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Changes in Operations Strategy .... An Example

Changes in Operations Strategy .... An Example. Ford (1915). Pre-Ford (1900). Changes in Operations Strategy .... An Example. From 1909 to 1923 Ford Model T improved in price by a factor of 4 Primary competitive priority (order winner) was clearly COST

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Changes in Operations Strategy .... An Example

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  1. Changes in Operations Strategy.... An Example Ford (1915) Pre-Ford (1900)

  2. Changes in Operations Strategy.... An Example • From 1909 to 1923 Ford Model T improved in price by a factor of 4 • Primary competitive priority (order winner) was clearly COST • Ford’s competitive priorities gave rise to a coherent set of STRUCTURAL and INFRASTRUCTURAL decisions with a single, over-riding objective

  3. Ford Motor Co.* Methods Used * • Product Stability • Capital Equipment Specialization • Process Rationalization • Scale Economies • Material Specialization • Labor Specialization

  4. Too much of a good thing ..... • By 1920 Ford was SO SUCCESSFUL and TOO RIGID .... • Henry’s motto was “You can have it in any color .... • .... So long as it is BLACK!!!

  5. Time for A NEW Strategy! • GM could not beat Ford at COST, so Sloan decided to beat them with FLEXIBILITY. • More models, more colors • Ford became so inflexible, that in 1926 had to shutdown for one year to retool for Model A • Ford fell from No. 1 automaker .... and has never recovered.

  6. Ford (1915) Pre-Ford (1900) GM (1930)

  7. Another Example .... • Anybody ever heard of Mostronics Calculators? • In 1970’s they were a leading manufacturer, BUT Texas Instruments aggressively reduced prices to fit experience curve • Drove Mostronics out of business because they could not compete based on cost.

  8. An Alternative Strategy • Hewlett Packard remained in the business by emphasizing QUALITY and FLEXIBILITY rather than low price. • Similar example: IBM vs. Compaq or Dell computers (1st generation), Packard Bell or Gateway (2nd generation)

  9. Trade-off Model of Competitive Priorities • This is the traditional model • Companies can only emphasize a single priority at a time. • i.e. COST .... • or ................. FLEXIBILITY or • QUALITY • or ............................................ DELIVERY

  10. Cumulative or “Sand-cone” Model • Companies can simultaneously compete on several competitive priorities. • Possible due to advanced manufacturing technologies (CIM & FMS) FLEXIBILITY COST DELIVERY QUALITY

  11. Operations:Reactive or Proactive?3 Dimensions of Proactivity • Manufacturing Involvement • Operations is centrally involved in formulating business strategy as well as other functional areas • Technical Assertiveness (Structure) • Operations makes efforts to anticipate the potential of new technologies • Capability Building (Infrastructure) • Operations pursues long-range programs in order to acquire capabilities in advance of needs.

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