STRATEGY

Lecturer: Nguyen Van Dung Ph.D.

Slides are based on slides accompanied the book “OPERATIONS AND
SUPPLY CHAIN MANAGEMENT”, with improvement from the lecturer

Chapter Two
McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
 LO2–1: Know what a sustainable business strategy is
and how it relates to operations and supply chain
management.
 LO2–2: Define operations and supply chain strategy.
 LO2–3: Explain how operations and supply chain
strategies are implemented.
 LO2–4: Understand why strategies have implications
relative to business risk.
 LO2–5: Evaluate productivity in operations and supply
chain management.

2-2
 Cliff Bar
Clif Bar & Company là một công ty của Mỹ
chuyên sản xuất thức ăn và đồ uống năng
lượng

Video: CLIF BAR Presents: Just Keep

Going

https://www.youtube.com/watch?v=WRZvy
9_sJIE

2-3
Company Aspirations Beyond Making a
Profit
Cliff Bar’s Aspirations (an example)
 1. Sustaining our Planet—Keep our impact on the planet
small, even as we grow.
 2. Sustaining our Community—Be good neighbors. Give
back to the community.
 3. Sustaining our People— Create an environment where
people can live life to the fullest, even from 9 to 5.
 4. Sustaining our Business—Grow slower, grow better, and
stick around longer.
 5. Sustaining our Brands—Make what people actually
need. Never compromise quality.

2-4
Sustainable Strategy
 The firm’s strategy describes how it will create and
sustain value for its current shareholders
 Shareholders (Cổ đông) – individuals or companies that
legally own one or more shares of stock in the company
 Stakeholders (Bên có liên quan) – individuals or
organizations who are directly or indirectly influenced by
the actions of the firm
 Adding a sustainability requirement means meeting
value goals without compromising the ability of
future generations to meet their own needs
 Triple bottom line – evaluating the firm against social,
economic, and environmental criteria

2-5
 Triple Bottom Line

https://www.youtube.com/watch?v=2f5m-
jBf81Q&t=38s 2-6
 Triple bottom line
 A business strategy that includes social, economic, and environmental
criteria
 Social Responsibility: This pertains to fair and beneficial business
practices toward labor, the community, and the region in which a firm
conducts its business.
 A triple bottom line company seeks to benefit its employees, the
community, and other social entities that are impacted by the firm’s
existence. A company should not use child labor, and should pay fair
salaries to its workers, maintain a safe work environment with
tolerable working hours, and not otherwise exploit a community or its
labor force.
 A business can also give back by contributing to the strength and growth
of its community through health care, education, and other special
programs 2-7
 Triple bottom line
 Economic Prosperity: The firm is obligated to
compensate shareholders who provide capital through
stock purchases and other financial instruments via a
competitive return on investments.
 Company strategies should promote growth and grow
long-term value to this group in the form of profit.
 Within a sustainability framework, this dimension
goes beyond just profit for the firm; it also provides
lasting economic benefit to society.

2-8
 Triple bottom line
 Environmental Stewardship. This refers to the firm’s
impact on the environment. The company should protect
the environment as much as possible—or at least
cause no harm.
 Managers should move to reduce a company’s
ecological footprint by carefully managing its
consumption of natural resources and by reducing
waste.

2-9
 Examples of Triple bottom line
 Unilever: Unilever has aimed to “reuse”, “recycle” or “compost” 100%
of plastic packaging by the year 2025. One of the strong images
populated by Unilever is as follows:

Source:
https://www.wallstr
eetmojo.com/triple-
bottom-line/

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Activity 2.1
 Find an example of Triple bottom line

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Operations and Supply Chain Strategy

 Setting broad policies and plans for using the

resources of a firm – must be integrated with
corporate strategy
 Corporate strategy provides overall direction and
coordinates operational goals with those of the larger
organization
 Example: if the high-level corporate strategy
includes goals related to the environment and
social responsibility, then the operations and
supply chain strategy must consider these goals.
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Operations and Supply Chain Strategy

 Operations effectiveness – performing activities in

a manner that best implements strategic priorities at
a minimum cost
 The processes span all the business functions, from
taking customer orders, handling returns,
manufacturing, and managing the updating of the
Website, to shipping products.
 Operational effectiveness is reflected directly in the
costs associated with doing business.

