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Operations

Management
Chapter 2 –
Operations Strategy in a
Global Environment
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
© 2008 Prentice Hall, Inc. 2–1
Operation Strategic and
Process Management
Operations Strategy in a Global Environment

02
Modul ke:

Dr. Tukhas Shilul Imaroh,MM


ts_imaroh@yahoo.com
081289047582
Fakultas 081311224534
Fakultas
Ekonomi
IMA
Program Studi
Pasca Sarjana

© 2008 Prentice Hall, Inc. 2–2


Operation Strategic and
Process Management
Operations Strategy in a Global

02
Modul ke:
Environment

Dr. Tukhas Shilul Imaroh,MM


ts_imaroh@yahoo.com
081289047582
Fakultas 081311224534
Fakultas
Ekonomi
IMA
Program Studi
Pasca Sarjana

© 2008 Prentice Hall, Inc. 2–3


Operation Strategic and
Process Management
Modul ke:
Operations Strategy in a Global Environment
Dr. Tukhas Shilul Imaroh,MM
ts_imaroh@yahoo.com
081289047582
Fakultas 081311224534
Fakultas
Ekonomi
IMA
Program Studi
Pasca Sarjana

© 2008 Prentice Hall, Inc. 2–4


Outline
Global Company Profile: Boeing
A Global View of Operations
Cultural and Ethical Issues
Developing Missions And Strategies
Mission
Strategy

© 2008 Prentice Hall, Inc. 2–5


Outline – Continued

Achieving Competitive Advantage


Through Operations
Competing On Differentiation
Competing On Cost
Competing On Response
Ten Strategic OM Decisions

© 2008 Prentice Hall, Inc. 2–6


Outline – Continued

Issues In Operations Strategy


Research
Preconditions
Dynamics

© 2008 Prentice Hall, Inc. 2–7


Outline – Continued

Strategy Development and


Implementation
Critical Success Factors and Core
Competencies
Build and Staff the Organization
Integrate OM with Other Activities

© 2008 Prentice Hall, Inc. 2–8


Outline – Continued

Global Operations Strategy


Options
International Strategy
Multidomestic Strategy
Global Strategy
Transnational Strategy

© 2008 Prentice Hall, Inc. 2–9


Learning Objectives
When you complete this chapter you
should be able to:

1. Define mission and strategy


2. Identify and explain three strategic
approaches to competitive advantage
3. Identify and define the 10 decisions of
operations management

© 2008 Prentice Hall, Inc. 2 – 10


Learning Objectives
When you complete this chapter you
should be able to:

4. Identify five OM strategy insights


provided by PIMS research
5. Identify and explain four global
operations strategy options

© 2008 Prentice Hall, Inc. 2 – 11


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

© 2008 Prentice Hall, Inc. 2 – 12


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

© 2008 Prentice Hall, Inc. 2 – 13


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
© 2008 Prentice Hall, Inc. 2 – 14
Some Multinational
Corporations
% Sales % Assets
Outside Outside
Home Home Home % Foreign
Company Country Country Country Workforce
ICI Britain 78 50 NA
Nestle Switzerland 98 95 97
Philips Netherlands 94 85 82
Electronics
SiemensGermany 51 NA 38
Unilever Britain & 95 70 64
Netherlands

