MM ZG512 Manufacturing

Strategy
Rajiv Gupta
BITS Pilani
Live Lecture 7
 Sample Exam Question

Suggest why a process type layout is better suited for a

job shop while a product layout is better suited for line
production? (2+2 marks)

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 Recitation 7
• Module 1
– Topics Covered in Taped Lectures 9 and 10
• Module 2
– Discussion Questions Based on Taped Lecture 9
• Module 3
– Discussion Questions Based on Taped Lecture 10
• Module 4
– Brief Introduction Taped Lectures 11 and 12
• Module 5
– Discussion Questions for the next Recitation

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 Recitation 7
• Begin Module 1
– Topics Covered in Recorded Lectures 9 and 10

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 Recorded Lecture 9
• In Lecture 9 we discuss the article “Competing Through
Manufacturing.”
• We discuss the 4 stages that were introduced in Lecture 8.
• It is mentioned that Stages 1-3 are very different from Stage 4
as the first 3 stages do not entail a rethink of the
manufacturing function, and its relationship with the rest of
the organization.
• Companies in Stages 1-3 tend to have a command and control
attitude, and do not look to engage the workforce.
• Stage 4 is one where the creativity of the entire workforce is
sought to be harnessed.

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 Recorded Lecture 9
• Most companies begin in Stage 1 or 2 because their main
focus is on a product or service that they feel gives them
an edge in the marketplace.
• The transition from Stage 1 to 2 comes about without
much effort and sometimes the organization is not even
aware of the change.
• The move from Stage 2 to 3 occurs when management
realizes that traditional approaches do not work any
more.
• Early success attaining Stage 3 can also signal a reversal
back to Stage 2. This may happen due to complacency, or
due to the initial leaders being promoted elsewhere.

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 Recorded Lecture 9
• The jump to Stage 4, however, is a very difficult one.
• Management has to start questioning the role of
manufacturing and how it relates to the rest of the
organization.
• Several companies do not feel that they need to
move to Stage 4 as several of the benefits are
obtained in Stage 3.
• Also there is great uncertainty with regard to what is
in store in Stage 4, scaring top management to play it
safe.

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 Recorded Lecture 10
• In Lecture 10, we begin with the case study of GE’s
Dishwasher SBU in the 1970s.
• The SBU had been very successful, but its products
and processes were getting dated.
• Management was considering the infusion of capital
to upgrade the product design and to get new
equipment. It was considered a move from Stage 2 to
Stage 3
• In going through the analysis, the management
realizes that there is greater potential for change.

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 Recorded Lecture 10
• Senior management of GE felt that, by investing
more capital and by instituting some fundamental
changes, they could achieve bigger benefits and be in
Stage 4.
• Careful implementation of the changes resulted in
significant improvement in overall performance of
the SBU.
• Next we introduced the topic of Strategic Fit based
on Michael Porter’s article, “What is Strategy?”

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 Recorded Lecture 10
• Strategic Fit deals with the relationship of the
different activities that a company chooses to do.
• By ensuring a tight meshing among the various
activities, the company can not only gain superior
performance, but also make it difficult for any other
company to copy part of the system.
• There are three levels of orders of Fit as suggested by
Porter.
• The first order Fit considers the synchronization of all
activities toward the corporate strategy

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 Recorded Lecture 10
• In the second order Fit, the activities not only
support the company strategy, but also mutually
reinforce each other. There is synergy among the
activities.
• In the third order Fit, the activities go beyond
synergy. The activities attempt to optimize the
performance of the entire system.
• An example of Southwest Airlines is presented to
illustrate the concept of Strategic Fit.

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 Recitation 7
• End of module 1

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 Recitation 7
• Begin Module 2
– Discussion Questions Based on Recorded Lecture
9

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 Recitation
• Based on the characteristics discussed in the lecture,
which stage describes your organization? Discuss one
or two important points in this regard.
• What do you think it would take to transition to the
next stage? Is there a risk of slipping to an earlier
stage?
• Do you agree with the premise that a lot of
companies focus on product technology rather than
their process capability as their strength? Support
your answer with reasons/examples.

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 Recitation
• How well does top management in your organization
support creativity and innovation?
• How much is the drive for creating a learning
environment versus a command and control state?

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 Recitation 7
• End of module 2

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 Recitation 7
• Begin Module 3
– Discussion Questions Based on Recorded Lecture
10

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 Recitation
• What do you understand from strategic fit?
• To what extent do you see strategic fit in your
organization?
• Is the strategic fit first order, second order, or
third order? Give your reasons.
• Where do you see potential for improvement
by implementing strategic fit in your
company?

