MGMT2026 Production and Operations

Management

UNIT 2
Operations Strategy in a Global
Environment

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Learning Objectives
Explain the key dimensions of competition.
Justify why the key dimensions are termed
competitive priorities.
Differentiate between various types of strategy,
namely corporate and/or business, global, functional
and operations strategy.
Discuss the strategy development procedure.
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Introduction Productivity,
Competitiveness and Strategy
Better quality, higher productivity, lower cost, and
the ability to respond quickly to customer needs are
o e i po ta t tha e e a d… the a is getti g
higher (Heizer and Render, 2008).

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What is Strategy?
Strategy defines the means by which an organization will achieve
organizational objectives and goals. How are we going to compete?
Mintzberg (1994) defines strategy as a plan or course of action into the
future.
Strategy identifies and defines the resources (skills, assets, finance,
relationships, technical competence, facilities) that are required in order
to be able to compete in the market.

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Strategy and Productivity

Productivity relates to the effective use of resources (little

wastage) in the production process. The productivity ratio is a
fraction of output divided input.
Operations and production managers are directly responsible
for improving productivity to improve competitiveness.
Adopting new technologies or concepts, which requires capital
expenditures for new equipment, computers, or software.
Lean Six Sigma, Process re-engineering, streamlining
business/operating
U
processes,
W I
process
O
NIVERSITY OF THEC
optimization
.A R R
EST NDIES .
etc.
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Strategy and Competitiveness
Organizations compete through a combination of their marketing and
operating functions.
Competitiveness relates to an organization performance and
effectiveness in the market place relative to other organizations
that offer similar products or services.
How are we doing in our business processes and functions
compared to our competitors? Good, Bad, Poor, Superior?
Competitiveness is a by-product (output) of an effective and
properly executed strategies. Productivity and competitiveness are
positively correlated.
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Vision, Mission and Strategy
1. Vision expresses what the organization would like to accomplish
and/or where it would like to be in the future. Vision statements
are usually brief, appeal to stakeholders, inspire and challenge.
2. Mission statements outline where the organization is going. What
do we provide to society? What are our boundaries (service,
product offering, geographic area etc.)?
3. Strategy outlines how the organization is going to get there. How
are we (the organization is going to compete)?

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Conflicting Objectives Among
Functional Areas
Each functional area has different interests and goals (Zhao et al.
2008).
For example:
Marketing/Sales wants: more inventory, fast delivery, many
package types, special wishes/promotions
Production/Operations wants: bigger batch size, depots at factory,
latest ship date, decrease changeovers, stable production plan
Finance/Accounting: low inventory and capital cost

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Strategic Plan Development and
Deployment
Strategic planning is a continuous process
St ategi pla s o u i ate the o ga izatio s p io ities
throughout
De elop e t of st ategi pla s should i ol e e e o e a d ot a
few selected managers. (all levels)
The development of the strategic plan is affected by various
internal (culture, finance, workers skills, type of organizational
structure etc. ) and external forces (technology, laws, regulation,
political environment etc.)
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Strategy Formulation and
Deployment Procedure
1. Plan for Planning
2. Conduct Business Environmental scanning and SWOT Analysis
3. Determine Corporate Mission
4. Form a Strategy (Strategic Goal)

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Strategy Formulation and
Deployment Procedure
5. Set Strategic Objectives (multi year)
6. Prepare tactical action plans and deploy/Implement action plans
(DO)
7. Tack and measure progress (Check and Act)
8. Evaluate results

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Business Environment
Analysis/Scanning
SWOT Analysis
PESTEL (PESTLE) - Political, Economic, Social, Technological,
Environmental, Legal
A al sis of Ma ket Fo es Po te s Fi e Fo es F a e o k
Competitive Analysis
Benchmarking (Internal and External)
Stakeholder Analysis
Technology
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Setting, Deploying, and Tracking
Strategic Plans
Balanced Score Card Model (Financial Objectives,
Customer/Stakeholder, Internal Process, Learning and Growth)
Six Sigma and the DMAIC Model
Critical Success Factors (6-14 factors)
Key Performance Indicators (KPI)

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Bernard Leong (2011)

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Role of Operations in Strategy Development
and Deployment
Operations/manufacturing function plays an important role in the
fo ulatio a d i ple e tatio of a o ga izatio s st ateg .
Operations has significant role in the implementation of strategy by
increasing productivity and competitiveness.
Market conditions have changed from a mass production era to
an emphasis of high volume, low cost production to an
environment demanding performance on measures such as quality
and speed of delivery as well as cost. The rapid pace of change in
markets means the basis of how the organization will compete may
change quickly overtime (Sharma, 2010).
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Operational Strategy and Global Strategy
The operations strategy is the one that concerns us most in
(Production) Operations Management.
Given the global perspective that is now necessary to remain
competitive in our global village, a firm may develop a global strategy
that is supportive of its corporate, business and operations strategy.
Firms usually make certain adjustments to its operations strategy to
suit cross-border situations. This is referred to as a Global Strategy.

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Considerations in Developing Operations Strategy

Krajewski & Ritzman (n.d.)