© 2008 Prentice Hall, Inc. 2 – 15


Some Boeing Suppliers (787)
Firm Country Component
Latecoere France Passenger doors
Labinel France Wiring
Dassault France Design and
PLM software
Messier-Bugatti France Electric brakes
Thales France Electrical power
conversion system
and integrated
standby flight display
Messier-Dowty France Landing gear structure
Diehl Germany Interior lighting
© 2008 Prentice Hall, Inc. 2 – 16
Some Boeing Suppliers (787)
Firm Country Component
Cobham UK Fuel pumps and valves
Rolls-Royce UK Engines
Smiths Aerospace UK Central computer
system
BAE SYSTEMS UK Electronics
Alenia Aeronautics Italy Upper center
fuselage &
horizontal stabilizer
Toray Industries Japan Carbon fiber for
wing and tail units
© 2008 Prentice Hall, Inc. 2 – 17
Some Boeing Suppliers (787)
Firm Country Component
Fuji Heavy Japan Center wing box
Industries
Kawasaki Heavy Japan Forward fuselage,
Industries fixed section of wing,
landing gear well
Teijin Seiki Japan Hydraulic actuators
Mitsubishi Heavy Japan Wing box
Industries
Chengdu Aircraft China Rudder
Group
Hafei Aviation China Parts
© 2008 Prentice Hall, Inc. 2 – 18
Some Boeing Suppliers (787)
Firm Country Component
Korean Aviation South Wingtips
Korea
Saab Sweden Cargo access doors

© 2008 Prentice Hall, Inc. 2 – 19


Reasons to Globalize

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

© 2008 Prentice Hall, Inc. 2 – 20


Reduce Costs
Foreign locations with lower wage
rates can lower direct and indirect
costs
Maquiladoras
World Trade Organization (WTO)
North American Free Trade Agreement
(NAFTA)
APEC, SEATO, MERCOSUR
European Union (EU)
© 2008 Prentice Hall, Inc. 2 – 21
Improve the Supply Chain
Locating facilities closer to unique
resources
Auto design to California
Athletic shoe production to China
Perfume manufacturing in France

© 2008 Prentice Hall, Inc. 2 – 22


Provide Better Goods
and Services
Objective and subjective
characteristics of goods and
services
On-time deliveries
Cultural variables
Improved customer service

© 2008 Prentice Hall, Inc. 2 – 23


Understand Markets
Interacting with foreign customers
and suppliers can lead to new
opportunities
Cell phone
design from
Europe
Cell phone
fads from
Japan
Extend the product life cycle

© 2008 Prentice Hall, Inc. 2 – 24


Learn to Improve Operations
Remain open to the free flow of
ideas
General Motors partnered with a
Japanese auto manufacturer to learn
Equipment and layout have been
improved using Scandinavian
ergonomic competence

© 2008 Prentice Hall, Inc. 2 – 25


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

© 2008 Prentice Hall, Inc. 2 – 26


Cultural and Ethical Issues
Cultures can be quite different
Attitudes can be quite different
towards
 Punctuality  Thievery
 Lunch breaks  Bribery
 Environment  Child labor
 Intellectual
property
© 2008 Prentice Hall, Inc. 2 – 27
You May Wish To Consider
 National literacy rate Work ethic
 Rate of innovation Tax rates
 Rate of technology Inflation
change Availability of raw
 Number of skilled materials
workers Interest rates
 Political stability Population
 Product liability laws Number of miles of
 Export restrictions highway
 Variations in language Phone system

© 2008 Prentice Hall, Inc. 2 – 28


Match Product & Parent
 Braun Household
Appliances • Volkswagen
 Firestone Tires • Bridgestone
 Godiva Chocolate • Campbell Soup
 Haagen-Dazs Ice • Ford Motor Company
Cream • Gillette
 Jaguar Autos
• Nestlé
 MGM Movies
• Pillsbury
 Lamborghini Autos
• Sony
 Alpo Petfoods

© 2008 Prentice Hall, Inc. 2 – 29


Match Product & Parent
 Braun Household
Appliances • Volkswagen
 Firestone Tires • Bridgestone
 Godiva Chocolate • Campbell Soup
 Haagen-Dazs Ice • Ford Motor Company
Cream • Gillette
 Jaguar Autos
• Nestlé
 MGM Movies
• Pillsbury
 Lamborghini Autos
• Sony
 Alpo Petfoods

© 2008 Prentice Hall, Inc. 2 – 30


Match Product & Country
Braun Household
Appliances
Firestone Tires 1. Great Britain
Godiva Chocolate 2. Germany
Haagen-Daz Ice Cream 3. Japan
Jaguar Autos 4. United States
MGM Movies 5. Switzerland
Lamborghini Autos
Alpo Pet Foods

