REVIEWER ON CH 3_Operations Strategy

Competitive Advantage Competitive Priorities

A firm’s ability to achieve market and The strategic emphasis that a firm places on
financial superiority over its competitors. certain performance measures and
operational capabilities within a value chain
Requires:
• Types:
– Understanding of customer NEEDS
and EXPECTATIONS - Cost - Flexibility
– Building and leveraging operational - Quality - Innovation
capabilities to support desired
competitive priorities - Time

Understanding Customer Wants and Cost

Needs
Understood by segmenting customers based
on their unique wants and needs
– Order Qualifiers: basic customer
expectations
Low prices can be achieved by:
 High Productivity
 High Capacity Utilization
 Achieving economies of scale

 minimum performance level required  Efficient design and operation of the

to stay in business supply chain

– Order Winners: goods and service  Improvement in Quality

features and performance
characteristics that differentiate one
CBP from another Quality

 Help win the customers

Evaluating Goods and Services

Search Attributes

- Aspects of a good or service that a

customer can determine prior to purchase

Experience Attributes

- Aspects of a good or service that can be

discerned only after making a purchase or
during consumption or use

Credence Attributes
Time
- Aspects of a good or service that the
customer believes in and cannot be Important source of competitive advantage
discerned even after making a purchase • Customers demand:
and consumption
 Quick response
How Customers Evaluate Goods and
Services  Short waiting times

 Consistency in Performance

• Reductions

 Accomplished by streamlining and

simplifying processes and value
chains

 Drive improvements in quality, cost,

and productivity

Flexibility
• Manifests in mass: customization
strategies
• Mass Customization: ability to make
goods and services that global
customers require at any volume and
time.
Innovation
• Discovery and practical application or
commercialization of a device,
method, or idea that differs from
existing norms
• Innovative companies focus on:
– Outstanding product research,
design, and development
– High product quality
– Ability to modify production
facilities to produce new
products frequently
OM and Strategic Planning
Strategy is a pattern or plan that integrates
an organization’s major goals, policies, and
action sequences into a cohesive whole
• Effective Strategies:
– Developed around competitive
priorities
– Provide focus for an organization
and exploits its core competencies
• Core Competencies: Strengths
unique to an organization
Strategic Planning
• Process of determining long-term goals,
policies, and plans for an organization
• Helps an organization build a strong
position to achieve its goals, despite
unforeseen external factors
Levels of Strategy, P1
• Corporate Strategy
–Defines businesses in which
corporations participate and develop
plans for:
• Acquisition and allocation of
resources among strategic business
units (SBUs)
• Business Strategy
– Helps make decisions about the
competitive priorities that SBUs
need to pursue to gain
competitive advantage
Levels of Strategy, P2
• Functional Strategy
– Set of decision that each functional
area develops to support its
particular business strategy
• Operations Strategy
– Set of decisions made across value
chains that support implementation
of higher-level business strategies
– Developed by translating
competitive priorities into
operational capabilities
Sustainability & Operations Strategy
• Type of an organizational strategy and is
also considered corporate strategy by
some companies
–Requires innovation in value chains,
operations design, and day-to-day
management activities
• Dimensions
 Environmental
 Social
 Economic
Global Supply Chains & Operations
Strategy
Multinational Enterprise
- An organization that sources, markets,
and produces its goods and services in
several countries to minimize costs,
maximize profit, customer satisfaction,
and social welfare.
Operations Design Choices
- Decisions made for determining the
process structures that are best suited
for producing goods or creating
services
Address:
1. Types of processes
2. Value chain integrations and
outsourcing
 3. Technology
4. Capacity and facilities
5. Inventory and service capacity
6. Trade-offs

Infrastructure

- Focuses on non process features and the

capabilities of an organization

Includes:

 Workforce

 Operating Plans and Control Systems

 Quality control

 Organizational structure

 Compensation systems

 Learning and innovation systems

 Support Services

Hill’s Four Key Decision Loops

Mc Donald’s

Mc Donald’s

• Vision: be the world’s best quick-service

restaurant experience

• Strategies:

a. Be the Best Employer

b. Deliver Operational Excellence

c. Achieve Enduring Profitable Growth

• Sustainability Initiatives

 Build a sustainable McDonald’s

that involves all facets of our
business.

 Commit to a three-pronged
approach—reduce, reuse, and
recycle.

 Work with suppliers and outside

experts to continuously improve
purchasing decisions and
evaluation of supplier
performance regarding animal
welfare.