Chapter Two

Operations Strategy &

Competitiveness

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 Operation strategy and Competitive
Priorities
• Strategies
–Plans for achieving organizational goals.
• Operations strategy: A long-range plan for the
operations function to support the business
strategy.

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 Developing Business Strategy
• Factors to be considered

Mission: what business the company is in?

Environmental Scanning: understanding of the
market.

Core Competencies: identifying the company’s

strengths

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 Developing an Operations Strategy
• Once a business strategy has been developed, an
operations strategy must be formulated.
• This will provide a plan for the design and
management of the operations function in ways
that support the business strategy.

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• The operations strategy relates the business
strategy to the operations function.
• The operations strategy focuses on specific
capabilities of the operation that give the
company a competitive edge.
• These capabilities are called competitive
priorities.
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 Competitive priorities
• Operations managers must work closely with
marketing in order to understand the
competitive situation.
• how effectively an organization meets the wants
and needs of customers relative to others that
offer similar goods or services.

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• There are four broad categories of competitive
priorities:

1. Cost: offering a product at a low price relative

to the prices of competing products.
• Low cost does not imply low quality. E.g
Ryanair airlines

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2. Quality: Many companies claim that quality is
their top priority, and many customers say that
they look for quality in the products they buy.
• Has two aspects;

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• Product design quality; involves making sure
the product meets the requirements of the
customer.
• Process quality; deals with designing a process
to produce error-free products.

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3. Time or speed: competing based on all time-
related issues, such as rapid delivery and on-
time delivery.
• Rapid delivery: how quickly an order is
received.
• On-time: how often deliveries are made on
time.

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4. Flexibility: the ability to readily accommodate
changes.
• There are two dimensions of flexibility.
• Product flexibility: the ability to offer a wide
variety of goods or services and customize them
to the unique needs of clients.
• Volume flexibility: the ability to rapidly increase
or decrease the amount produced in order to
accommodate changes in the demand.
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1. Cost

2. Quality Tradeoffs

3. Time

4. Flexibility

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• To help a company decide which competitive
priorities to focus on, it is important to
distinguish between order winners and order
qualifiers;
• Order qualifiers: Competitive priorities that
must be met for a company to qualify as a
competitor in the marketplace.
• Order winners: Competitive priorities that win
orders in the marketplace.

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• Consider a simple restaurant that makes and
delivers Tea.
• Order qualifiers might be low price (say, 5 birr)
and quick delivery (say, 15 minutes) because
this is a standard that has been set by
competing restaurants.
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