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Strategic Reconciliation. Market Requirements. OPERATIONS STRATEGY. Operations Resources. Performance objective B. Performance objective A. Time, trade-offs and targeting. ?. Topics in operations strategy treated in this chapter.

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Topics in operations strategy treated in this chapter

Strategic Reconciliation

Market Requirements

OPERATIONS STRATEGY

Operations Resources

Performance objective B

Performance objective A

Time, trade-offs and targeting

?

Topics in operations strategy treated in this chapter


Topics in operations strategy treated in this chapter

The “technological” specification of its product/service?

PRODUCT/SERVICE TECHNOLOGY

OPERATIONS

MARKETING

The way it positions itself in its market?

The way it produces its goods and services?

Where does the business get its competitive advantage?


Topics in operations strategy treated in this chapter

PRODUCT / SERVICE TECHNOLOGY product/service?

PRODUCT / SERVICE TECHNOLOGY

OPERATIONS

MARKETING

PRODUCT

SERVICE

TECHNOLOGY

MARKETING

OPERATIONS

MARKETING

OPERATIONS

The contribution of each area will change over time


Topics in operations strategy treated in this chapter

STRATEGIES OF VOLKSWAGENWERK product/service?

1920 - 1992

BEFORE 1948

FERDINAND PORSHE - ‘PEOPLES CAR’ 1920s

GOVERNMENT SUPPORT 1934 - PLANT ON STREAM

1939

1939 WAR - PLANT TURNED TO PRODUCTION OF WAR VEHICLES

1948 NORDHOFF PUT IN CHARGE

1948

NORDHOFF TAKES HALF A STRATEGY - PEOPLES CAR

ADDS EMHPASIS ON QUALITY, TECHNICAL, EXPORT, SERVICE STANDARDS

1949 - 1958

INTENDED STRATEGY REALIZED

CAR IDEAL FOR POST WAR CONDITIONS

RAPID EXPANSION IN VOLUME

NO NEW MODELS (WORK ON NEW MODEL HALTED IN 1954)


Topics in operations strategy treated in this chapter

1959 product/service?

INCREASED COMPETITION AND CHANGES IN TASTES

RESPONSE - INCREASED ADVERTISING

- DESIGN STARTED FOR 1500

ORIGINAL STRATEGY UNCHANGED IN ESSENTIALS

  • 1960 - 1964

  • 1500 MODEL INTRODUCED

  • SALES INCREASED BUT PROFITS SQUEEZED

  • 1965 - 1975

  • PRESSURES OF COMPETITION BECOME SEVERE

  • NEW STRATEGY FROM AUDI - FRONT WHEELED DRIVE, STYLISH, WATERCOOLED

  • OTHER LINES DROPPED

  • PRODUCTION RATIONALISED ON WORLD BASIS

  • MARKETING EMPHASISED PERFORMANCE, RELIABILITY AND SERVICE

  • 1976 - 1989

  • GOLF ESTABLISHED AS MARKET LEADER

    • CONTINUED EMPHASIS ON TECHNICAL EXCELLENCE

  • OLD DESIGNS PERIODICALLY FASHIONABLE

  • MAIN EUROPEAN COMPETITOR SEEN AS FIAT

  • SOME PRESSURE FROM JAPANESE MANUFACTURING


Topics in operations strategy treated in this chapter

1990 - 1996 product/service?

INCREASING PRESSSURE ON COSTS FROM JAPANESE MANUFACTURERS

GERMAN LABOUR COSTS AND EXCHANGE RATE ARE DISADVANTAGEOUS

LATTERLY EUROPEAN RECESSION INCREASES PRESSURE

COST CUTTING MEASURES - EAST EUROPEAN PLANT - AGGRESSIVE PURCHASING

1997 - 2000

DEVELOPING SEPARATE BRANDING STRATEGIES TO OCCUPY DIFFERENT MARKET SEGMENTS

DEVELOP SEPARATE PRODUCTS FROM COMMON PLATFORMS TO REDUCE COST

CONTINUE AGGRESSIVE COST REDUCTION AND PROCESS IMPROVEMENT


Topics in operations strategy treated in this chapter

MINTZBERG’S CONCEPT OF EMERGENT STRATEGIES product/service?

NOT ALL INTENDED STRATEGIES ARE REALISED

and …...

NOT ALL REALISED STRATEGIES ARE INTENDED

DELIBERATIVE STRATEGIES

UNREALISED STRATEGIES

EMERGENT STRATEGIES

Emergent strategies derive from the shared understanding of managing the resources of the organization

The concept of emergent strategies therefore has a particular significance for operations strategy


Topics in operations strategy treated in this chapter

Operations Resources product/service?

Strategic Reconciliation

Market Requirements

Emerging, any working vehicle

Building up capacity and capability

1946-1951

Implementing strategy

Simple design

Systemisation of resources and processes

Maturing, simple robust vehicle

1952-1958

Continuity of strategy

Standardized design

1959-1964

Minor change and continuity

More sophisticated performance, quality

Minor reconfigura-tion for new model

New 1500 model

1965-1970

Searching for viable strategy

Uncertain rejection of VW traditional products

Fragmented acquisition of new resources

Multiple new designs

Market requirements, operations resources and strategic reconciliation at VW for half a century


Topics in operations strategy treated in this chapter

Operations Resources product/service?

