1. OPERATIONS STRATEGY

2. Contents 1- what is strategy ? 2- strategy levels 3- What is operations strategy? 4- Competitive priorities. 5- Trade-Offs.

3. 1- What is strategy

4. What is strategy? The Rise and Fall of Strategic Planninguse "strategy" in several different ways, being these four Henry Mintzberg, in his 1994 book, The Rise and Fall of Strategic Planning, points out that people use "strategy" in several different ways, the most common being these four : plan Strategy is a plan, a "how," a means of getting from here to there” pattern Strategy is a pattern in actions over time; for example, a company that regularly markets very expensive products is using a "high end" strategy. position Strategy is position ; that is, it reflects decisions to offer particular products or services in particular markets. perspective Strategy is perspective, that is, vision and direction.

5. What is strategy? long term plan achieve a particular goal 1- Strategy is a long term plan of action designed to achieve a particular goal approach overall direction of the organization and will establish the organization’s future environment. 2- Strategy is approach taken that will affect the overall direction of the organization and will establish the organization’s future environment.. 3- A strategy is: a planned, deliberate procedure goal-oriented (has an identifiable outcome) achieved with a sequence of steps subject to monitoring and modification

6. 2-Strategy levels

7. s ss strategy levels company strategy can be formulated and implemented at three different levels: Corporate level Business unit level Functional or departmental level:

8. Corporate strategy Corporate -level strategy is a set of objectives, plans, and policies for the organization to successfully compete in its markets. - Focus on:- kinds of businesses - The kinds of businesses the firm wants to engage in Specifies business of the company (new products/services) - (Specifies business of the company (new products/services) acquire or get rid of businesses, - - Ways to acquire or get rid of businesses, Allocation of resources among businesses - - Allocation of resources among businesses, Ways to manage the businesses - - Ways to manage the businesses Long range (3 to 5 years) Focuses on few key areas

9. 2- Business –level strategy - Once top management agrees on corporate -level strategy, they can turn their attention to the business –level strategy…. outlining how it will compete.Defines the long-range plan to compete in the marketplace+ Helps to differentiate the firm from competitors) - business –level strategy is the strategy that guides the operations of a single business, outlining how it will compete. ( Defines the long-range plan to compete in the marketplace+ Helps to differentiate the firm from competitors)  It answers the question of “how do we compete” Involve: (A)- How the firm can maintain a competitive advantage ? (A)- How the firm can maintain a competitive advantage ? (B)- How each key functional department (production, human resources, marketing, and finance) can contribute to the overall effectiveness? (B)- How each key functional department (production, human resources, marketing, and finance) can contribute to the overall effectiveness? (C)- How resources should be allocated among these functions? (C)- How resources should be allocated among these functions?

10. 3- Functional -level strategy a set of decisions develop to support the particular business strategy. functional strategy is a set of decisions that marketing, finance, operations, and other departments develop to support the particular business strategy. Functional strategy consists of guidelines for managing a firm’s functional areas, such as marketing, human resources, engineering, R&D. Each functional strategy should be design to contribute to the business –level strategy.

11. Strategy process Marketing Decisions Operations Decisions Fin./Acct. Decisions Corporate Strategy Business Strategy Functional Area Strategies

13. 3- What is operations strategy?

14. 2 - What is operations strategy? 1- 1- The plan that specifies the design and use of resources to support the business strategy.. The operations strategy must be aligned with the company’s business strategy and enable the company to achieve its long- term plan 2- by which operations and helps to build a customer-driven firm. 2- The means by which operations implements the firm’s corporate strategy and helps to build a customer-driven firm. It links long-term and short-term operations decisions to corporate strategy. 3 - A long-range plan for the production of a company’s products/services, and provides a road map for the production function in helping to achieve the business strategy.

15. 4-Competitive priorities

16. What are competitive priorities ? 1- Competitive priorities are approaches through which operations function provides a firm with a specific competitive advantage. 2- Competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices The key to developing an effective operations strategy lies in understanding how to create or add value for customers. The key to developing an effective operations strategy lies in understanding how to create or add value for customers. value is added through the competitive priority or prioritiesthat are selected to support a given strategy Specifically, value is added through the competitive priority or priorities that are selected to support a given strategy. cost, quality, delivery, and flexibility Skinner and others initially identified four basic competitive priorities. These were cost, quality, delivery, and flexibility. service In the 1990s companies began to differentiate themselves with a fifth competitive priority- service.