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Formulating an Operations and Supply
Chain Strategy

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Competitive Dimensions
Price
• Make the product or deliver the service cheap
Quality
• Make a great product or delivery a great service
Delivery Speed
• Make the product or deliver the service quickly
Delivery Reliability
• Deliver it when promised
Coping with Changes in Demand
• Change its volume
Flexibility and New-Product Introduction Speed
• Change it

2-15
1. Cost or Price: “Make the Product or Deliver the
Service Inexpensively”

 Within every industry, there is usually a segment of the

market that buys solely on the basis of low cost.
 To successfully compete in this niche, a firm must be the
low-cost producer.
 Competing based on cost can be difficult unless the
firm has some unique advantage over the competition.
 For example, an inexpensive source of raw material or
access to low-cost labor may create the necessary
advantage

2-16
 Cost or Price: Examples

 Giá mì gói Miliket (3.000đ –

3.500đ)
 Top các loại mì gói rẻ nhất thị
trường và giữ nguyên giá
trong suốt nhiều năm
 Phân khúc bình dân
 Miliket hạn chế tối đa các
khoản chi phí liên quan đến
truyền thông mà đẩy mạnh
tiêu thụ thông qua liên kết
chặt chẽ với các đại lý, chợ,
nhà hàng
Source: https://inboundmarketing.vn/nhung-chien-luoc-
hieu-qua-ve-gia-cho-san-pham-cua-doanh-nghiep/
2-17
 Cost or Price: Examples

 Wal-mart vận hành hơn 11.000 địa

điểm bán lẻ ở 27 quốc gia.
 Wal-Mart - nhà sản xuất giá rẻ với
lợi thế kinh tế nhờ qui mô
khổng lồ.
 Nhờ vào vị thế vững chắc trên thị
trường, Wal-Mart có thể kiểm soát
rất nhiều nhà cung cấp của mình,
giảm chi phí thu mua hàng hóa đáng
kể. Source: https://vietnambiz.vn/nha-san-
xuat-gia-re-low-cost-producer-la-gi-vi-
du-ve-nha-san-xuat-gia-re-
20191029152418196.htm

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2. Quality: “Make a Great Product or Deliver a Great
Service”

 Quality
 Design quality
 Process quality
 Design quality relates to the
set of features the product or
service contains.
 Example: a child’s first two-
wheel bicycle ➔ significantly
different quality vs. the bicycle
of a world-class cyclist.
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2. Quality: “Make a Great Product or Deliver a Great
Service”

 Process quality is critical because it relates directly

to the reliability of the product or service.
 Regardless of whether the product is a child’s first
two-wheeler or a bicycle for an international cyclist,
customers want products without defects.
 Goal of process quality: produce defect-free
products and services.

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 Quality: Example

• Từ 2026, Audi sẽ
chỉ giới thiệu những
mẫu xe hybrid, xe
điện.
• Động cơ xăng, dầu
sẽ ngừng sản xuất
vào 2033.
• Tập trung vào phần
mềm, công nghệ tự
động, chất lượng và
thiết kế ➔ khác biệt
mạnh mẽ so với các • Chìa khóa là dự án "Audi DNA" nơi mà công
đối thủ. ty sẽ đi sâu vào các chi tiết kỹ thuật như yêu
cầu góc lái, mô-men xoắn và âm thanh, để
phát triển cảm giác lái của Audi trở nên độc
đáo nhất. 2-21
3. Delivery Speed: “Make the Product or Deliver the
Service Quickly”

 In some markets, a firm’s ability to deliver more

quickly than its competitors is critical.
 A company that can offer an onsite repair service
in only 1 or 2 hours has a significant advantage
over a competing firm that guarantees service only
within 24 hours.

