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Operations Strategy and Competitive Priorities

Understanding Customer Wants and Needs
Dissatisfiers: requirements that are expected in a good or service. If these features are not present, the customer is dissatisfied, sometimes very dissatisfied.
Satisfiers: requirements that customers say they want.

Exciters/delighters: new or innovative good or service features that customers do not expect.

Understanding Customer Wants and Needs
Basic customer expectations - dissatisfiers and satisfiers – are generally considered the minimum performance level required to stay in business and are often called order qualifier.
Order winners are goods and service features and performance characteristics that differentiate one customer benefit package from another, and win the customer's business.

price. furniture. and smell. clothing.Understanding Customer Wants and Needs Search attributes are those that a customer can determine prior to purchasing the goods and/or services. These attributes include things like color. style. and houses are high in search attributes. . freshness. hardness. feel. Goods such as supermarket food. automobiles. fit.

taste. wearability. and customer satisfaction. safety. . fun.Understanding Customer Wants and Needs Experience attributes are those that can only be discerned after purchase or during consumption or use. Examples of these attributes are friendliness.

the knowledge of a tax advisor. or the accuracy of tax preparation software. Examples would include the expertise of a surgeon or mechanic. but cannot personally evaluate even after purchase and consumption.Understanding Customer Wants and Needs Credence attributes are any aspects of a good or service that the customer must believe in. .

How Customers Evaluate Goods and Services .

Competitive Priorities Competitive advantage denotes a firm’s ability to achieve market and financial superiority over its competitors. . Competitive priorities represent the strategic emphasis that a firm places on certain performance measures and operational capabilities within a value chain.

Competitive Priorities  Cost  Quality  Time  Flexibility  Innovation .

. A strong competitive advantage is driven by customer needs and aligns the organization's resources with its business opportunities. or sunk costs.Competitive Priorities Every organization is concerned with building and sustaining a competitive advantage in its markets. often because of a firm’s culture. A strong competitive advantage is difficult to copy. habits.

Interlinking Quality and Probability Performance .

.Competitive Priority – Quality Competitive strategies often led to tradeoffs between quality and cost. some company strategies are willing to sacrifice quality in order to develop a low cost advantage.

Time Time is perhaps the most important source of competitive advantage. . FedEx. Customers demand quick response. Dell. Many firms use time as a competitive weapon to create and deliver superior goods and services such as Charles Schwab. CNN. Clarke American Checks. short waiting times. and consistency in performance. and Wal-Mart.Competitive Priority -.

and more often on-time. First. they speed up work processes so that customer response is improved. reductions in processing time can only be accomplished by streamlining and simplifying processes and value chains to eliminate nonvalue-added steps such as rework and waiting time.Competitive Priority -.Time Reductions in processing (flow) time serve two purposes. Deliveries can be made faster. Second. .

cost. and productivity.Time Processing (flow) time reductions often drive simultaneous improvements in quality.Competitive Priority -. .

. High-levels of flexibility might require special strategies such as modular designs. interchangeable components. and operations around flexibility. and postponement strategies. services.Competitive Priority -Flexibility Mass customization requires companies to align their activities around differentiated customer segments and design goods.

Flexible operations may also require attention to outsourcing decisions. agreements with key suppliers.Competitive Priority -. . because delayed shipments and a complex supply chain can hinder flexibility. and innovative partnering arrangements.Flexibility Flexible operations require sharing manufacturing lines and specialized training for employees.

.Competitive Priority -Flexibility Mass customization is being able to make whatever goods and services the customer wants. at any volume. and for a global organization. at any time for anybody. from any place in the world.