© 2008 Prentice Hall, Inc. 2 – 31


Match Product & Country
Braun Household
Appliances
Firestone Tires 1. Great Britain
Godiva Chocolate 2. Germany
Haagen-Daz Ice Cream 3. Japan
Jaguar Autos 4. United States
MGM Movies 5. Switzerland
Lamborghini Autos
Alpo Pet Foods

© 2008 Prentice Hall, Inc. 2 – 32


Developing Missions and
Strategies

Mission statements tell an


organization where it is going

The Strategy tells the


organization how to get there

© 2008 Prentice Hall, Inc. 2 – 33


Mission
Mission - where are
you going?
Organization’s purpose
for being
Answers ‘What do we
provide society?’
Provides boundaries
and focus

© 2008 Prentice Hall, Inc. 2 – 34


FedEx
FedEx is committed to our People-Service-Profit
philosophy. We will produce outstanding financial
returns by providing total reliable, competitively superior,
global air-ground transportation of high priority goods
and documents that require rapid, time-certain delivery.
Equally important, positive control of each package will
be maintained using real time electronic tracking and
tracing systems. A complete record of each shipment
and delivery will be presented with our request for
payment. We will be helpful, courteous, and professional
to each other and the public. We will strive to have a
completely satisfied customer at the end of each
transaction.

Figure 2.2
© 2008 Prentice Hall, Inc. 2 – 35
Merck
The mission of Merck is to provide
society with superior products and
services - innovations and solutions that
improve the quality of life and satisfy
customer needs - to provide employees
with meaningful work and advancement
opportunities and investors with a
superior rate of return

Figure 2.2
© 2008 Prentice Hall, Inc. 2 – 36
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
© 2008 Prentice Hall, Inc. 2 – 37
Arnold Palmer Hospital

Arnold Palmer Hospital is a healing


environment providing family-centered
care with compassion, comfort and
respect… when it matters the most.

Figure 2.2
© 2008 Prentice Hall, Inc. 2 – 38
Factors Affecting Mission
Philosophy
and Values

Profitability
Environment and Growth
Mission

Customers Public Image

Benefit to
Society
© 2008 Prentice Hall, Inc. 2 – 39
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
© 2008 Prentice Hall, Inc. 2 – 40
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

Process design To 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.

Figure 2.3
© 2008 Prentice Hall, Inc. 2 – 41
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.

Human resources To provide a good quality of work life, with well-


designed, safe, rewarding jobs, stable
employment, and equitable pay, in exchange for
outstanding individual contribution from
employees at all levels.

Figure 2.3
© 2008 Prentice Hall, Inc. 2 – 42
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
© 2008 Prentice Hall, Inc. 2 – 43
Strategic Process
Organization’s
Mission

Functional Area
Missions

Finance/
Marketing Operations Accounting

© 2008 Prentice Hall, Inc. 2 – 44


Strategy
 Action plan to achieve
mission
 Functional areas have
strategies
 Strategies exploit
opportunities and
strengths, neutralize
threats, and avoid
weaknesses

© 2008 Prentice Hall, Inc. 2 – 45


Strategies for Competitive
Advantage

Differentiation – better, or at least


different
Cost leadership – cheaper
Response – rapid response

© 2008 Prentice Hall, Inc. 2 – 46


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 – dining experience
© 2008 Prentice Hall, Inc. 2 – 47
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
© 2008 Prentice Hall, Inc. 2 – 48
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

© 2008 Prentice Hall, Inc. 2 – 49


OM’s Contribution to Strategy
Operations Specific Competitive
Decisions Examples Strategy Used Advantage
Product FLEXIBILITY:
Sony’s constant innovation
Quality of new products………………………………....Design
HP’s ability to lead
Process the printer market………………………………Volume

Location Southwest Airlines No-frills service……..…..LOW COST

DELIVERY: Differentiation
Layout Pizza Hut’s 5-minute guarantee (Better)
at lunchtime…………………..…..………………….Speed
Federal Express’s “absolutely,
positively on time”………………………..….Dependability Response
Human (Faster)
resource QUALITY: Cost
Motorola’s HDTV converters….……........Conformance leadership
Supply chain Motorola’s pagers………………………..….Performance (Cheaper)