2-22
 4. Delivery Reliability: “Deliver It When Promised”

 Firm’s ability to supply the product or

service on or before a promised
delivery due date.
 Automobile manufacturer: important
that its supplier of tires provide the
needed quantity and types for each
day’s car production.
 If the tires needed for a particular
car are not available when the car
reaches the point on the assembly
line where the tires are installed, the
whole assembly line may have to be
shut down until they arrive.
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 4. Delivery Reliability: “Deliver It When Promised”

 Service firm such as Federal Express: delivery

reliability ➔ the cornerstone of its strategy.

2-24
5. Coping with Changes in Demand: “Change Its
Volume”

 A company’s ability to respond to increases and

decreases in demand is important to its ability to compete.
 When demand is strong and increasing, costs are
continuously reduced due to economies of scale, and
investments in new technologies can be easily justified.

2-25
5. Coping with Changes in Demand: “Change Its
Volume”

 Scaling back when demand decreases may require many

difficult decisions about laying off employees and related
reductions in assets.
 The ability to effectively deal with dynamic market
demand over the long term is an essential element of
operations strategy.

2-26
 6. Flexibility and New - Product Introduction Speed:
“Change It”

 Flexibility: ability of a company to offer a wide variety of

products to its customers.
 An important element of this ability to offer different
products:
 Time required for a company to develop a new product

 Time to convert its processes to offer the new product

2-27
 7. Other Product - Specific Criteria: “Support It”

 Technical liaison (sự liên lạc) and support. A supplier may

be expected to provide technical assistance for product
development, particularly during the early stages of design
and manufacturing
 Example of the automobile industry

2-28
 7. Other Product - Specific Criteria: “Support It”

 Meeting a launch date

 A firm may be required to coordinate with other firms on
a complex project.
 In such cases, manufacturing may take place while
development work is still being completed.
 Coordinating work between firms and working
simultaneously on a project will reduce the total time
required to complete the project.

2-29
 7. Other Product - Specific Criteria: “Support It”

 Supplier after-sale support

 Availability of replacement parts

 Modification of older, existing products to new

performance levels (Example: airplane parts)

 Speed of response to after-sale needs

2-30
 7. Other Product - Specific Criteria: “Support It”

 Environmental impact
 Carbon dioxide emissions

 Use of nonrenewable
resources
 Other factors that relate to
sustainability
 Example: Vinamilk

2-31
Activity 2.1
 Find an example of the competitive dimensions of a
company
 FPT

 Vinamilk

 Vietjet Air

2-32
Multiple choice questions
 Which of the following is not a major strategic
operational competitive dimension that forms a
company's competitive position?
A. Cost or price
B. Delivery speed
C. Delivery reliability
D. Management acumen (sự nhạy bén)

Key: D
2-33
Multiple choice questions
 A major competitive dimension that forms a
company's strategic operational competitive position
in their strategic planning is which of the following?
A. Cost or price
B. Focus
C. Automation
D. Activity-system mapping

Key: A
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Activity 2.2
 Find an example of the competitive dimensions of a
company

2-35
Trade-Offs
 Management must decide which parameters of
performance are critical and concentrate resources on
those characteristics
 For example, a firm that is focused on low-cost production
may not be capable of quickly introducing new products
 A strategic position is not sustainable unless there are
compromises with other positions.
 Trade-offs occur when activities are incompatible so that
more of one thing necessitates less of another. An airline
can choose to serve meals—adding cost and slowing
turnaround time at the gate—or it can choose not to, but it
cannot do both without bearing major inefficiencies

2-36
 Straddling (Bành trướng)
 Seeking to match a successful competitor by adding features, services, or
technology to existing activities
 Often a risky strategy