. or idea that differs from existing norms. method. Innovations in all forms encapsulate human knowledge.Competitive Priority -Innovation Innovation is the discovery and practical application or commercialization of a device.

computers. and cell phones. Management practices such as customer satisfaction surveys. refrigerators. and Internet banking Manufacturing such as computer-aided design. quantitative decision models. Services such as self-service. and smart tags.Competitive Priority -. all-suite hotels. health maintenance organizations. optical fiber. automobiles. and Six Sigma. . robotic automation. satellites.Innovation Innovations take many forms such as: Physical goods such as telephones.

and action sequences into a cohesive whole.which provide a focus for the entire organization.Strategic Planning Strategy is a pattern or plan that integrates an organization’s major goals.such as low cost or fast service time . . Effective strategies develop around a few key competitive priorities . policies.the strengths unique to that organization. and exploit an organization’s core competencies .

and so on . research and development. A Business strategy defines the focus for SBUs. engineering. . operations.Strategic Planning Most large organizations have three levels of strategy: A Corporate strategy is necessary to define the businesses in which the corporation will participate and develop plans for the acquisition and allocation of resources among those businesses. what competitive priorities the firm should pursue A Functional strategy is the set of decisions that each functional area marketing. finance. that is.develops to support its particular business strategy. The major decisions involve which markets to pursue and how best to compete in those markets.

Whoever has superior operational capability over the long term is the odds-on-favorite to win the industry shakeout . Managers recognize that the value (supply) chain can be leveraged to provide a distinct competitive advantage.Strategic Planning The operations strategy is how an organization’s processes are designed and organized to produce the type of goods and services to support the corporate and business strategies. and that operations is a core competency for the organization.

financial and societal risks. industry structure and non-industry competitors. the competitive environment. for making key long-term business decisions. human resource capabilities and needs. The process typically takes into account customer and market requirements. technological capabilities.Strategic Planning Process Strategy development refers to a company's approach. . formal or informal. and supplier capabilities.

Revise/Develop Strategy Step 4 .Review/Analyze Existing Strategic Directions and Documents Step 3 . and resource allocation plans .Deploy Objectives and Action Plans Step 5 .Strategic Planning Process The major steps are as follows: Step 1 . policies.Review Progress and Results Step 6 .Gather and Analyze Strategic Performance Data Step 2 .Continually Evaluate and Improve The next step is to translate business strategy into operations strategy.

Strategic Planning Process The strategic mission of a firm defines its reason for existence. Example Strategic Vision: . The strategic vision (SV) describes where the organization is headed and what it intends to be.

Values are reinforced through conscious and subconscious behavior at all levels of the organization .Values are attitudes and policies for all employees to follow that direct the journey to achieving the organization’s vision.

Example: Strategic Values for a leading restaurant are: .

.Operations Strategy An operations strategy defines how an organization will execute its chosen business strategies. For example. if corporate objectives are to be the low cost and mass market producer of a good then adopting an assembly line type of process is how operations can help achieve this corporate objective. Operating decisions must be aligned with achieving the desired competitive priorities. 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.

Operations Strategy and Competitive Priorities • • Professor Terry Hill’s Strategy Development Framework 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.       Types of processes and alternative designs Supply chain integration and outsourcing Technology Capacity and Facilities (size. location) Inventory Trade-off Analysis . timing.

Hill’s Strategy Development Framework .

 quality control.  compensation systems.Operations Strategy and Competitive Priorities • • • Hill’s Strategy Development Framework Infrastructure focuses on the non-process features and capabilities of the organization and includes the  workforce.  organizational structure. . and  support services.  learning and innovation systems.  operating plans and control systems.

Four Key Decision Loops in Terry Hill’s Generic Strategy Framework .

Being the best means providing outstanding quality.Operations Strategy and Competitive Priorities • • Hill’s Strategy Framework Applied to McDonald’s McDonald's vision is to be the world's best quick service restaurant experience. service. cleanliness and value. we focus on three worldwide strategies: » (1) » (2) » (3) Be The Best Employer Deliver Operational Excellence Achieve Enduring Profitable Growth • • Customer Benefit Package Design and Strategy Strategy Development for McDonald’s . To achieve our vision. so that we make every customer in every restaurant smile.

McDonald’s Customer Benefit Package .

Applying the Hill’s Strategy Development Framework to McDonald’s (slide 1) .

Applying the Hill’s Strategy Development Framework to McDonald’s (slide 2) .