Strategic Reconciliation

Market Requirements

Clarifying around style, quality and variety

Adapt best practices from enlarged group

1971-1975

Emergent strategy

Defined range

Accommodate new models and acquisitions

1976-1989

Continuing with minor changes

Segmentation around performance, style and variety

Product development paths

Drastic reconfiguration to increase efficiency, reduce costs

1990-1996

Major change (internal)

Design for low-cost manufacture

Increasingly competitive around price

Continuous process improvement and cost reduction

Branding with price, quality, and style

1997-2000

Implementing strategy

Common product platforms

Market requirements, operations resources and strategic reconciliation at VW for half a century


Topics in operations strategy treated in this chapter

Realised Strategy product/service?

Deliberate Strategy

Intended Strategy

Unrealized Strategy

Emergent Strategy

Mintzberg’s concept of emergent strategy


Topics in operations strategy treated in this chapter

Order winners and product/service?qualifiers

Positive

Order Winners

Neutral

Competitive Benefit

Qualifiers

Negative

Low

High

Achieved Performance


Topics in operations strategy treated in this chapter

Adding ‘Delights’ product/service?

Positive

Delights

Order Winners

Neutral

Competitive Benefit

Qualifiers

Negative

Low

High

Achieved Performance


Topics in operations strategy treated in this chapter

Delights become order winners and order winners become qualifiers

Positive

Delights

Order Winners

Neutral

Competitive Benefit

Qualifiers

Negative

Low

High

Achieved Performance


Topics in operations strategy treated in this chapter

What service dimensions are delight, order winners and qualifiers – now, and in the future?

Today

Tomorrow

Delights

Order Winners

Qualifiers


Topics in operations strategy treated in this chapter

Budget Hotel Chain qualifiers – now, and in the future?

Today

Tomorrow

Delights

Central reservation

Order Winners

Central reservation

Location (autoroutes)

Location (autoroutes)

Location (restaurants)

Price

Loyalty cards

Qualifiers

Location (restaurants)

Price

Loyalty cards

Cleanliness

Décor

Cleanliness

Décor

Service

?


Topics in operations strategy treated in this chapter

Budget Hotel Chain qualifiers – now, and in the future?

Today

Tomorrow

Delights

Price

Central reservation

Order Winners

Central reservation

Location (autoroutes)

Location (restaurants)

Location (autoroutes)

Location (restaurants)

Price

Loyalty cards

Qualifiers

Location (restaurants)

Price

Loyalty cards

Cleanliness

Décor

Cleanliness

Décor

Service

?


Topics in operations strategy treated in this chapter

Budget Hotel Chain qualifiers – now, and in the future?

What aspects of service will form tomorrows delights, order winners and qualifiers?

What new capabilities will operations need to develop to deliver these?

Delights

Price

Search processes

Flexible design

Cheap land costs

Build at low cost

Low fixed costs

Standardization

Low overheads

Low labor costs

New technology

Operate at low cost

Order Winners

Central reservation

Location (autoroutes)

Location (restaurants)

More, smaller sites

Partnership deals with restaurants

Qualifiers

Location (restaurants)

Price

Loyalty cards

Cleanliness

Decor


Topics in operations strategy treated in this chapter

Trade-offs qualifiers – now, and in the future?

“Do you want it good, or do you want it Tuesday?”

“No such thing as a free lunch.”

“You can’t have an aircraft which flies at the speed of sound, carries 400 passengers and lands on an aircraft carrier. Operations are just the same.” (Skinner)

“Trade-offs in operations are the way we are willing to sacrifice one performance objective to achieve excellence in another.”


Topics in operations strategy treated in this chapter

Competitive Objective qualifiers – now, and in the future?

A

Competitive Objective

A

Competitive Objective

B

Competitive Objective

B

Model I: Function

(Skinner, 1992:

Hayes and Pisano, 1996)

Model II: Pivot and Function

(Slack, 1991)

Two ways of illustrating the trade-off concept


Topics in operations strategy treated in this chapter

Performance measure B qualifiers – now, and in the future?

Performance measure B

Performance measure A

Performance measure A

Three schools of trade-off thought

“Natural” Frontier of Performance

X3

X2

X

X1

X

Z

Performance measure B

Y

Y3

Y

Y2

Y1

Performance measure A

“Must aim to be good at everything”

(e.g. Schonberger)

“You have to choose when to reposition and when to overcome trade-offs through improvement”

(e.g. Hayes and Pisano)

“It’s all about positioning”

(e.g. Skinner)


Topics in operations strategy treated in this chapter

Repositioning vs.improvement qualifiers – now, and in the future?

Improve

Net improvement in performance because trade-off is overcome

A

B

A

B

Pivot

Pivot

Base +

Base

Base

Trade-off changed because improved system attributes have enabled both A and B to be improved without changing their relative position

Original trade-off

Reposition

Change in relative performance of competitive objectives

A

A

B

Pivot

B

Pivot

Base +

Base

Base

Trade-off changed because A is now required to have higher performance but system attributes have not improved so performance of B is lower.

