Chapter 3

Operations strategy

Source: courtesy of Justin Waskovich

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Levels of Decisions in Operations

Decision Strategic Tactical Operational

Level of
Management

Timescale

Risk

Detail

Structure

Focus

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
What is strategy?

Strategic decisions – means those decisions which …

Are widespread in their effect on the organization to

which the strategy refers

Define the position of the organization relative to its

environment

Move the organization closer to its long-term goals.

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
‘Operations’ is not the same as ‘operational’

‘Operations’ are the resources that create products and

services

‘Operational’ is the opposite of strategic, meaning day-to-

day and detailed

So, one can examine both the operational and the

strategic aspects of operations

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
 The strategy hierarchy

Key strategic Influences on

decisions decision making
What business to be in? Economic environment
Corporate What to acquire? Social environment
strategy What to divest? Political environment
How to allocate cash? Company values and ethics

What is the mission? Customer/market dynamics

Business What are the strategic Competitor activity
strategy objectives of the firm? Core technology dynamics
How to compete? Financial constraints

How to contribute to the Skills of function’s staff

Functional strategic objectives? Current technology
strategy How to manage the Recent performance of the
function’s resources? function

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
 The effects of the product/service life cycle on the
organisation
volume
Sales

Introduction Growth Maturity Decline

Volume Slow growth in Rapid growth in Sales slow down Market needs
sales sales volume and level off largely met

Customers Innovators Early adopters Bulk of market Laggards

Competitors Few or none Increasing Stable number Declining

numbers numbers

Variety of Possible high Increasingly Emerging Possible move to

product / customisation or standardised dominant types commodity
service frequent design standardisation
design changes

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
 The effects of the product/service life cycle on the
organization
volume
Sales

Introduction Growth Maturity Decline

Likely order Product/service Availability of Low price Low price
winners characteristics, quality Dependable
performance or products/services supply
novelty
Likely Quality Price Quality Dependable
qualifiers Range Range Range supply

Dominant Flexibility Speed Cost Cost

operations Quality Dependability Dependability
performance Quality
objectives

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
 Different competitive factors imply different performance
objectives
Competitive factors Performance objectives
If the customers value these ... Then, the operations will need to
excel at these ...
Low price Cost

High quality Quality

Fast delivery Speed

Reliable delivery Dependability

Innovative products and services Flexibility (products and services)

Wide range of products and services Flexibility (mix)

Ability to change the timing or quantity Flexibility (volume and/or delivery)

of products and services

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Operations strategy is …

‘… the decisions which shape the long-

term capabilities of the company’s
operations and their contribution to overall
strategy through the on-going
reconciliation of market requirements and
operations resources …’

Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007