Professional Documents
Culture Documents
30 Collapse of the
Berlin Wall
25
Percent
20
15
10
0 | | | | | | | | | | |
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 (est*)
Year
Figure 2.1
2011 Pearson Education 2 - 14
Some Multinational
Corporations
% Sales % Assets
Outside Outside
Home Home Home % Foreign
Company Country Country Country Workforce
Citicorp USA 34 46 NA
Colgate- USA 72 63 NA
Palmolive
Dow USA 60 50 NA
Chemical
Gillette USA 62 53 NA
Honda Japan 63 36 NA
IBM USA 57 47 51
ICI Britain 78 50 NA
Nestle Switzerland 98 95 97
Philips Netherlands 94 85 82
Electronics
Siemens Germany 51 NA 38
Unilever Britain & 95 70 64
Netherlands
Reasons to Globalize
Tangible 1. Reduce costs (labor, taxes, tariffs, etc.)
Reasons 2. Improve supply chain
3. Provide better goods and services
4. Understand markets
Intangible 5. Learn to improve operations
Reasons 6. Attract and retain global talent
Figure 2.2
2011 Pearson Education 2 - 32
Hard Rock Cafe
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
2011 Pearson Education 2 - 33
Arnold Palmer Hospital
Figure 2.2
2011 Pearson Education 2 - 34
Factors Affecting Mission
Philosophy
and Values
Profitability
Environment
and Growth
Mission
Benefit to
Society
Figure 2.3
2011 Pearson Education 2 - 36
Sample Missions
Sample OM Department Missions
Product design To design and produce products and
services with outstanding quality and
inherent customer value.
Quality management To 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
Figure 2.3
2011 Pearson Education 2 - 37
Sample Missions
Sample OM Department Missions
Location To locate, design, and build efficient and
economical facilities that will yield high
value to the company, its employees, and the
community.
Layout design To achieve, through skill, imagination, and
resourcefulness in layout and work methods,
production effectiveness and efficiency
while supporting a high quality of work life.
Figure 2.3
2011 Pearson Education 2 - 38
Sample Missions
Sample OM Department Missions
Supply-chain To collaborate with suppliers to develop
management innovative products from stable, effective,
and efficient sources of supply.
Inventory To achieve low investment in inventory
consistent with high customer service levels
and high facility utilization.
Scheduling To achieve high levels of throughput and
timely customer delivery through effective
scheduling.
Maintenance To achieve high utilization of facilities and
equipment by effective preventive
maintenance and prompt repair of facilities
and equipment.
Figure 2.3
2011 Pearson Education 2 - 39
Strategic Process
Organizations
Mission
Functional
Area Missions
Finance/
Marketing Operations
Accounting
Differentiation better, or at
least different
Cost leadership cheaper
Response rapid response
Product DIFFERENTIATION
Innovative design Safeskins innovative gloves
Broad product line Fidelity Securitys mutual funds
Quality After-sales service Caterpillars heavy equipment
service
Process Experience Hard Rock Cafs dining
experience
Table 2.1
2011 Pearson Education 2 - 49
Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Supply Relationship Important, but
chain critical to final may not be
product critical
Inventory Raw materials, Cannot be stored
work-in-process,
and finished
goods may be
held
Scheduling Level schedules Meet immediate
possible customer demand
Table 2.1
2011 Pearson Education 2 - 50
Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Maintenance Often preventive Often repair and
and takes place takes place at
at production site customers site
Table 2.1
2011 Pearson Education 2 - 51
Managing Global Service
Operations
Requires a different perspective on:
Capacity planning
Location planning
Facilities design and layout
Scheduling
Table 2.2
2011 Pearson Education 2 - 54
Operations Strategies of
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Product Differentiation Low Cost
Advantage
Process Product and modular Process focused;
process; long general processes; job
production runs in shop approach, short-
specialized facilities; run production; focus
build capacity ahead of on high utilization
demand
Location Still located in the city Recently moved to low-
where it was founded tax, low-labor-cost
environment
Table 2.2
2011 Pearson Education 2 - 55
Operations Strategies of
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Product Differentiation Low Cost
Advantage
Scheduling Centralized production Many short-run
planning products complicate
scheduling
Table 2.2
2011 Pearson Education 2 - 56
Operations Strategies of
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Product Differentiation Low Cost
Advantage
Human Hire the best; Very experienced top
Resources nationwide searches executives; other
personnel paid below
industry average
Table 2.2
2011 Pearson Education 2 - 57
Operations Strategies of
Two Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Product Differentiation Low Cost
Advantage
Inventory High finished goods Process focus drives up
inventory to ensure all work-in-process
demands are met inventory; finished
goods inventory tends
to be low
Maintenance Highly trained staff; Highly trained staff to
extensive parts meet changing demand
inventory
Table 2.2
2011 Pearson Education 2 - 58
Issues In Operations Strategy
Resources view
Value Chain analysis
Porters Five Forces model
Operating in a system with many
external factors
Constant change
Figure 2.5
2011 Pearson Education 2 - 61
SWOT Analysis
Mission
Internal External
Strengths Opportunities
Analysis
Internal External
Weaknesses Threats
Strategy
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.