Inventory Caterpillar’s after-sale service


on heavy equipment……………....AFTER-SALE SERVICE
Scheduling Fidelity Security’s broad Figure 2.4
line of mutual funds………….BROAD PRODUCT LINE
Maintenance
© 2008 Prentice Hall, Inc. 2 – 50
10 Strategic OM Decisions
1. Goods and service 6. Human resources
design and job design
2. Quality 7. Supply chain
3. Process and management
capacity design
8. Inventory
4. Location selection
9. Scheduling
5. Layout design
10. Maintenance

© 2008 Prentice Hall, Inc. 2 – 51


Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Goods and Product is usually Product is not
service tangible tangible
design
Quality Many objective Many subjective
standards standards
Process and Customers not Customer may be
capacity involved directly involved
design Capacity must
match demand
Table 2.1
© 2008 Prentice Hall, Inc. 2 – 52
Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Location Near raw materials Near customers
selection and labor

Layout Production Enhances product


design efficiency and production
Human Technical skills, Interact with
resources consistent labor customers, labor
and job standards, output standards vary
design based wages
Table 2.1
© 2008 Prentice Hall, Inc. 2 – 53
Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Supply chain Relationship Important, but may
critical to final not be critical
product
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
© 2008 Prentice Hall, Inc. 2 – 54
Goods and Services and
the 10 OM Decisions
Operations
Decisions Goods Services
Maintenance Often preventive Often “repair” and
and takes place at takes place at
production site customer’s site

Table 2.1
© 2008 Prentice Hall, Inc. 2 – 55
Managing Global Service
Operations
Requires a different perspective on:

 Capacity planning
 Location planning
 Facilities design and layout
 Scheduling

© 2008 Prentice Hall, Inc. 2 – 56


Process Design
High Process-focused Mass Customization
JOB SHOPS Customization at high
(Print shop, emergency Volume
room, machine shop, fine- (Dell Computer’s PC,
Repetitive (modular)
Variety of Products

dining cafeteria)
restaurant) focus
ASSEMBLY LINE
Moderate (Cars, appliances, TVs,
)
fast-food restaurants
Product focused
CONTINUOUS
(steel, beer, paper,
bread, institutional
)
kitchen
Low

Low Moderate High


Volume
© 2008 Prentice Hall, Inc. 2 – 57
Operations Strategies for Two
Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Product Differentiation Low Cost
Advantage
Product Heavy R&D investment; Low R&D investment;
Selection and extensive labs; focus on focus on development of
Design development in a broad generic drugs
range of drug categories

Quality Major priority, exceed Meets regulatory


regulatory requirements requirements on a
country by country basis

Table 2.2
© 2008 Prentice Hall, Inc. 2 – 58
Operations Strategies for Two
Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Product Differentiation Low Cost
Advantage
Process Product and modular Process focused; general
process; long production processes; “job shop”
runs in specialized approach, short-run
facilities; build capacity production; focus on high
ahead of demand utilization

Location Still located in the city Recently moved to low-


where it was founded tax, low-labor-cost
environment

Table 2.2
© 2008 Prentice Hall, Inc.
2 – 59
Operations Strategies for Two
Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Product Differentiation Low Cost
Advantage
Scheduling Centralized production Many short-run products
planning complicate scheduling

Layout Layout supports Layout supports process-


automated product- focused “job shop”
focused production practices

Table 2.2
© 2008 Prentice Hall, Inc. 2 – 60
Operations Strategies for Two
Drug Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Product Differentiation Low Cost
Advantage
Human Hire the best; nationwide Very experienced top
Resources searches executives; other
personnel paid below
industry average

Supply Chain Long-term supplier Tends to purchase


relationships competitively to find
bargains

Table 2.2
© 2008 Prentice Hall, Inc. 2 – 61
Operations Strategies for 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 inventory;
demands are met finished goods inventory
tends to be low