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Types of Global Strategy

Some firms may choose to form strategic alliances or arrangements

and joint ventures with local entities rather than to fully and
physically locate their operations abroad.
1. Multi-domestic Operations Strategy
Focuses on local responsiveness and competitiveness
Decisions are decentralized to each country
Consumer will perceive them to be domestic company
High local responsiveness and low cost reduction consideration
2. Global Operations Strategy-
Decisions are centralized at headquarters where standards and training
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Types of Global Strategy
3. Transnational Operations Strategy
 e pe tise does ot eside e el i the ho e ou t
 A combination of localization strategy (high responsiveness) with global
standardization strategy (low cost)

4. International Operations Strategy

 Leveraging home base core competencies
 Selling the same products or services in both home and foreign market
 Low local responsiveness and low cost reduction consideration

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Benefits of Going Global
New and increase revenue potential
Reduction in operating and production cost
Greater access to global talent, skills and technology
Optimize the supply chain
Diversification (a means of reducing various type of risks)
Faster growth
Relationships with additional companies (joint ventures and
alliances )
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Disadvantages of Going Global
Organization may run into costly and complicated regulatory and
legal issues
Currency and political risks can eliminate profits
Increase business and financial risks
High upfront cost and investment in not unusual when entering the
global market
It takes time to understand the dynamics of the new market

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Factors to be Considered in Going Global
PESTEL of the host country
PESTEL (PESTLE) - Political, Economic, Social, Technological,
Environmental, Legal
Evaluation of the risks involved (Risk Assessment)
Cost Benefit Analysis (CBA)
History (Foreign Firms)
O ga izatio s poli a d alue

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World Class Organization
A world class organization is recognized as a benchmark by its
industry sector and, for some aspects, by other industry sectors as
well (Vaishnav, 2009).
A world class organization sets the tone in the market and industry.
Consistently Best at what it does.
 Best of the Bests in the world.

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World Class Organizations:
Are market leaders
Focus intensely on customers
Focus intensely on quality
Are agile and adapt to changes
Focus on continuous improvement
Value and appreciate employees
Make data driven decisions
Have strong and knowledgeable leadership and management
Take a system and integrative approach
Values on research andOFdevelopment
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Flexible Organization/Highly Responsive
Organization
 Flexible organization has its roots in agility and lean
operations, which results in the organizations ability to cope
with continuous and unanticipated changes in their business
environment and proactively capture opportunities from the
turbulent business environment (Sun, Valota and Zhang, 2014).
Fle i le o ga izatio s a e ot stu k i thei a s.
Kaizen events (quickly improving a process) are common for
flexible organization.

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Flexible Organization/Highly Responsive
Organization
Flexible organizations have an organic instead of a mechanistic
structure.
A flexible organization capitalizes on the strengths of its workforce.
Flexible organization uses Flexible Manufacturing Systems (FMS).
Flexible organization adopts new technology and integrates
business systems and functions such as marketing, operations,
accounting.

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Lean Organizations
Lean systems tend to achieve greater productivity, lower costs,
shorter cycle times, and higher quality than non lean systems.
He Fo d defi ed the lea o ept i o e se te e: We ill ot
put i to ou esta lish e t a thi g that is useless.
http://asq.org/learn-about-quality /lean/overview/overview.html

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The Link: World Class, Flexible and Lean
Organizations
Word class, flexible/responsive, and lean organizations share many
points of contact and do not exist in mutually exclusive domains.
Some authors and industries use the terms interchangeably.
World class organizations have many characteristics of lean,
flexible/responsive organizations.
Lean can be described as a management philosophy derived mostly
from the Toyota Production System (TPS).

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Pre Conditions for Competitiveness
Lean, highly flexible, highly responsive or world class organizations
compete simultaneously along six lines of competitive priorities,
namely: quality, cost, timeliness, dependability, flexibility, service.
Certain basic preconditions or structural prerequisites are necessary
to become a highly competitive firm, namely:
Technology adoption
Research and development
Continuous improvement and waste elimination
Integration of activity

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Competitive Priorities/ Elements of
Competition
Competitive priorities of highly successful, world class firms, based on
usto e s e pa ded o ept of alue:
1) Quality
2) Cost
3) Timeliness
4) Dependability
5) Service
6) Flexibility

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Competitive Priorities/ Elements of
Competition
Competitive priorities of highly successful, world class firms, based on
usto e s e pa ded o ept of alue:
1) Quality
2) Cost
3) Timeliness
4) Dependability
5) Service
6) Flexibility

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Competitive Element of Quality
Quality
Functionality
Visual appeal
Reliability
Ease of use
Durability
High performance well designed products

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Competitive Element of Price/Cost
Price/cost
Lowest possible price
Low maintenance costs
Cost-effectiveness (value for money)
Payment terms and conditions

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Competitive Element of Timeliness
Timeliness
Quick throughput time in production
Quick turnover of new designs, set ups
Quick product development cycle
Up-to-date and timely product offerings

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Competitive Element of Dependability
Dependability
Ability to deliver as promised on time and with consistent quality
Having reliable production facilities

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Competitive Element of Service
Service
Installation
Return policies
After sales service
Warranties
Service ability
Ongoing relationship and technical advice
Being able to respond rapidly to suit customer requirements and at
low cost
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Competitive Element of Flexibility
Flexibility
Product/service modification of customization

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 Competitive Priorities

Kaplan and Norton (1992)

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 Measuring Competitiveness
Elements of Competition Some indicators
Quality  Percentage of defect-free products
Price/cost  Product cost
Timeliness  Throughput time [processing time + inspection time +
movement time + waiting
 and /or storage time]
Dependability  Equipment availability [ratio of hours required to hours
available]
Flexibility  Setup downtime, batch run time
Service  Respo se ti e to usto e s i ui ies

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 References
.

Heizer, J., & Render, B. (2008). Operations management.

Upper Saddle River, NJ: Pearson Prentice Hall.
Heizer, J. & Render, B. (2014). Operations management (11th
ed.). Boston, MA: Prentice Hall
Stevenson, W. J. (2012). Operations management.

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 THE END
Questions/Comments/Discussion

Thank you for your kind attention and participation

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