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 Recitation 7
• End of module 3

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 Recitation 7
• Begin Module 4
– Brief Introduction to Taped Lectures 11 and 12

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 Taped Lecture 11
• In Lecture 11 we continue the discussion based on
Michael Porter’s article, “What is Strategy.”
• In lecture 10 we had discussed the concept of Strategic
Fit. In lecture 11 we consider two of the remaining points
covered by Michael Porter, i.e., Focus and Trade-offs.
• Focus implies that we need to concentrate our efforts
toward a limited set of objectives. Ideally the focus ought
to be derived from the set of customers we choose to
serve well.
• Once a focus has been developed, then all activities can
be designed to help achieve the aims of the focus.

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 Taped Lecture 11
• The first example that is discussed is Southwest Airlines.
• Southwest has a clear focus in terms of the target flying
population it wishes to serve. The typical Southwest
passenger is one who is looking to get from Point A to
Point B and is interested in getting there at a low cost.
Southwest does not target business travelers .
• Once the airlines has defined its target customers, it
designs its activities, such as the selection of airports,
routes, and aircraft, etc. to meet the needs of the
customers while keeping operating costs low.

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 Taped Lecture 11
• In order to ensure that the activities fit the needs of the
customer, there are a number of trade-offs that Southwest
has to make.
• For example, Southwest does not provide baggage transfers
to connecting flights at airports. It also chooses to fly out of
secondary airports to reduce the airport fees . Also, by
flying out of smaller, less congested airports, Southwest
ensures that there are fewer delays.
• When competitors, such as Continental, tried to copy some
of Southwest’s tactics, but did so without making trade-
offs, the result was chaos and the CEO had to resign as a
result.

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Hub and Spoke

HUB

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 Taped Lecture 11
• We also discuss the case of Ikea wherein we
see how the ideas of strategic fit, focus, and
trade-offs are demonstrated. Ikea is a very
successful, Swedish furniture retailer, with
stores in several countries.
• Again, by choosing its target customer
segment, the company has designed its
activities to best meet the requirements of its
customers while keeping costs and prices low.

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 Taped Lecture 11
• Next we do a review of the material covered in the
course up to now.
• It is discussed that the steps and approaches
discussed so far seem to be static in nature and the
concepts are available to all companies.
• Then how do only a few companies manage to be
successful?
• Also, Japanese companies such as Toyota seem to
have excelled in more than one dimension. Then,
why the need for focus?

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 Taped Lecture 12
• In Lecture 12, we continue with the questions raised
at the end of lecture 11.
• We ask what is it that differentiates companies from
one another, since the same information is available
in the public domain, the same equipment is
available in the market, the people can be recruited
from other companies?
• The concept of capabilities is introduced.
• It is discussed that capabilities are the reason for the
difference in performance of different companies.

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 Taped Lecture 12
• Capabilities are the abilities of a company that are
not necessarily visible on the surface.
• Capabilities are developed over a long period of time
and cannot be gained in any other way except by
direct experience.
• Capabilities of individuals do not necessarily
translate into capabilities of companies. Also,
sometimes companies, as well as individuals are
incapable of verbalizing how they are able to
accomplish things that others find difficult to
achieve.
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 Taped Lecture 12
• Three types of capabilities are discussed; process
based, systems based and organization based.
• Process based capabilities are the simplest while the
organizations based capabilities are the most
complex and difficult to achieve. But the
organizational capabilities yield the highest returns
and are the most difficult to imitate.
• Finally a case study is presented illustrating how Wal-
Mart developed its capability over several years to
become the top retailer in the world.

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 Taped Lecture 12
• Wal-Mart began as a small retailer in the rural
Southern United States.
• It developed its capabilities in logistics and systems,
without attracting the attention of the industry
leader Kmart, which was primarily present in urban
areas.
• By the time Wal-Mart launched its attack on Kmart,
the latter was incapable of retaliating because it was
not possible to create the capabilities of Wal-Mart in
a short time. Ultimately Wal-Mart became the
industry leader.
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 Recitation 7
• End of module 4

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 Recitation 7
• Begin Module 5
– Discussion Questions Based on Taped Lecture 11
and 12 for the next recitation

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 Recitation
• Does your organization display a clear focus? What would
you say it is?
• What could be some examples of trade-offs made by
your organization? Do you feel that these trade-offs were
necessary?
• Do you agree that companies need to make trade-offs?
What would happen if a company did not make trade-
offs?
• Do you agree that a company typically should try to excel
in terms of only one or two of the manufacturing
outputs?

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 Recitation
• Does your company have any special
capability which cannot be not easily
imitated? How was it developed?
• Do you have any personal capability which is
has taken years to develop? Can you describe
the process of obtaining this capability?

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 Recitation 7
• End of module 5

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Questions?

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