Maintenance Highly trained staff; Highly trained staff to


extensive parts inventory meet changing demand

Table 2.2
© 2008 Prentice Hall, Inc. 2 – 62
Issues In Operations Strategy

 Research about effective


operations management strategies
 Preconditions for developing
effective OM strategies
 The dynamics of OM strategy
development

© 2008 Prentice Hall, Inc. 2 – 63


Characteristics of
High ROI Firms
High product quality
High capacity utilization
High operating efficiency
Low investment intensity
Low direct cost per unit

From the PIMS program of the Strategic Planning Institute

© 2008 Prentice Hall, Inc. 2 – 64


Strategic Options to Gain a
Competitive Advantage
28% - Operations Management
18% - Marketing/distribution
17% - Momentum/name recognition
16% - Quality/service
14% - Good management
4% - Financial resources
3% - Other
© 2008 Prentice Hall, Inc. 2 – 65
Elements of Operations
Management Strategy
 Low-cost product
 Product-line breadth
 Technical superiority
 Product characteristics/differentiation
 Continuing product innovation
 Low-price/high-value offerings
 Efficient, flexible operations adaptable to
consumers
 Engineering research development
 Location
 Scheduling
© 2008 Prentice Hall, Inc. 2 – 66
Preconditions
One must understand:
 Strengths and weaknesses of competitors and
possible new entrants into the market
 Current and prospective environmental,
technological, legal, and economic issues
 The product life cycle
 Resources available within the firm and within the
OM function
 Integration of OM strategy with company’s strategy
and with other functional areas

© 2008 Prentice Hall, Inc. 2 – 67


Dynamics of
Strategic Change
Changes within the organization
 Personnel
 Finance
 Technology
 Product life
Changes in the environment

© 2008 Prentice Hall, Inc. 2 – 68


Product Life Cycle
Introduction Growth Maturity Decline
Best period to Practical to change Poor time to change Cost control
increase market price or quality image, price, or critical
Company Strategy/Issues

share image quality

R&D engineering is Strengthen niche Competitive costs


critical become critical
Defend market
position
CD-ROMs
Internet search engines
Analog TVs
Drive-through
LCD & plasma TVs restaurants

Sales iPods

3 1/2”
Xbox 360 Floppy
disks

Figure 2.5
© 2008 Prentice Hall, Inc. 2 – 69
Product Life Cycle
Introduction Growth Maturity Decline
Product design Forecasting critical Standardization Little product
and development Product and Less rapid product differentiation
critical process reliability changes – more Cost
Frequent product minor changes minimization
OM Strategy/Issues

Competitive
and process product Optimum capacity Overcapacity
design changes improvements and in the industry
Increasing
Short production options stability of Prune line to
runs Increase capacity process eliminate
High production Shift toward Long production items not
costs product focus runs returning good
Limited models margin
Enhance Product
Attention to distribution improvement and Reduce
quality cost cutting capacity

Figure 2.5
© 2008 Prentice Hall, Inc. 2 – 70
SWOT Analysis

Mission

Internal External
Strengths Opportunities
Analysis

Internal External
Weaknesses Threats
Strategy

© 2008 Prentice Hall, Inc. 2 – 71


Strategy Development Process
Environmental Analysis
Identify the strengths, weaknesses, opportunities, and threats. Understand
the environment, customers, industry, and competitors.

Determine 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.

© 2008 Prentice Hall, Inc. Figure 2.6 2 – 72


Strategy Development and
Implementation
Identify critical success factors
Build and staff the organization
Integrate OM with other activities

The operations manager’s job is to implement an


OM strategy, provide competitive advantage, and
increase productivity

© 2008 Prentice Hall, Inc. 2 – 73


Critical Success Factors
Marketing Finance/Accounting Production/Operations
Service Leverage
Distribution Cost of capital
Promotion Working capital
Channels of Receivables
distribution Payables
Product positioning Financial control
(image, functions) Lines of credit

