry 4 Foreign competition posed major threat to industry in early 1980s. 4 In 1982, US producers needed 10.59 labor hours to produce on metric ton compared with 10.01 hours in Japan. 4 US closed plants, modernized others, and reduced payrolls.

5. egekwu_20045 American Steel Industry continued 4 By middle of 1991, US steelmakers able to produce a metric ton with 5.4 hours compared to 5.6 hours for Japanese. 4 At the same time, quality also improved. 4 In early 80s, Ford rejected 8% of domestic steel shipments and 20% were late. 4 By early 1990s, steel rejects reduced to 1% and 99% of shipments were on time.

6. egekwu_20046 Technology Examples 4 Kansas City Power & Light using automatic meter readers which broadcasts data on electricity usage and eliminates $15/hour human meter readers. 4 Coca-Cola is installing similar technology in its vending machines. 4 This will allow Coke to better schedule deliveries and evaluate ad campaigns.

7. egekwu_20047 Examples Illustrate 4 Shortage of employees often necessitates need to improve productivity. 4 Increased competition (especially foreign competition) another reason why companies seek to improve their productivity. 4 Improving productivity is often dependent on new technologies.

8. egekwu_20048 Top Management 4 Responsible for making and keeping organization competitive. 4 Develops business strategy –provides direction and vision –guides short- and long-term decisions –must consider international competition 4 All functional areas and business processes must support the business strategy.

9. egekwu_20049 Business or Corporate Strategy A set of objectives, plans, and policies for the organization to successfully compete in its markets. 4 Long range (3 to 5 years) 4 It specifies what organization’s competitive advantage will be 4 Focuses on few key areas 4 The pattern of decisions made over time is in fact an organization’s business strategy.

10. egekwu_200410 Formulating the Corporate Strategy

11. egekwu_200411 Corporate Strategy Formulation COLLBORATORS & COOPERATORS

12. egekwu_200412 Vision and Mission Statements 4 Vision statements used to express organization’s values and aspirations. 4 Mission statements express organization’s purpose or reason for existence.

13. egekwu_200413 Core Competencies 4 Collective knowledge and skills an organization has that distinguish (or differentiate) it from the competition. 4 Typically center on an organization’s ability to integrate a variety of specific technologies and skills in the development of new products and services. 4 Are aggregates of core capabilities.

14. egekwu_200414 Core Competencies continued 4 Are basis on which new outputs are developed. 4 Better to think of organization in terms of its portfolio of core competencies than as a portfolio of products. 4 Identifying and developing core competencies is one of top management’s most important roles.

15. egekwu_200415 Examples of Core Competencies 4 Sony - miniaturization 4 3M- knowledge of substrates, coatings and adhesives; Knowledge management 4 Black and Decker - small electrical motors and industrial design 4 Honda - engines and power trains 4 Daimei-Benz - safety systems, quality and luxury.

16. egekwu_200416 Core Competencies Used to Gain Access to Variety of Markets 4 Cannon –core competencies in optics, imaging, and electronic controls –Products include copiers, laser printers, cameras, and image scanners. 4 Boeing –integrating large scale systems –commercial jetliners, space stations, missiles

17. egekwu_200417 Core Capabilities 4 Organization practices and business processes 4 Collection of capabilities lead to core competencies

18. egekwu_200418 Key Characteristics of Core Competencies 4 Should be used to gain access to a variety of markets 4 Should be strongly related to key benefits provided by products or services 4 Should be difficult to imitate (what about benchmarking?)

19. egekwu_200419 Operations Strategy - Definition Operations Strategy - involves setting broad policies and plans on how to use “available” resources of a firm to support its long-term competitive strategy. Corporate strategy leads to Operations strategy

20. egekwu_200420 3 Operations Strategy Customer NeedsCorporate Strategy Operations Strategy Alignment Core Competencies Decisions Processes, Infrastructure, and Capabilities

21. egekwu_200421 10 How do we convert order winners into specific performance requirements? Us (Core competencies) Competition (Them) Differentiation

22. egekwu_200422 8 A Framework for Operations/Manufacturing Strategy Customer Needs New and Current Products Performance Priorities and Requirements Quality, Dependability, Speed, Flexibility, and Price Operations & Supplier Capabilities TechnologyPeopleSystemsR&DCIMJITTQMDistribution Support Platforms Financial Management Human Resource ManagementInformation Management Enterprise Capabilities Strategic Vision

23. egekwu_200423 Strategy Example:Outsourcing 4 Subcontracting out production of parts or performance of activities 4 Activities and parts fall on a continuum ranging from strategically unimportant to strategically important 4 Activities not strategically important are candidates to be outsourced

24. egekwu_200424 Strategically Important Parts or Activities 4 Strongly related to what customers perceive to be key product characteristics. 4 Require highly specialized skill and knowledge. 4 Require highly specialized physical assets 4 The organization has the technological lead or is likely to obtain it.