Figure 2.6
2011 Pearson Education 2 - 63
Strategy Development and
Implementation
Identify key success factors
Build and staff the organization
Integrate OM with other activities
Service Leverage
Distribution Cost of capital
Promotion Working capital
Channels of distribution Receivables
Product positioning Payables
(image, functions) Financial control
Lines of credit
Competitive Advantage:
Low Cost
High Frequent,
Aircraft Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
Figure 2.8
2011 Pearson Education 2 - 66
Activity Mapping at
Southwest Airlines
Courteous, but
Limited Passenger
Service
Strategy
Cost Reduction Considerations
Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
2011 Pearson Education 2 - 73
Four International
Operations Strategies
High Figure 2.9
Cost Reduction Considerations
International Strategy
Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
2011 Pearson Education 2 - 74
Four International
Operations
GlobalStrategies
High Figure 2.9
Strategy
Standardized
Cost Reduction Considerations
product
Economies of scale
Cross-cultural
learning
International Strategy
Examples
Import/export or
license existing
Texas Instruments
product
U.S.Caterpillar
Examples
Steel
Harley Davidson
Otis Elevator
Low
Low High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
2011 Pearson Education 2 - 75
Four International
Operations Strategies
High Figure 2.9
Global Strategy
Cost Reduction Considerations
Standardized product
Economies of scale
Cross-cultural learning
Examples:
Texas Instruments
Caterpillar
Otis Elevator
International Strategy
Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
2011 Pearson Education 2 - 76
Four International
Operations Strategies
Multidomestic
Strategy
High Figure 2.9
Use existing
Global Strategy
Cost Reduction Considerations
Standardized product
domestic
Economies of scale
Cross-cultural learning
model
Examples:globally
Franchise, joint
Texas Instruments
Caterpillar
Otis Elevator
ventures,
subsidiaries
International Strategy
Import/export or
Examples
license existing
product
Heinz
Examples
McDonalds
U.S. Steel
Harley Davidson
Standardized product
Economies of scale
Cross-cultural learning
Examples:
Texas Instruments
Caterpillar
Otis Elevator
Multidomestic Strategy
International Strategy Use existing
Import/export or domestic model globally
license existing Franchise, joint ventures,
product subsidiaries
Examples Examples
U.S. Steel Heinz The Body Shop
Harley Davidson McDonalds Hard Rock Cafe
Low
Low High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
2011 Pearson Education 2 - 78
Four International
Operations Strategies
Transnational
High Figure 2.9
Strategy
Global Strategy
Move material,
Cost Reduction Considerations
Standardized product
Economies of scale
Cross-cultural learning
Examples:
people, ideas
Texas across
Instruments national
Caterpillar
boundaries
Otis Elevator
Economies of scale
Cross-cultural
Multidomestic Strategy
International Strategy Use existing
Import/export or domestic model globally
learning
license
product
existing Franchise, joint ventures,
subsidiaries
Examples
Examples
Examples
U.S. Steel Heinz The Body Shop
McDonalds Hard Rock Cafe
Harley Davidson
Coca-Cola
Low
Nestl
Low High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
2011 Pearson Education 2 - 79
Four International
Operations Strategies
High Figure 2.9
Global Strategy Transnational Strategy
Cost Reduction Considerations
Multidomestic Strategy
International Strategy Use existing
Import/export or domestic model globally
license existing Franchise, joint ventures,
product subsidiaries
Examples Examples
U.S. Steel Heinz The Body Shop
Harley Davidson McDonalds Hard Rock Cafe
Low
Low High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
2011 Pearson Education 2 - 80
Ranking Corruption
Rank Country 2009 CPI Score (out of 10)
1 New Zealand 9.4 Least
2 Demark 9.3 Corrupt
3 Singapore, Sweden 9.2
5 Switzerland 9.0
8 Australia, Canada, Iceland 8.7
12 Hong Kong 8.2
14 Germany 8.0
17 Japan, UK 7.7
19 USA 7.5
37 Taiwan 5.6
39 South Korea 5.5
56 Malaysia 4.5
79 China 3.6 Most
89 Mexico 3.3 Corrupt
146 Russia 2.2
2011 Pearson Education 2 - 81
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