Decisions Sample Options Chapter


Product Customized, or standardized 5
Quality Define customer expectations and how to achieve them 6, S6
Process Facility size, technology, capacity 7, S7
Location Near supplier or near customer 8
Layout Work cells or assembly line 9
Human resource Specialized or enriched jobs 10, S10
Supply chain Single or multiple suppliers 11, S11
Inventory When to reorder, how much to keep on hand 12, 14, 16
Schedule Stable or fluctuating production rate 13, 15
Maintenance Repair as required or preventive maintenance 17

Figure 2.7
© 2008 Prentice Hall, Inc. 2 – 74
Activity Mapping
Courteous, but
Limited Passenger
Service

Lean, Short Haul, Point-to-


Productive Point Routes, Often to
Employees Secondary Airports
Competitive Advantage:
Low Cost
High Frequent,
Aircraft Reliable
Utilization Standardized Fleet Schedules
of Boeing 737
Aircraft
Figure 2.8
© 2008 Prentice Hall, Inc. 2 – 75
Activity Mapping
Courteous, but
Limited Passenger
Service

Lean, Short Haul, Point-to-


Productive Point Routes, Often to
Employees Secondary Airports
Automated ticketing machines
Competitive Advantage:
No seat assignments
Low Cost
No baggage transfers
High Frequent,
Aircraft No meals (peanuts) Reliable
Utilization Standardized Fleet Schedules
of Boeing 737
Aircraft
Figure 2.8
© 2008 Prentice Hall, Inc. 2 – 76
Activity Mapping
Courteous, but
Limited Passenger
Service
No meals (peanuts)
Lean,Lower gate costs at Short Haul, Point-to-
Productive
secondary airports Point Routes, Often to
Employees Secondary Airports
High number of flights
Competitive
reduces employee Advantage:
idle time
Low Cost
between flights
High Frequent,
Aircraft Reliable
Utilization Standardized Fleet Schedules
of Boeing 737
Aircraft
Figure 2.8
© 2008 Prentice Hall, Inc. 2 – 77
Activity Mapping
High number of flights
Courteous, but
Limitedidle
reduces employee Passenger
time
Service
between flights
Lean,Saturate a city with flights, Short Haul, Point-to-
Productive Point Routes, Often to
lowering
Employees administrative costs Secondary Airports
(advertising, HR, etc.) per
passenger for that city
Competitive Advantage:
Low Cost
Pilot training required on only
High
one type of aircraft Frequent,
Aircraft Reduced maintenance Reliable
Utilization
inventory required becauseFleet
Standardized of Schedules
only one type ofof Boeing
aircraft737
Aircraft
Figure 2.8
© 2008 Prentice Hall, Inc. 2 – 78
Activity Mapping
Pilot training required on only
one Courteous,
type of but
aircraft
Limited Passenger
Reduced Service
maintenance
inventory required because of
Lean, Short Haul, Point-to-
Productive only one type of aircraft Point Routes, Often to
Employees Excellent supplier relationsSecondary Airports
with BoeingAdvantage:
Competitive has aided
financing
Low Cost
High Frequent,
Aircraft Reliable
Utilization Standardized Fleet Schedules
of Boeing 737
Aircraft
Figure 2.8
© 2008 Prentice Hall, Inc. 2 – 79
Activity Mapping
Courteous, but
Limited Passenger
Reduced maintenance
Service
inventory required because of
Lean, only one type of aircraft
Short Haul, Point-to-
Productive Flexible employees Point
and Routes, Often to
Flexible
Employees union Secondary Airports
contracts standard planes aid
Competitivescheduling
Advantage:
Low Cost
Maintenance personnel
trained only one type of
High Frequent,
Aircraft aircraft Reliable
Utilization 20-minute
Standardizedgate Schedules
Fleetturnarounds
of Boeing 737
Aircraft
Figure 2.8
© 2008 Prentice Hall, Inc. 2 – 80
Activity Mapping
Automated ticketing
Courteous, but
machines
Limited Passenger
Empowered
Service employees
Lean, High employee compensation
Short Haul, Point-to-
Productive Point Routes, Often to
Employees Hire for attitude, then train Airports
Secondary
High level of stock ownership
Competitive Advantage:
HighCost
Low number of flights
reduces employee idle time
High between flights Frequent,
Aircraft Reliable
Utilization Standardized Fleet Schedules
of Boeing 737
Aircraft
Figure 2.8
© 2008 Prentice Hall, Inc. 2 – 81
Four International Operations
Strategies
International
High
Strategy
 Import/export or
Cost Reduction Considerations

