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2 Heizer - Om13 - ch02
2 Heizer - Om13 - ch02
Operations Strategy in
a Global Environment
HEADQUARTERS
SUPPLIER COUNTRY COMPONENT
Latecoere France Passenger doors
Labinel France Wiring
Dassault France Design and PLM software
Messier-Bugatti France Electric brakes
Thales France Electrical power conversion
system
Messier-Dowty France Landing gear structure
Diehl Germany Interior lighting
HEADQUARTERS
SUPPLIER COUNTRY COMPONENT
Cobham UK Fuel pumps and valves
Rolls-Royce UK Engines
Smiths Aerospace UK Central computer system
BAE Systems UK Electronics
Alenia Aeronautica Italy Upper center fuselage
Toray Industries Japan Carbon fiber for wing and tail
units
Fuji Heavy Industries Japan Center wing box
HEADQUARTERS
SUPPLIER COUNTRY COMPONENT
Kawasaki Heavy Japan Forward fuselage, fixed
Industries sections of wing
Teijin Seiki Japan Hydraulic actuators
Mitsubishi Heavy Japan Wing box
Industries
Chengdu Aircraft China Rudder
Hafei Aviation China Parts
Korean Airlines South Korea Wingtips
Saab Sweden Cargo and access doors
Figure 2.1
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Reasons to Globalize
Figure 2.2
Figure 2.2
Figure 2.2
Profitability and
Environment Growth
Mission
Benefit to
Society
Functional Area
Missions
Finance/
Marketing Operations Accounting
Figure 2.3
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Sample Missions
Sample OM Department Missions
Product design To design and produce products and
services with outstanding quality and
inherent customer value.
Quality management To attain the exceptional value that is
consistent with our company mission and
marketing objectives by close attention to
design, supply chain, production, and field
service opportunities
Figure 2.3
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Sample Missions
Sample OM Department Missions
Location To locate, design, and build efficient and
economical facilities that will yield high
value to the company, its employees, and the
community.
Layout design To achieve, through skill, imagination, and
resourcefulness in layout and work methods,
production effectiveness and efficiency
while supporting a high quality of work life.
Figure 2.3
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Sample Missions
Sample OM Department Missions
Supply-chain To collaborate with suppliers to develop
management innovative products from stable, effective,
and efficient sources of supply.
Inventory To achieve low investment in inventory
consistent with high customer service levels
and high facility utilization.
Scheduling To achieve high levels of throughput and
timely customer delivery through effective
scheduling.
Maintenance To achieve high utilization of facilities and
equipment by effective preventive
maintenance and prompt repair of facilities
and equipment.
Figure 2.3
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Strategy
Strategies require managers to
► Develop action plan to achieve
mission
► Ensure functional areas have
supporting strategies
► Exploit opportunities and strengths,
Product DIFFERENTIATION:
Innovative design ………... Safeskin’s innovative gloves
Broad product line ……… Fidelity Security’s mutual
Quality funds
After-sales service …….. Caterpillar’s heavy equipment
Process service
Experience …………….. Hard Rock Café’s dining
Location experience
▶ Resources view
▶ Value-chain analysis
▶ Porter’s Five Forces model
▶ Operating in a system with many
external factors
▶ Constant change
Defend market
position
Hybrid engine vehicles Xbox One
Boeing 787
3D printers
Boeing 747
Figure 2.5
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Product Life Cycle
Introduction Growth Maturity Decline
Product design Forecasting critical Standardization Little product
and development Product and Fewer rapid differentiation
critical process reliability product changes, Cost
Frequent product Competitive more minor minimization
and process changes
Strategy/Issues
product Overcapacity in
OMStrategy/Issues
Product
improvement and
cost cutting
Figure 2.5
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SWOT Analysis
Mission
Internal External
Strengths Opportunities
Analysis
Internal External
Weaknesses Threats
Strategy
Form a Strategy
Build a competitive advantage, such as low price, design, or volume
flexibility, quality, quick delivery, dependability, after-sale service,
broad product lines.