Trade-off changed because improved system attributes have enabled A to be improved without reduction in B


Topics in operations strategy treated in this chapter

good qualifiers – now, and in the future?

bad

vs.

vs.

vs.

Cost

good

Service

bad

Degree and number of service checks

Cost of providing service

Average waiting time for service

Cost of providing service

Ability to keep waiting time short even in peak periods

Cost of providing service

vs.

Range of services offered

Cost of providing service

Examples of services vs. cost trade-offs at an auto quick fit center


Topics in operations strategy treated in this chapter

good qualifiers – now, and in the future?

bad

good

Capital expenditure

Service

bad

Degree and number of service checks

Capital cost of purchasing computer diagnostics equipment

vs.

Capital cost of providing extra physical capacity or automated processes

Average waiting time for service

vs.

Ability to keep waiting time short even in peak periods

Capital cost of providing extra capacity for peak loading

vs.

Range of services offered

Capital cost of purchasing wider range of equipment

vs.

Examples of services vs. capital expenditure at an auto quick fit center


Topics in operations strategy treated in this chapter

good qualifiers – now, and in the future?

bad

good

Capital expenditure

Service

bad

Capital cost of providing computer diagnostic equipment

Cost of providing service

vs.

Examples of cost vs. capital expenditure at an auto quick fit center


Topics in operations strategy treated in this chapter

good qualifiers – now, and in the future?

good

good

good

bad

bad

bad

Working capital

Service

bad

Level of parts inventory kept in stock

Ability to replace part without any delay

vs.

good

Working capital

Cost

bad

Level of parts inventory kept in stock

Cost of arranging for out of stock part to be delivered

vs.

good

Capital expenditure

Working capital

bad

Capital expenditure on storage space

Level of parts inventory kept in stock

vs.

Examples of working capital related trade-offs at an auto quick fit center


Topics in operations strategy treated in this chapter

Service qualifiers – now, and in the future?

versus

Cost

versus

versus

Capital expenditure

versus

versus

versus

Working capital

Trade-off categories


Topics in operations strategy treated in this chapter

Extended performance frontier qualifiers – now, and in the future?

Area Q

Z

X

Performance objective B

Area P

Y

Natural performance frontier

Performance objective A

Reconciliation as improvement by pushing back the performance frontier of a trade-off


Topics in operations strategy treated in this chapter

Trade-off curve of operation designed for narrow range of activities only

‘Normal’ operation trade-off frontier zone

Variety

B

A

Cost performance

Trade-off curves are (a) broad representations of a performance frontier zone; (b) dependent on how the operations have been designed


Topics in operations strategy treated in this chapter

Market segment A activities only

Market segment A

Operation A

Operation A

Market segment B

Market segment B

Operation B

Operation B

Market segment C

Market segment C

Operation C

Operation C

Market and operations segmentation matched

Market and operations segmentation not matched

Segmentation of markets and operations resources


Topics in operations strategy treated in this chapter

Army 1 activities only

Island

Army 2

Burning bridges behind you increases commitment but reduces flexibility


Topics in operations strategy treated in this chapter

Operations Resources activities only

Strategic reconciliation

Market Requirements

Clarity of objectives

Appropriate resources

Learning and improvement

Clearly focused resources

Clearly targeted market

but

but

but

Structural vulnerability

Risk of market change

Limited capabilities

Focused operations can exhibit positive and negative characteristics in both market and operations perspectives


Topics in operations strategy treated in this chapter

Operational cost of credit information activities only

Response time

Speed and quality of information

Utilisation of staff

1st trade-off

2nd trade-off

Staff scheduling in retail loans

Level of service purchased from credit agency

Operations cost and speed of service

Range of services possible

Capital investment in ‘retail’ system

Investment in multi-function system

3rd trade-off

4th trade-off

Retail loans on-site investment

Insurance IT system investment

Three trade-offs in the Call Center example


Topics in operations strategy treated in this chapter

Specific activities only

Specific

A

A

Ideal performance

Ideal performance

Quality of service

Quality of service

B

B

Superficial

Superficial

Limited

Broad

High

Low

Range of services

Cost of providing services


Topics in operations strategy treated in this chapter

Specific activities only

Specific

A

A

A

A

Ideal performance

Ideal performance

Ideal performance

Ideal performance

Quality of service

Quality of service

Quality of service

Quality of service

C

C

Superficial

Superficial

Limited

Limited

Broad

Broad

High

High

Low

Low

Range of services

Range of services

Cost of providing services

Cost of providing services


Topics in operations strategy treated in this chapter

Specific activities only

Specific

A

A

A

A

Ideal performance

Ideal performance

Ideal performance

Ideal performance

D

D

Quality of service

Quality of service

Quality of service

Quality of service

C

C

Superficial

Superficial

Limited

Limited

Broad

Broad

High

High

Low

Low

Range of services

Range of services

Cost of providing services

Cost of providing services