Operations Management as a Competitive Weapon

Module 1:

Operations Strategy
OM Course Framework

Strategic Issues Tactical Issues Operational Issues

Operations
Strategy Capacity
The theory
of
constraints MRP
Process (TOC) is a

Analysis
management Location Just-in-time, or
paradigm
that views JIT, is an
any inventory
JIT
Manufacturing manageable management
system as method in which
Design & being limited Inventory goods are
Selection in achieving received from
suppliers only as
more of its
goals by a they are needed.
Material requirements planning is a The main
very small
production planning, scheduling, and
inventory control system used to
number of Aggregate objective of this
TOC
Planning
constraints. method is to
manage manufacturing processes. reduce inventory
Most MRP systems are holding costs and
software-based, but it is possible to increase inventory
conduct MRP by hand as well. Module 01: Operations Strategy turnover. 2
 Learning Objectives
At the end of this module, each student will be able to:

1. Evaluate the strategic process of any org.

2. Explain competitive dimensions

3. Understand marketing-operations link

4. Identify some basic business strategies

Module 01: Operations Strategy 3
1. Strategic Process

Mission

Module 01: Operations Strategy 4

 Mission Examples

1. Levi Strauss a. Colorful visual expression

b. Ladies & gentlemen serving
2. Motorola
Ladies & gentlemen
3. Intel
c. Branded casual apparel
4. Ritz Carlton d. Building blocks to computer
5. Binney & Smith industry
(Crayola) e. Total customer
satisfaction
Module 01: Operations Strategy 5
Strategic Process

Mission

Business
Strategy

Marketing Operations Fin/Acct

Strategy Strategy Strategy

Module 01: Operations Strategy 6

 Core Competencies

 Collective knowledge and skills an

organization has that distinguish it from
the competition.

 Typically centers on an organization’s

ability to integrate a variety of specific
technologies and skills in the development
of new products and services.

Module 01: Operations Strategy 7

 Core Competencies (cont.)

 Are basis on which new products are

developed.
 Better to think of organization in terms of
its portfolio of core competencies than as a
portfolio of products.
 Identifying and developing core
competencies is one of top management’s
most important roles.
Module 01: Operations Strategy 8
Examples of Core Competencies

 Sony - miniaturization
 3M - knowledge of substrates,
coatings and adhesives
 Black and Decker - small electrical
motors and industrial design
 Honda - engines and power trains
Module 01: Operations Strategy 9
Typical Use of Core Competencies

 Cannon
 Core competencies in optics, imaging,
and electronic controls
 Products include copiers, laser printers,
cameras, and image scanners.
 Boeing
 Integrating large scale systems
 Commercial jetliners, space stations,
missiles
Module 01: Operations Strategy 10
 Core Competencies Characteristics

 Used to gain access to a variety of

markets
 Should be strongly related to key
benefits provides by products or
services
 Should be difficult to imitate
Module 01: Operations Strategy 11
Total Strategic Process

Core achieve
competencies competitive
affect
Company advantage
Mission

Business
Strategy

Marketing Operations Fin./Acct.

Strategy Strategy Strategy

Module 01: Operations Strategy 12

2. Competitive Dimensions

 Cost
 Quality
 High performance design (Lexus)
 Consistency (Coke)
 Dependability
 Rapid (Domino’s Pizza)
 On-time (Federal Express)
 Flexibility
 Variety (Emergency room)
 Volume (Supermarkets)
Module 01: Operations Strategy 13
3. Marketing-Operations Link

OM Marketing
Produce goods Investigate demand;
and services establish dist. chain
Costs Price
Schedule Delivery promise
Flexibility Number of models

High quality Repeat sales

Module 01: Operations Strategy 14
Marketing-Operations Link (cont.)

 Order qualifier An order qualifier is a characteristic

of a product or service that is
required in order for the
product/service to even be
considered by a customer.

 Order winner An order winner is a characteristic

that will win the bid or customer's
purchase. Therefore, firms must
provide the qualifiers in order to
get into or stay in a market.

Module 01: Operations Strategy 15

4. First-to-Market Strategy

 Products available before competition

 Strong applied research capability

needed

 Can set high price to skim market or

set lower price to gain market share

Module 01: Operations Strategy 16

Second-to-Market Strategy

 Quick imitation of first-to-market

companies

 Less emphasis on applied research

and more emphasis on development

 Learn from first-to-market’s

mistakes
Module 01: Operations Strategy 17
 Late-to-Market Strategy

 Wait until market becomes standardized

and large volumes demanded

 Compete on basis of costs instead of

product features

 Research efforts focus on process

development versus product development

Module 01: Operations Strategy 18