17. priorities Competitive priorities

18. Compete on cost ? ( 1 of 3) Within every industry, there is usually a segment of the market that buys strictly on the basis of price. Within every industry, there is usually a segment of the market that buys strictly on the basis of price. But even doing this doesn't success. always guarantee …. why? To profitably compete in this niche, a firm must necessarily, therefore, be the low cost producer. But even doing this doesn't success. always guarantee …. why? very large, This segment of the market is frequently very large, and many companies are lured by the potential for the significant profits that are associated with large unit volumes of product. competition in this segment is exceedingly fierce-and so is the failure rate. As a consequence, the competition in this segment is exceedingly fierce-and so is the failure rate. there can only be one low-cost producer, and that firm usually establishes the selling price in the market After all, there can only be one low-cost producer, and that firm usually establishes the selling price in the market

19. Compete on cost ?(2 of 3 ) product at a low price relative to the prices of competitors Competing based on cost means offering a product at a low price relative to the prices of competitors. The need for this type of competition emerges from the business strategy. The role of the operations strategy is to develop a plan for the use of resources to support this type of competition. The role of the operations strategy is to develop a plan for the use of resources to support this type of competition. low cost does not imply low quality. Note that a low-cost strategy can result in a higher profit margin, even at a competitive price. Also, low cost does not imply low quality. some specific characteristics Let’s look at some specific characteristics of the operations function we might find in a company competing on cost. To develop this competitive priority, the operations function must focus primarily on cutting costs in the system:

20. Compete on cost ?(3 of 3) Such as costs of labor, materials, and facilities. Such as costs of labor, materials, and facilities. Companies that compete based on cost study their operations system carefully to eliminate all waste. Companies that compete based on cost study their operations system carefully to eliminate all waste. They might offer extra training to employees to maximize their productivity They might offer extra training to employees to maximize their productivity minimize scrap minimize scrap. Also, they might invest in automation in order to increase productivity Also, they might invest in automation in order to increase productivity. offer a narrow range of products and product features, Generally, companies that compete based on cost offer a narrow range of products and product features, allow for little customization, allow for little customization, and have an operations process that is designed to be as efficient as possible. and have an operations process that is designed to be as efficient as possible. In the U.S., low cost tended to be the primary objective of manufacturing firms from the 1950s to the mid 1970s. Cost measures include Cost measures include :- dollars per unit, inventory turns, and labor hours per unit. dollars per unit, inventory turns, and labor hours per unit.

21. Compete on quality ?(1 of 3) Many companies claim that quality is their top priority, and many customers say that they look for quality in the products they buy. Many companies claim that quality is their top priority, and many customers say that they look for quality in the products they buy. Yet quality has a subjective meaning; it depends on who is defining it. Yet quality has a subjective meaning; it depends on who is defining it. For example, to one person quality could mean that the product lasts a long time, such as with a Volvo, a car known for its longevity. For example, to one person quality could mean that the product lasts a long time, such as with a Volvo, a car known for its longevity. To another person quality might mean high performance, such as a BMW. To another person quality might mean high performance, such as a BMW. When companies focus on quality as a competitive priority, they are focusing on the dimensions of quality that are considered important by their customers. When companies focus on quality as a competitive priority, they are focusing on the dimensions of quality that are considered important by their customers.

22. Compete on quality ?(2 of 3) Quality as a competitive priority has two dimensions. high-performance design + goods and services consistency Quality as a competitive priority has two dimensions. high-performance design + goods and services consistency (1)- high-performance design :- (1)- high-performance design :- This means that the operations function will be designed to focus on aspects of quality such as superior features, close tolerances, high durability, and excellent customer service. This means that the operations function will be designed to focus on aspects of quality such as superior features, close tolerances, high durability, and excellent customer service. (2) goods and services consistency:- (2) goods and services consistency:- The second dimension is goods and services consistency, which measures how often the goods or services meet the exact design specifications. – to get the same product every time at any location. The second dimension is goods and services consistency, which measures how often the goods or services meet the exact design specifications. – to get the same product every time at any location. Companies that compete on quality must deliver not only high- performance design but goods and services consistency as well. Companies that compete on quality must deliver not only high- performance design but goods and services consistency as well.