Figure 2.6
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Strategy Development and
Implementation
▶ Identify key success factors
▶ Integrate OM with other activities
▶ Build and staff the organization
Service Leverage
Distribution Cost of capital
Promotion Working capital
Channels of distribution Receivables
Product positioning Payables
(image, functions) Financial control
Lines of credit
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Activity Mapping at
Southwest Airlines
Courteous, but
Limited Passenger
Service
No meals
Lean,
Lower gate costs at secondary Point-to-Point
Productive airports Routes, Often to
Employees
High number of flights reduces Secondary Airports
employee idle time between flights
Competitive Advantage:
Low Cost
High Frequent,
Aircraft Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
Figure 2.8
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Activity Mapping at
Southwest Airlines
Courteous, but
Limited Passenger
Service
Lean, Point-to-Point
Productive Routes, Often to
Employees Secondary Airports
High number of flights reduces
employeeCompetitive
idle time between Advantage:
flights
Saturate a city with Low
flights,Cost
lowering
administrative costs per passenger
High for that city Frequent,
AircraftPilot training required on only Reliable
Utilization one type ofStandardized
aircraft Schedules
Reduced maintenance inventory
Fleet of Boeing
required because of only one type of
737 Aircraft
aircraft
Figure 2.8
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Activity Mapping at
Southwest Airlines
Courteous, but
Limited Passenger
Service
Pilot training required on only
one type of aircraft
Lean, Point-to-Point
Productive Reduced maintenance inventory Routes, Often to
Employees required because of only one type Secondary
of Airports
aircraft
Competitive
Excellent supplierAdvantage:
relations with
Boeing have aided financing
Low Cost
High Frequent,
Aircraft Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
Figure 2.8
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Activity Mapping at
Southwest Airlines
Courteous, but
Limited Passenger
Service
Lean, Point-to-Point
Productive Routes, Often to
Employees Secondary Airports
Reduced maintenance inventory
required because of only one type of
Competitive Advantage:
aircraft is used
Low Cost
Flexible employees/unions and
standard planes aid scheduling
High Maintenance personnel trained Frequent,
on
Aircraft only one type of aircraft Reliable
Utilization 20-minute gate turnaroundsSchedules
Standardized
Fleet of Boeing
737 Aircraft
Figure 2.8
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Activity Mapping at
Southwest Airlines
Courteous, but
LimitedAutomated
Passengerticketing
Service
Empowered employees
High employee compensation
Lean, Point-to-Point
Hire for attitude, then train
Productive Routes, Often to
Employees High level of stock ownership
Secondary Airports
High number of flights reduces
Competitive
employeeAdvantage:
idle time between flights
Low Cost
High Frequent,
Aircraft Reliable
Utilization Standardized Schedules
Fleet of Boeing
737 Aircraft
Figure 2.8
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Implementing Strategic Decisions
TABLE 2.1 Operations Strategies of Two Drug Companies
BRAND NAME DRUGS, INC. GENERIC DRUGS CORP.
COMPETITIVE PRODUCT DIFFERENTIATION LOW-COST STRATEGY
ADVANTAGE STRATEGY
Product Heavy R&D investment; extensive labs; Low R&D investment; focus on
selection and focus on development in a broad range development of generic drugs
design of drug categories
Quality Quality is major priority, standards Meets regulatory requirements on a
exceed regulatory requirements country-by-country basis, as necessary
Process Product and modular production Process focused; general production
process; tries to have long product runs processes; “job shop” approach, short-
in specialized facilities; builds capacity run production; focus on high utilization
ahead of demand
Location Still located in city where it was founded Recently moved to low-tax, low-labor-
cost environment
▶ Subcontracting - contract
manufacturing
▶ Outsourced activities
► Legal services
► IT services ► Payroll
► Travel ► Production
services ► Surgery
Score for BIM = (.2 * 3) + (.2 * 4) + (.2 * 5) + (.1 * 4) + (.1 * 5) + (.1 * 4) + (.1 * 2) = 3.9