25. egekwu_200425 Hollowed Out 4 The extent that most of a firm’s complex parts and production are outsourced 4 Often when complex parts are outsourced, engineering talent follows 4 Supplier may become competitor

26. egekwu_200426 Creeping Breakeven Phenomenon 4 Viscous cycle where products appear to become more expensive to produce in- house as others are outsourced. –Result from way overhead is covered and allocated 4 Logical conclusion is organization ends up producing no outputs.

27. egekwu_200427 Business Strategy and the Product Life Cycle

28. egekwu_200428 The Life-Cycle Curve

29. egekwu_200429 Product Life Cycle 4 Strategies often tied to product life cycle 4 Length of life cycles shrinking 4 Business strategy should match life cycles stages

30. egekwu_200430 Product Life Cycle Stages and Emphasis

31. egekwu_200431 Categories of Business Strategies

32. egekwu_200432 A:First-to-Market Strategy 4 Products available before competition 4 Strong applied research capability needed 4 Can set high price to skim market or set lower price to gain market share

33. egekwu_200433 B:Second-to-Market Strategy 4 Quick imitation of first-to-market companies 4 Less emphasis on applied research and more emphasis on development 4 Learn from first-to-market’s mistakes

34. egekwu_200434 C:Cost Minimization or Late-to- Market Strategy 4 Wait until market becomes standardized and large volumes demanded 4 Compete on basis of costs instead of product features 4 Research efforts focus on process development versus product development

35. egekwu_200435 D:Market Segmentation 4 Serving niche markets 4 Applied engineering skills and flexible manufacturing processes needed flexibility:ability to handle variations in product volume and product mix.

36. egekwu_200436 Implementation:The Balanced Scorecard 4 Helps translate mission and strategy into appropriate performance measures. 4 Traditionally organizations relied primarily on financial measures. 4 No single set of measures can provide information needed in all critical areas of the business. 4 Purpose of balanced scorecard the development of a set of measures that provides a comprehensive view of the organization.

37. egekwu_200437 Benefits of Using Balanced Scorecard 4 Clarify and gain consensus of strategy 4 Mechanism for communicating strategy 4 Mechanism for aligning departmental and personal goals to the strategy 4 Help ensure strategic objectives are linked to annual budget 4 Timely feedback related to improving the strategy

38. egekwu_200438 Performance Measured in Four Areas 4 Financial Performance 4 Customer Performance 4 Internal Business Process Performance 4 Organizational Learning and Growth

39. egekwu_200439 Developing a Balanced Scorecard 4 Top management translates mission and strategy into specific customer and financial objectives. 4 Measures for internal business processes developed on basis of customer and financial objectives. 4 Investments in employee training and information technology linked to customer, financial, and internal business process objectives.

40. egekwu_200440 Focus 4 Goal of business strategy is to establish and maintain a unique strength, or focus that leads to a sustainable competitive advantage. 4 Two successful competitive positions –lowest cost –outstanding strength

41. egekwu_200441 Common Areas of Focus 4 Innovation 4 Customization 4 Product/service flexibility 4 Volume flexibility 4 Performance 4 Quality 4 Product/service reliability 4 Delivery reliability 4 Response 4 After-sale service 4 Price

42. egekwu_200442 Order Qualifiers and Winners 4 Order qualifiers are characteristics that are the ante to enter the market ( cost, quality, speed, flexibility, dependability) 4 Order winners are characteristics that win the customer’s purchase

43. egekwu_200443 5 Dealing with Trade-offs Cost Quality DeliveryFlexibility FOCUS Plant within a Plant (PWP) Traditional Approach Advanced Approaches World Class Manufacturing Trade-offs © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill

44. egekwu_200444 6 World-Class Manufacturing World-class manufacturers no longer view cost, quality, speed of delivery, and even flexibility as tradeoffs. They have become order qualifiers. What are the order winners in today’s market? © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill

45. egekwu_200445 7 Service Breakthroughs 4 Service can be an “order winner” Warranty Roadside Assistance Travel Planning Loaner Vehicles Leases © The McGraw-Hill Companies, Inc., 1998 Irwin/McGraw-Hill

46. egekwu_200446 Contributors to Loss of Corporate (Business) Focus 4 New outputs 4 New attributes 4 New tasks 4 Departmental professionalism 4 Ignorance and noncommunication 4 Life cycle changes

47. egekwu_200447 Strategic Frameworks

48. egekwu_200448 The Sand Cone Model

49. egekwu_200449 Example Performance Frontier Which company is pursuing a customization policy?

50. egekwu_200450 New Technology Results in Shift of Performance Frontier “Company B develops new technology”

51. egekwu_200451 Global Competitiveness 4 Long-term viability of a firm 4 Short-term success in terms of market share or profitability 4 Since 1970s, imports to the US have grown faster than exports from the US 4 US is biggest debtor nation in world

52. egekwu_200452 Exchange Rates 4 US competitiveness reflected in value of dollar relative to other currencies 4 As US increases its imports relative to its exports, a surplus of US dollars accumulates abroad reducing the desirability of holding US dollars 4 Price adjusted broad dollar index

53. egekwu_200453 International Markets and Producers 4 Three Major Trading Regions –Europe –North America –Pacific Rim 4 Previously firms classified as domestic, exporters, or international 4 Now have global firms, joint ventures, foreign subsidiaries

54. egekwu_200454 Reasons to Produce Offshore 4 Circumvent governmental regulations 4 Avoid effects of currency fluctuations 4 Avoid fees and quotas 4 Placate local customers

55. egekwu_200455 Supply Chain Management 4 Cost of labor decreasing 4 Cost of logistics becoming more significant 4 Total value chain of global production 4 Coordination –Information flows –Finding efficient suppliers –Identifying and evaluating transportation options

56. egekwu_200456 New Technologies that facilitate globalization environment 4 ERP 4 EDI 4 Bar coding/Radio frequency identification 4 Internet

57. egekwu_200457 Six Primary Characteristics of Transformation Process 4 Efficiency 4 Effectiveness 4 Capacity 4 Quality 4 Response time 4 Flexibility

58. egekwu_200458 Productivity Definitions and Measures 4 Normally defined as output per worker hour 4 This is a partial measure of productivity 4 Total Factor Productivity includes all factors of production:

59. egekwu_200459 Improving Productivity Growth 4 Estimated that technology has been responsible for at least half the productivity gains in the U.S. 4 Mechanization 4 Automation

60. egekwu_200460 International Comparisons of Productivity

61. egekwu_200461 Why is Productivity Important? 4 For a society to increase its standard of living it must increase its productivity 4 How has the standard of living changed since 1970 in the US?

62. egekwu_200462 Responsiveness Customization, Response Time, and Quality

63. egekwu_200463 Customization 4 Ability to offer a product or service exactly suited to the customer’s desires or needs 4 Closer matches to customers needs 4 Ability of offer full product line with minimal inventory 4 Faster design-to-market time to meet new customer needs

64. egekwu_200464 Continuum of Customization

65. egekwu_200465 Mass Customization 4 Goal is to produce low cost, high quality outputs in high variety 4 Mass Customization Strategies –Collaborative customizers –Adaptive customizers –Cosmetic customizers –Transparent customizers

66. egekwu_200466 Prerequisites and Advantages of Rapid Response 4 Sharper focus on the customer 4 Better management 4 Efficient processing 4 Higher quality 4 Overhead elimination 4 Improved focus 4 Reduced charges 4 Faster revenue generation 4 Better communication 4 Improved morale

67. egekwu_200467 Cost Reductions with Decreases in Response Time

68. egekwu_200468 Defining and Measuring Quality 4 Conformance to specifications 4 Performance 4 Quick response 4 Quick-change expertise 4 Features 4 Reliability 4 Durability

69. egekwu_200469 Defining and Measuring Quality continued 4 Serviceability 4 Aesthetics 4 Perceived quality 4 Humanity 4 Value

70. egekwu_200470 Benefits of High Quality 4 More satisfied customers 4 Enhanced reputation 4 Increased profitability and higher market shares 4 Protection from competition 4 Minimizes safety risks and liability 4 Higher worker morale 4 Reduced production costs