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Business
Strategy
Context for
Operations
Strategy
Chapter 1
McGraw-Hill/Irwin
Operations Strategy
Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.
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What is strategy?
 Strategic thinking has its roots in military
strategy
 “The branch of military science dealing with
military command and the planning and conduct
of a war.”

 And has evolved to focus on business
 “An elaborate and systematic plan of action.”
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Competitive Strategy: The Positioning View
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Competitive Strategy: The Positioning
View
 Options for firm positioning:
 Cost leadership
 Differentiation
 Focus

 And, within each of the three:
 Variety-based
 Needs-based
 Access-based
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Competitive Strategy: The Positioning
View
 SWOT Analysis
 Strengths
 Weaknesses
 Opportunities
 Threats
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Concerns with the Positioning View
 Too narrowly focused on industry and
product economics rather than customer
economics
 Allows too few options for positioning.
Looking at conflicts among positions might
lead to new options.
 Relies too much on analytical tools
 Does not acknowledge the need for learning
and adaptation over time
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Competitive Strategy: The Resource-
Based View
 Competitive advantage is derived from the
firm’s development of unique bundles of
resources and capabilities that are:
 Inimitable: are difficult or costly to imitate or
replicate
 Valuable: allow the firm to improve its market
position relative to competitors
 Rare: in relatively short supply
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Competitive Strategy: The Resource-
Based View
 Resource: an observable, but not necessarily
tangible, asset that can be valued and traded
 e.g., brand, patent, parcel of land, license
 Asset or input to production than an organization owns,
controls or has access to on a semi-permanent basis
 Capability: not observable, and hence necessarily
intangible, cannot be valued and changes hands
only as part of an entire unit
 Processes, activities or functions performed within a
system
 Utilize the organization's resources
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Competitive Strategy: The Resource-
Based View
 Types of capabilities
 Process-based
 e.g., McDonald’s
 Systems- or coordination-based
 e.g., Ritz-Carlton
 e.g., Southwest Airlines
 Organization-based
 e.g., Nucor Steel
 Network-based
 e.g., Zara
 e.g., Dell
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Competitive Strategy: Integrating the
Positioning and Resource-Based Views


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How Strategy Is Made
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Levels of Strategy-Making
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Business Strategy: Views the Firm
Might Take
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Business Strategy: Focus on the
Customer
 Types of customer needs
 Must haves
 Linear satisfiers
 Delighters
 Neutral
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Business Strategy: Dimensions along
which Customers Assess Performance
 Cost
 Quality
 Availability
 Features/Innovativeness
 Environmental performance
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Business Strategy: Dimensions along
which Customers Assess Performance
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Business Strategy: Making Tradeoffs in
Positioning


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Strategy-Making in Context
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Strategy-Making: Cross-Functional
Participation


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Operations Strategy: Goals
 Cost
 Quality
 Availability
 Features/Innovativeness
 Environmental Performance
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Operations Strategy: Connecting Operations
Goals to Customer Concerns
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Operations Strategy: Decision
Categories
 Structural decisions
 Vertical integration
 Process technology
 Capacity
 Facilities

 Infrastructural decisions
 Sourcing
 Information technology
 Supply chain
coordination
 Business processes and
policies
 Capabilities development
 Lean operation
 Quality
 Flexibility
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Strategy-Making: Step 1
 Understand what position the firm wants to or can
take in the marketplace by learning about:
 Competitors
 Suppliers
 Complementary product or service offerings and firms
offering them
 Spaces outside the industry into which the firm might
expand
 Customer needs in terms of:
 Cost
 Quality
 Availability
 Features/innovativeness
 Environmental performance
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Strategy-Making: Step 2
 Understand what capabilities the firm has to
offer, can or should develop both within and
across the key functional areas of the firm:
 Operations
 Marketing
 Research and development
 Human resources
 Finance and accounting
 As well as outside the firm with supply chain
partners
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Strategy-Making: Step 3
 Integrate or synthesize the activities and
capabilities of the functions to achieve:
 Coherent strategic fit in support of a desired
strategic direction
 Development of a set of capabilities to pursue a
new strategic direction
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Integrated Strategy-Making
Framework