 The risky nature of this strategy is shown by Continental Airlines’ ill-fated

attempt to compete with Southwest Airlines.
 While maintaining its position as a full-service airline, Continental set out
to match Southwest on a number of point-to-point routes.
 The airline dubbed (đặt tên) the new service Continental Lite.
 It eliminated meals and first-class service, increased departure frequency,
lowered fares, and shortened gate turnaround time.
 Continental remained a full-service airline on other routes, it continued to
use travel agents and its mixed fleet of planes and also provide
baggage checking and seat assignments.
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 Straddling (Bành trướng)
 Trade-offs ultimately grounded
Continental Lite. The airline lost
hundreds of millions of dollars, and
the chief executive officer lost his job.
 Its planes were delayed, leaving hub
cities congested, slowed at the gate
by baggage transfers.
 Late flights and cancellations
generated a thousand complaints a
day.
 Continental tried to compete in two
ways at once and paid an enormous
straddling penalty
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 Order Winners and Order Qualifiers

 Order winner: (Tiêu chí khác biệt) a criterion, or

possibly a set of criteria, that differentiates the
products or services of one firm from those of another.
 Depending on the situation, the order-winning criteria
may be the cost of the product (price), product
quality and reliability, or any of the other
dimensions.
 Features that customers use to determine which
product to ultimately purchase

2-39
Order Winners and Order Qualifiers

 Order qualifiers (tiêu chí sàng lọc): a screening

criterion that permits a firm’s products to even be
considered as possible candidates for purchase.

2-40
 Order Winners and Order Qualifiers:
Example
 Consider your purchase of a notebook computer. You might
think that such features as screen size, weight, operating
system version, and cost are important qualifying dimensions.
 The order-winning feature that actually differentiates those
candidate notebook computers that qualify is battery life.
 In doing your search, you develop a list of computers that all
have 14-inch screens, weigh less than three pounds, run the
latest Microsoft Windows operating system, and cost less than
$1,000.
 From this list of acceptable computers, you select the one that
has the longest battery life
2-41
 Order Winners and Order Qualifiers:
Example
 In an industrial setting where a firm is deciding on a supplier, the
decision can be quite different.
 Consider a firm that is deciding on a supplier for its office supplies.
Companies such as Office Depot, OfficeMax, Quill, or Staples might
be candidates.
 Qualifying dimensions are: Can the company supply the items
needed, can the supplier deliver orders within 24 hours, are the
items guaranteed, and is a private Web-based catalog available?
 Companies that have these capabilities would qualify for
consideration as possible suppliers.
 The order winner might be the discount schedule that the company
offers on the price of the items purchased
2-42
 STRATEGIES IMPLEMENTED USING OPERATIONS AND SUPPLY
CHAIN ACTIVITIES—IKEA’S STRATEGY

 All the activities that make up a firm’s operation relate to one

another. To make these activities efficient, the firm must
minimize its total cost without compromising customers’
needs.
 IKEA: Swedish retailer of home products, implements its
strategy using a set of unique activities.
 IKEA targets young furniture buyers who want style at a low
cost. IKEA has chosen to perform activities differently from its
rivals.

2-43
STRATEGIES IMPLEMENTED USING OPERATIONS AND SUPPLY
CHAIN ACTIVITIES—IKEA’S STRATEGY

IKEA - Why are they so successful

https://www.youtube.com/watch?v=QgbtoL65X04

2-44
 STRATEGIES IMPLEMENTED USING OPERATIONS AND SUPPLY
CHAIN ACTIVITIES—IKEA’S STRATEGY

 IKEA uses a self-service model with roomlike displays where furniture

is shown in familiar settings.
 Rather than relying on third-party manufacturers, IKEA designs its
own low-cost, ready-to-assemble furniture.
 In the store there is a self-serve warehouse, where customers can pick
up products themselves and take them home the same day.
 Much of its low-cost operation comes from having customers
service themselves, but IKEA offers extra services, such as home
delivery, assembly, kitchen planning, and instore, by-appointment
interior design consultation. Those services align well with the needs
of its customers, who are young, not wealthy, and likely to have
children.
2-45
 STRATEGIES IMPLEMENTED USING OPERATIONS AND SUPPLY
CHAIN ACTIVITIES—IKEA’S STRATEGY