International
strategy
• Import/export or
Cost Reduction
license existing
product
Examples:
U.S. Steel
Harley-Davidson
Low
Low High
Local Responsiveness
(Quick Response and/or Differentiation)
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Global Operations Strategy
Options
High
Figure 2.9
Cost Reduction
International
strategy
• Import/export or
license existing
product
Examples:
U.S. Steel
Harley-Davidson
Low
Low High
Local Responsiveness
(Quick Response and/or Differentiation)
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Global Operations Strategy
Options
High
Figure 2.9
Global
strategy
• Standardize product
• Economies of scale
Cost Reduction
• Cross-cultural
learning
International
strategy
• Import/export or
Examples:
license existing
product
Texas
Examples:
Instruments
Caterpillar
U.S. Steel
Harley-Davidson
Low
Otis Elevator
Low High
Local Responsiveness
(Quick Response and/or Differentiation)
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Global Operations Strategy
Options
High Global strategy
Figure 2.9
• Standardize product
• Economies of scale
• Cross-cultural learning
Examples:
Texas Instruments
Cost Reduction
Caterpillar
Otis Elevator
International
strategy
• Import/export or
license existing
product
Examples:
U.S. Steel
Harley-Davidson
Low
Low High
Local Responsiveness
(Quick Response and/or Differentiation)
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Global Operations Strategy
Options
High
Multidomestic
Global strategy
Figure 2.9
• Standardize product
strategy
• Economies of scale
• Cross-cultural learning
• Use existing domestic
Examples:
model globally
Texas Instruments
Cost Reduction
• Franchise, joint
Caterpillar
Otis Elevator
ventures, subsidiaries
International
strategy
Examples:
• Import/export or
Heinz, McDonald’s
license existing
product
Examples:
The Body Shop
Hard Rock Cafe
U.S. Steel
Harley-Davidson
Low
Low High
Local Responsiveness
(Quick Response and/or Differentiation)
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Global Operations Strategy
Options
High Global strategy
Figure 2.9
• Standardize product
• Economies of scale
• Cross-cultural learning
Examples:
Texas Instruments
Cost Reduction
Caterpillar
Otis Elevator
Multidomestic
International
strategy
strategy
• Use existing domestic
• Import/export or model globally
license existing • Franchise, joint
product ventures, subsidiaries
Examples:
Examples: Heinz, McDonald’s
U.S. Steel The Body Shop
Harley-Davidson Hard Rock Cafe
Low
Low High
Local Responsiveness
(Quick Response and/or Differentiation)
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Global Operations Strategy
Options
High Global strategy
• Transnational
Standardize product
Figure 2.9
•
• strategy
Economies of scale
Cross-cultural learning
Caterpillar
Otis Elevator
boundaries
•International Multidomestic
Economies of scale strategy
strategy
•
• Cross-cultural
Import/export or
learning
• Use existing domestic
model globally
license existing • Franchise, joint
Examples:
product ventures, subsidiaries
Coca-Cola, Nestlé
Examples:
Examples:
Heinz, McDonald’s
U.S. Steel The Body Shop
Harley-Davidson Hard Rock Cafe
Low
Low High
Local Responsiveness
(Quick Response and/or Differentiation)
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Global Operations Strategy
Options
High Global strategy Transnational
strategy Figure 2.9
• Standardize product
• Economies of scale • Move material, people,
• Cross-cultural learning or ideas across
national boundaries
Examples: • Economies of scale
Texas Instruments • Cross-cultural learning
Cost Reduction
Caterpillar Examples:
Otis Elevator Coca-Cola, Nestlé
International Multidomestic
strategy
strategy
• Import/export or (eg, Heinz, McDonald’s
license existing The Body Shop
product Hard Rock Cafe)
• Use existing domestic
Examples: model globally
U.S. Steel • Franchise, joint
Harley-Davidson ventures,
subsidiaries
Low
Low High
Local Responsiveness
(Quick Response and/or Differentiation)
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Ranking Corruption
Rank Country 2017 CPI Score
(out of 100)
1 New Zealand 89
2 Denmark 88
3 Finland, Norway, Switzerland 85
6 Singapore, Sweden 84
Least
Corrupt 8 Canada, UK 82
12 Germany 81
16 USA 75
20 Japan 73
51 South Korea 54
77 China 41
135 Mexico, Russia 29
Most
Corrupt
180 Somalia 9