Prepared & Presented by:

Lal Prasad Aryal, (M. Phil)

e. mail : [email protected]
Phone : 9851124309
 Concept of Operations Strategy

 Global View of Operations

 Developing Missions and Strategies

 Achieving Competitive Advantages through

Operations

 Strategy Development and Implementation

 Strategy is a tool that used in competitive business environment.
 Strategy always developed from the strength side of the
organization.
 Strategy increases the competitiveness (ability to fight with the
competitors in a competitive environment.
 Ultimate objective of developing strategy is to gain competitive
advantages.
 Competitiveness can be increased with the effective use of its tools
such as cost/price, quality, quick response, timing, differentiation
etc.
 Operations strategy refers to the long-term plans and policies that
are set with the best utilization of the resources of a firm to support
its long-term competitive strategy.
 The operations function helps strategy evolve by creating new and
better ways of delivering a firm’s competitive priorities to the
customer.
 Once a firm’s competitive priorities have been established, its
operating system must be configured and managed to provide for
those priorities.
 Today’s successful operations manager has a global view of operations
strategy.
 There are six reasons identified domestic business operations decide to
change to some form of international operation. They are:
1. Reduce Costs
 Many international operations seek to take advantage of the tangible
opportunities to reduce their costs.
 Foreign locations can help lower both direct and indirect costs.
 Flexible government regulations on a wide variety of operations practices
(e.g., environmental control, health and safety, etc.) reduce costs.
 Opportunities to cut the cost of taxes and tariffs also encourage foreign
operations.
 Shifting low-skilled jobs to another country has several advantages:
 First and most obviously, the firm may reduce costs.
 Second, moving the lower-skilled jobs to a lower-cost location frees
higher cost workers for more valuable tasks.
 Third, reducing wage costs allows the savings to the invested in
improved products and facilities at the home location.
 Trade agreements have also helped reduce tariffs and thereby reduce the
cost of operating facilities in foreign countries.
2. Improve the Supply Chain
 The supply chain can often be improved by locating facilities in countries
where unique resources are available.

 These resources may be human resource expertise, low-cost labour or raw

materials.

 Selecting best suppliers for materials and components an operations manager

can produce goods and services timely to inter into the market.

3. Improve Operations
 Operations learn from better understanding of differences in the way
business is handled in different countries.

 It is popularly known that Japanese manufacturing (JIT) has improved

inventory management.

 Another reason to have international operations is to reduce response time to

meet customers’ changing products and service requirements.
4. Understand Markets
 Because international operations require interaction with foreign customers, suppliers,
and other competitive businesses, international firm inevitably learn about opportunities
for new products and services.
 Knowledge of these markets not only helps firms understand where the market is going
but also helps firms diversity their customer base, add production flexibility and smooth
the business cycle.
 Another reason to go into foreign markets is the opportunity to expand the lifecycle of
the existing products.

5. Improve Products
 Learning does not take place in isolation. Firms serve themselves and their customers
well when they remain open to the free flow of ideas.
 For example, Toyota and BMW will manage joint research and share development costs
on battery research for the next generation of green cars.

6. Attract and Retain Global Talent

 Global organizations can attract and retain better employees by offering more
employment opportunities.
 They need people in all functional areas and areas of expertise worldwide.
 Global firms can recruit and retain good employees because they provide both greater
growth opportunities and insulation against unemployment during the times of
economic downturn.
 An effective operations management effort must have a mission so it
knows where it is going and a strategy so it knows how to get there.
Mission
 Mission is the purpose or rationale for an organization’s existence.
 Organization’s mission will contribute to society.
 Mission statements provide boundaries and focus for organizations and
the concept around which the firm can rally.
 Developing a good strategy is difficult, but it is much easier if the
mission has been well defined.
 Once the organization’s mission has been decided, each functional area
within the firm determines its supportive mission.
 By functional area, we mean the major disciplines required by the firm,
such as marketing, finance/accounting, and production/operations.
Missions for each function are developed to support the overall mission.
An example of mission of a Company
“To manufacture and serve an innovative, growing, and profitable
worldwide microwave communications business that exceeds our
customers’ expectations”
An example of mission of a Operations Management
“To produce products consistent with the company’s mission as the
worldwide low cost manufacturer:
Strategy
 Strategy is how an organization expects to achieve its missions and
goals.
 In other words, strategy is an organization’s action plan to achieve the
mission.
 Each functional area has a strategy for achieving its mission and for
helping the organization reach the overall mission.
 These strategies exploit opportunities and strengths, neutralize threats,
and avoid weaknesses.
 Firms achieve missions in three conceptual ways: differentiation, cost
leadership and response.
 This means operations managers are called on to deliver goods and
services that are i. better or at least different, ii. Cheaper, and iii. More
responsive.
 Operations managers translate these strategic concept into tangible
tasks to be accomplished.
 Any one or combination of these three strategies concepts can generate
a system that has a unique advantage over competitors.
 Each of the three strategies provides (Costs, differentiation and response) an
opportunity for operations managers to achieve competitive advantage.
 Competitive advantage implies the creation of a system that has a unique
advantage over competitors.
 The idea is to create customer value in an efficient and sustainable way.
 Pure forms of these strategies may exist, but operations managers will more
likely be called on to implement some combination of them.

 Let us briefly look at how managers achieve competitive advantage

via differentiation, low cost, and response.
1. Differentiation
 Differentiation is more concerned about providing unique
and innovative products, it should be regarded as going
beyond products and service attributes to encompass
everything that positively influences the value that customers
derive from it.

 This idea of differentiation creates customer experience as it

serves as a bridge to engage customers.

 In other words, uniqueness can go beyond both the physical

characteristics and service attributes to encompass
everything that impacts customer’s perception of value.

Examples:

► Walt Disney Magic Kingdom – experience differentiation

► Hard Rock Cafe – dining experience
2. Low Cost
 Low-cost leadership is about achieving maximum value
from your customers’ viewpoint.
 This strategy requires an in-depth analysis of the 10
operations management decisions in an effort to drive
down operations cost while at the same time meeting
customers’ expectations.
 The ten operations managements decisions consist of:
 Product
 Quality
 Process
 Location
 Layout
 Human Resources
 Supply chain
 Inventory
 Scheduling
 Maintenance
  Low costs may provide the maximum
value as perceived by customer. Does not
imply low quality.

Examples:
► Southwest Airlines – secondary airports, no
extra service charge, efficient
utilization of equipment
► Walmart – small overhead, shrinkage, and
distribution costs
 3. Response
 Response consists of being reliable, and capable of providing quick
and flexible response.

 Flexible response could be defined as the ability to quickly adapt to

and keep up with the changes in the market place.

 The idea of response also means that businesses need to be able to

develop and deliver innovative products in a timely manner while
creating customer value and experience.

Examples:

▶ Flexibility is matching market changes in design innovation and

volumes - A way of life at Hewlett-Packard

▶ Reliability is meeting schedules -German Machine Industry

▶ Timeliness is quickness in design, production, and delivery -

Johnson Electric, Pizza Hut, Motorola
 Analyze the Environment
Identify the strengths, weaknesses, opportunities, and threats.
Understand the environment, customers, industry, and competitors.

Determine the Corporate Mission

State the reason for the firm’s existence and identify the
value it wishes to create.

Form a Strategy
Build a competitive advantage, such as low price, design, or
volume flexibility, quality, quick delivery, dependability,
after-sale service, broad product lines.
An operations manager’s job is to implement
an OM strategy, to provide competitive
advantage, and increase productivity
Thank
You