23. Compete on quality ?(3 of 3) A company that competes on this dimension needs to implement quality in every area of the organization. A company that competes on this dimension needs to implement quality in every area of the organization. One of the first aspects that needs to be addressed is product design quality, which involves making sure the product meets the requirements of the customer. One of the first aspects that needs to be addressed is product design quality, which involves making sure the product meets the requirements of the customer. A second aspect is process quality, which deals with designing a process to produce error-free products. A second aspect is process quality, which deals with designing a process to produce error-free products. This includes focusing on equipment, workers, materials, and every other aspect of the operation to make sure it works the way it is supposed to. Companies that compete based on quality have to address both of these issues: the product must be designed to meet customer needs, and the process must produce the product exactly as it is designed. This includes focusing on equipment, workers, materials, and every other aspect of the operation to make sure it works the way it is supposed to. Companies that compete based on quality have to address both of these issues: the product must be designed to meet customer needs, and the process must produce the product exactly as it is designed. Quality measures include : Quality measures include : parts per million defective, percent returns, results from satisfaction surveys, warranty dollars, and so on. parts per million defective, percent returns, results from satisfaction surveys, warranty dollars, and so on.

24. Compete on flexibility ?(1 of 3) Flexibility has three dimensions:-volume, new product, and product mix/customization. Flexibility has three dimensions:-volume, new product, and product mix/customization. (1)-Volume flexibility: - Volume flexibility is related to how fast a company can change over its production facilities to produce a new line of products. (requires accelerating or decelerating the rate of production quickly to handle large fluctuations in demand). - Volume flexibility is related to how fast a company can change over its production facilities to produce a new line of products. (requires accelerating or decelerating the rate of production quickly to handle large fluctuations in demand). This dimension is growing in importance as product life cycles become shorter and shorter. This dimension is growing in importance as product life cycles become shorter and shorter. Volume flexibility also related to the ability to adjust for seasonal variations and fluctuations, and is particularly important for fashion apparel firms, for example. Volume flexibility also related to the ability to adjust for seasonal variations and fluctuations, and is particularly important for fashion apparel firms, for example.

25. Compete on flexibility ?(2 of 3) (2)-New product flexibility: - The speed, and frequency, with which new products are brought from concept to market. Automotive firms in recent years have made great strides in new product flexibility - The speed, and frequency, with which new products are brought from concept to market. Automotive firms in recent years have made great strides in new product flexibility

26. Compete on flexibility ?(3 of 3) (3)-Product mix/customization flexibility:- Product mix/customization flexibility is the ability of a company to offer a wide range of products. Product mix/customization flexibility is the ability of a company to offer a wide range of products. This may simply mean that the catalog contains many items, or it may mean that the firm has the ability to develop customized products. This may simply mean that the catalog contains many items, or it may mean that the firm has the ability to develop customized products. Many machine tool companies produce a single product for a given customer, and then never produce that exact product again. Many machine tool companies produce a single product for a given customer, and then never produce that exact product again. One element of flexibility is the firm's ability to offer its customers a wide variety of products. One element of flexibility is the firm's ability to offer its customers a wide variety of products.. The greatest flexibility along this dimension is achieved when every product is customized to meet the specific requirements of every individual customer.

27. Compete on delivery? two dimensions Delivery can be defined on two dimensions : speed & reliability. Speed:- Speed:- Quickly filling a customer’s order is often an important factor in the purchasing decision. Quickly filling a customer’s order is often an important factor in the purchasing decision. A firm that can provide consistent and fast delivery can charge a premium price for its products A firm that can provide consistent and fast delivery can charge a premium price for its products For instance, some firms compete on delivering within 24 hours of the customer request For instance, some firms compete on delivering within 24 hours of the customer request. Reliability:- Reliability:- In addition to fast delivery, the reliability of the delivery is also important. In other words, products should be delivered to customers when promised (provided reliably within the quoted delivery time.) Measures for delivery include Measures for delivery include percent on time, cycle time from request to receipt, percent stockouts, and so on.

28. Compete on service? Service might involve after –sales activities that perceived by customer as value-added, such as delivery, setup, warranty work, technical support, or extra attention while work is in progress, such as courtesy, keeping the customer informed, and attention to little details. Service might involve after –sales activities that perceived by customer as value-added, such as delivery, setup, warranty work, technical support, or extra attention while work is in progress, such as courtesy, keeping the customer informed, and attention to little details.

29. 5- The Trade-Offs

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