Operations Strategy

& Competitiveness

OM-I PGP 2018-20

Operations Strategy

“A consistent pattern of business

decisions for operations and the
associated supply chain …

… that are linked to the business

strategy and other functional
strategies, leading to a competitive
advantage for the firm.”
OM-I PGP 2018-20
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.
 Corporate strategy

Business strategy

Operations Strategy
Internal Functional strategies in
analysis Mission marketing, finance,
engineering,
Objectives human resources,
(cost, quality, flexibility, delivery) and
External information systems
Strategic Decisions (process,
analysis
quality system, capacity, and inventory)

Distinctive
Competence

Consistent pattern of decisions

Results
OM-I PGP 2018-20
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.

Mission
 Organization’s purpose for being
 Provides boundaries & focus
 Answers ‘How can we satisfy people’s
needs?’
 Expressed in mission statement

OM-I PGP 2018-20

 Mission of BHEL

Provide sustainable business solutions in

the field of Engineering, Industry &
Infrastructure.

OM-I PGP 2018-20

Mission of Maruti
The Leader in the Indian Automobile
Industry, Creating Customer Delight and
Shareholder's Wealth;
A pride of India.

OM-I PGP 2018-20

Mission of A Service Company

As a service company, our mission is to:

Satisfy our customers’ immediate needs and
wants by providing them with a wide variety of
goods and services at multiple locations.

OM-I PGP 2018-20

Factors Affecting Mission

Philosophy &
Values

Profitability
Environment
& Growth

Mission

Customers Public Image

Benefit to
Society

OM-I PGP 2018-20

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.
 Strategy
 Action plan to achieve mission
 Shows how mission will be achieved
 Develop company’s business strategy
 Develop functional strategies

OM-I PGP 2018-20

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.

Porter’s Business Strategy

• Low cost producer
• Product differentiation
• Market focus

OM-I PGP 2018-20

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.
 Competing on Cost

• Cost minimization in all activities in the firm’s value

chain, such as R&D, service, sales force, and
advertising etc.

• Tight cost and overhead control

OM-I PGP 2018-20

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.

Competing on Differentiation
Uniqueness - can go beyond both the physical
characteristics and service attributes
Differentiation can take many forms
• Prestige or brand image
• Technology
• Innovation
• Features
• Customer service
• Dealer network

OM-I PGP 2018-20

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.
 Market Focus
• Flexible
• Reliable
• Quick
• Requires institutionalisation within firm of
ability to respond

OM-I PGP 2018-20

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.

Types of Focus

• Product focus
• Process type
• Technology
• Volume of sales
• Make-to-stock and make-to-order
• New products and mature products

OM-I PGP 2018-20

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.
 Forces Driving Industry Competition
Suppliers
4. Bargaining power
3. Threat of of suppliers
new entrants
Market
Potential
Competitors Substitutes
Entrants
2. Rivalry among
existing firms 5. Threat of substitute
1. Bargaining power products or services
of customers

Buyers

Source: Porter (1980)

OM-I PGP 2018-20
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.

Operations Strategic
Objectives
• Cost – resources used
• Quality – conformance to customer
expectations
• Delivery – quickly and on time
• Flexibility – ability to rapidly change operations

How does a firm use these objectives to gain a

competitive advantage?
What trade-offs exist among the objectives?

OM-I PGP 2018-20

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.
 Distinctive Competence

• Something an organization does better than any

competing organization that adds value for the
customer.

• Examples: patents, proprietary technology,

operations innovations

OM-I PGP 2018-20

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.

McDonald’s Operations Strategy

• First restaurant started in 1955 by Ray Kroc in Des Plaines,

Illinois, USA

• Mission: fast product/service, consistent quality, low cost,

clean/friendly environment

• Operations Objectives: cost, quality, delivery and service

• Strategic decisions: process, quality, capacity, inventory

• Distinctive Competence: today - continuous improvement of the
transformation system, and brand (originally: unique service/supply
chain)

OM-I PGP 2018-20

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.
 McDonald’s Operations Strategy

• Service system was designed on the idea of a very limited menu

and fast production of standardized food and service with
convenience and low price

• Operation strategy:

“to provide a unique service operation and a supply

chain that would provide fast food to customers in
clean environment at low prices”

OM-I PGP 2018-20

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.

Examples of Important Strategic Decisions in

Operations

OM-I PGP 2018-20

To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Fifth Edition © 1999 Addison Wesley Longman. All rights reserved.
 Ops. Strategy and Decisions
Corporate strategy

Market analysis

Competitive priorities Capabilities

Operations strategy
Services Manufacturing
• Standardized services • Make-to-stock
• Customized services • Assemble-to-order
• Make-to-order

• Process decisions
• Quality decisions
• Capacity, location, and layout decisions
• Operating decisions

OM-I PGP 2018-20

Critical Success Factors

Microsoft & HP
 They focus on one business
 They are global
 Their senior management is actively involved
in defining and improving the product
development process
 They recruit and retain the top people in their
fields.
 They understand that speed to market
reinforces product quality
OM-I PGP 2018-20
Thank You

OM-I PGP 2018-20