license existing
product
Examples
U.S. Steel
Harley Davidson

Low
Low High
Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 82
Four International Operations
Strategies
High
Cost Reduction Considerations

International Strategy
 Import/export or
license existing
product
Examples
U.S. Steel
Harley Davidson

Low
Low High
Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 83
Four International Operations
Strategies
Global
High Strategy
 Standardized
product
Cost Reduction Considerations

 Economies of scale
 Cross-cultural
learning
Examples
International Strategy

Texas
 Import/export or
license
product
existing Instruments
Examples
Caterpillar
Otis
U.S. Steel
Harley DavidsonElevator
Low
Low High
Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 84
Four International Operations
Strategies
High
Global Strategy
 Standardized product
 Economies of scale
Cost Reduction Considerations

 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
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 85
Four International Operations
Multidomestic
Strategies
Strategy
High
 Use existing
Global Strategy
 Standardizeddomestic
product
 Economies of scale
model
globally
Cost Reduction Considerations

 Cross-cultural learning

Examples Franchise, joint


Texas Instruments
Caterpillar ventures,
Otis Elevator
subsidiaries
International Strategy
Examples
 Import/export or
Heinz
license existing
product
ExamplesMcDonald’s
U.S. Steel
The Body Shop
Harley Davidson

Low Hard Rock Cafe


Low High
Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 86
Four International Operations
Strategies
High
Global Strategy
 Standardized product
 Economies of scale
Cost Reduction Considerations

 Cross-cultural learning

Examples
Texas Instruments
Caterpillar
Otis Elevator

International Strategy Multidomestic 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 McDonald’s Hard Rock Cafe

Low
Low High
Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 87
Four International Operations
Strategies
Transnational
High Strategy
 Move material,
Global Strategy
 Standardized product
people, ideas across
 Economies of scale
Cost Reduction Considerations

 Cross-cultural learning

Examples
national boundaries
 Economies of scale
Texas Instruments
Caterpillar
 Cross-cultural
Otis Elevator

learning
International Strategy Multidomestic Strategy
 Use existing
Examples
 Import/export or
license existing
product
domestic model globally
 Franchise, joint ventures,
Coca-Cola
Examples
subsidiaries
Examples
Nestlé
U.S. Steel
Harley Davidson
Heinz The Body Shop
McDonald’s Hard Rock Cafe

Low
Low High
Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 88
Four International Operations
Strategies
High
Global Strategy Transnational Strategy
 Standardized product  Move material, people, ideas
 Economies of scale across national boundaries
 Economies of scale
Cost Reduction Considerations

 Cross-cultural learning
 Cross-cultural learning
Examples Examples
Texas Instruments Coca-Cola
Caterpillar Nestlé
Otis Elevator

International Strategy Multidomestic 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 McDonald’s Hard Rock Cafe

Low
Low High
Local Responsiveness Considerations
© 2008 Prentice Hall, Inc.
(Quick Response and/or Differentiation) 2 – 89
Ranking Corruption
Rank Country 2006 CPI Score (out of 10)
1 Finland 9.6 Least
1 Iceland 9.6 Corrupt
1 New Zealand 9.6
5 Singapore 9.4
7 Switzerland 9.1
11 UK 8.6
14 Canada 8.5
15 Hong Kong 8.3
16 Germany 8.0
17 Japan 7.6
20 USA, Belgium 7.3
34 Israel, Taiwan 5.9
70 Brazil, China, Mexico 3.3 Most
121 Russia2.5 Corrupt
Table 8.2
© 2008 Prentice Hall, Inc. 2 – 90