OPERATIONS STRATEGY

COMPETITIVE ADVANTAGE:
Firm’s ability to achieve market and financial superiority over its competitors
 Something that is hard to copy.
 Something that customers must benefit.
 Something that leads to superior customer satisfaction.
 Something that leads to higher return, market share…..
 Something that makes the firm outperform its competitors.
Requires:
 Understanding customer needs and expectations
 Building and leveraging operational capabilities to support desired competitive priorities
In a long run, sustainable competitive advantage is essential for survival
Strategic supply management helps organization to develop supply strategies that helps to create
competitive advantages.
Operations management identifies the parts of the supply chain links that can be developed into
competitive advantage by creating processes around them.
Create Competitive Advantages through OM
 Management must know or anticipate customer’s wants and needs and determines how the
value chain can meet these needs.
 At the same time identifies the CBP that makes the product more attractive.
 Build and leverage on operational capabilities & expertise to support desired competitive
priorities.

HILL’S STRATEGY DEVELOPMENT FRAMEWORK

This framework defines the essential elements of an effective operations strategy in the last two
columns
Operations design choices are the decisions management must make as to what type of process
structure is best suited to produce goods or create services. It typically addresses six key areas –
types of processes, value chain integration and outsourcing, technology, capacity and facilities,
inventory and service capacity and trade-offs among these decisions
Infrastructure focuses on the non-process features and capabilities of the organization and
includes the workforce operating plans and control systems, quality control, organizational
structure, etc. The infrastructure must support process choice and provide managers with accurate
and timely information to make good decisions. These decisions lie at the core or organizational
effectiveness and suggest that the integrative nature of operations management is one of the most
important aspects of success
A key feature of this framework is the link between operations and corporate and marketing
strategies.

COMPETITIVE PRIORITIES
Competitive Priorities represent the strategic emphasis that a firm places on certain performance
measures and operational capabilities within a value chain. Understanding competitive priorities
and their relationships with CBP provides a basis for designing the processes that create and
deliver goods and services
An operations strategy defines how an organization will execute its chosen business strategies.
Developing an operations strategy involves translating competitive priorities into operational
capabilities by making a variety of choices and trade-offs for design and operating decisions.
Hence, operating decisions must be aligned with achieving the desired competitive priorities
CP helps OM to focus on where (within value chain) to create & develop the competitive
advantages:
OM will decide on
• The competitive priorities to focus on (core competency) in developing products &
services.
• How superior the processes are designed and managed will decide if competitive
advantages can be achieved.
• How operations are designed and managed will depend on operations strategies.
1. Cost
Although prices are generally set outside the realm of operations, low prices cannot be achieved
without strict attention to cost and the design and management of operations. General Electrics
discovered that 75% of its manufacturing costs is determined by design
Costs accumulate through the value chain and include the costs of raw materials and purchased
parts, direct manufacturing cost, distribution, postsale services and all supporting processes.
Through good design and by chipping away at costs, operations managers help to support a firm’s
strategy to be a low-price leader. They emphasize achieving EOS and finding cost advantages
from all sources in the value chain
Low cost can result from high productivity and high capacity utilization. More important,
improvements in quality lead to improvements in productivity, which in turn lead to lower costs.
Thus a strategy of continuous improvement is essential to achieve a low-cost competitive
advantage

2. Quality
Businesses offering premium quality goods usually have large market shares and were early
entrants into their markets
Quality is positively and significantly related to a higher ROI for almost all kinds of market
situations
A strategy of quality improvement usually leads to increased market share but at a cost in terms of
reduced short-run profitability
Producers of high quality goods can usually charge premium prices
Operations managers deal with quality issues on a daily basis, including ensuring that goods are
produced defect-free or that service is delivered flawlessly
3. Time
Time is the most important source of competitive advantage. Customers demand quick response,
short waiting times and consistency in performance. Speeding up work processes improves
customer response. Deliveries can be made faster and more often on time but time reductions in
processes and value chains can only be accomplished by streamlining and simplifying them to
eliminate non-value-added steps such as rework and waiting time. Designing processes and using
technology efficiently to improve speed and time reliability are some of the most important
activities for operations managers
4. Flexibility
Flexibility is manifest in mass-customization strategies that are becoming prevalent today. Mass
customization requires companies to align their activities around differentiated customer segments
and design goods, services and operations around flexibility
5. Service
6. Technology
7. Innovation