• Activity-system maps, such as

this one for IKEA, show how
a company’s strategic
position is contained in a set
of tailored activities designed
to deliver it.
• In companies with a clear
strategic position, a number
of higher-order strategic
themes (in darker green
circles) can be identified and
implemented through
clusters of tightly linked
activities (in lighter circles).
• The themes here all relate to
reducing operations and
supply chain–
related costs ➔ important
for the firm’s success

2-46
 SC Risk, a Picture
The devastating
earthquake and
tsunami that hit
Japan in March
2011 were a
grim reminder
that managing
risk is a critical
part of
developing an
effective
operations and
supply chain
strategy 2-47
SC Risk Examples
 Japanese Tsunami (March 2011).
 In 1996 General Motors experienced an 18-day
labor strike at a brake supplier factory.
 This strike idled workers at 26 assembly plants and
led to an estimated $900 million reduction in
earnings.
 In 1997 a Boeing supplier’s failure to deliver two
critical parts led to a loss of $2.6 billion.

2-48
SC Risk Examples
 Covid-19 impact on the supply chain
 https://vtc.vn/chuoi-cung-ung-hang-hoa-dut-gay-
giua-covid-19-cuu-bang-cach-nao-ar635418.html

2-49
Activity 2.3
 Find an example of Covid-19 impact on the supply
chain

2-50
Assessing Risk Associated with OSCM
Strategy
 All strategies have an inherent level of risk
 Uncertainty in the environment causes supply chain planners
to evaluate the relative riskiness of their strategies
 Supply chain risk is the likelihood of a disruption that
would impact the ability of a company to continuously
supply products or services
 Supply chain coordination risks (rủi ro phối hợp chuỗi cung
ứng) are associated with the day-to-day management of
the supply chain (e.g., safety stock, safety lead time,
overtime)
 Disruption risks (rủi ro gián đoạn) are caused by natural or
manmade disasters (e.g., earthquakes, hurricanes, and
terrorism)

2-51
 Risk Mitigation Framework
 1. Identify the sources of potential disruptions and assess a type
of vulnerability.
 Focus on highly unlikely events that would cause a significant
disruption to normal operations.
 2. Assess the potential impact of the risk. Here the goal is to
quantify the probability and the potential impact of the risk.
 Could be based on financial impact, environmental impact,
ongoing business viability.
 Brand image/reputation, potential human lives, and so on.

 3. Develop plans to mitigate the risk. A detailed strategy for

minimizing the impact of the risk could take many different forms,
depending on the nature of the problem.
2-52
Risk Mitigation Framework
 Risk mapping: assessment of the probability or
relative frequency of an event against the
aggregate severity of the loss.
 Depending on the evaluation, some risks might be
deemed acceptable and the related costs
considered a normal cost of doing business.
 In some cases, the firm may find it is possible to
insure against the loss. There may be other cases
where the potential loss is so great that the risk
would need to be avoided altogether.

2-53
Risk Mitigation Strategies

2-54
 Productivity Measurement
 Productivity is a measure of how well resources are used
 Productivity =
 To increase productivity ➔ make this ratio of outputs to inputs as
large as practical
 Productivity is a relative measure
 Must be compared to something else to be meaningful
◼ Operations can be compared to each other
◼ Firms can be compared to other firms
 A company can compare itself to similar operations within its
industry, or it can use industry data when such data are available
(e.g., comparing productivity among the different stores in a
franchise).
 Another approach is to measure productivity over time within the
same operation ➔ compare our productivity in one time period
with that in the next.
2-55
 Productivity Measurement
 Partial productivity measures compare output to a
single input
 Multifactor productivity measures compare output to
a group of inputs
 Total productivity measures compare output to all
inputs

2-56
Productivity Calculation

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