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Competitiveness and Operations Strategy. Competitiveness. Competitiveness. Competitiveness refers to how effective an organization is in the competition for customers’ purchases Primarily a function of how well the organization (through its operations) meets the needs of customers

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competitiveness
Competitiveness
  • Competitiveness refers to how effective an organization is in the competition for customers’ purchases
    • Primarily a function of how well the organization (through its operations) meets the needs of customers
    • Competitiveness is relative to others that offer similar goods or services
    • What is competitive today may not be competitive tomorrow.
competitiveness bases for competition

Price

Flexibility

Quality

Service

Differentiation

Time

Competitiveness : Bases for Competition

Business organizations compete with one another in a variety of ways. These includes

Managers and workers

Note: Some of the dimensions, mentioned above might overlap. Ex: Several of the items on the list may come under the heading of “quality”.

slide5

Bases for Competition

  • Price is the amount a customer must pay for the product or service. If all other factors are equal, customers will choose the product or service that has the lowest price.
    • Organizations that compete on price may settle for lower profit margins, but most focus on lowering costs of goods or services.
slide6

Bases for Competition

Quality refers to materials and workmanship as well as design [Appearance, Performance & Function, After sales service, etc].

Usually, it relates to a buyer’s perceptions of how well the product or service will serve its intended purpose.

slide7

Bases for Competition (Contd.)

Product or service differentiation refers to any special features that cause a product or service to be perceived by the buyer as more suitable than a competitor’s product or service.

Example for Special Feature:

Design, Cost, Quality, Easy of use, Convenient Location, Warrantee

slide8

Bases for Competition (Contd.)

Flexibility is the ability to respond to changes. The better a company or department is at responding to changes, the greater its competitive advantage over another company that is not as responsive.

The changes might relate to increase or decrease in volume demanded, or to changes in the design of goods or services.

slide9

Bases for Competition (Contd.)

  • Time refers to a number of different aspects of an organization’s operations, such as
  • how quickly a product or service is delivered to a customer
  • how quickly new products or services are developed and brought to the market,
  • the rate at which improvements in products or processes are made, etc.
slide10

Bases for Competition (Contd.)

Service might involve after-sale activities that perceived by customers as value added, such as

delivery,

setup,

warranty work,

technical support, or

extra attention while work is in progress such as

curtsey,

keeping the customer informed, and

attention to little details.

slide11

Bases for Competition (Contd.)

Managers and workers are the people at the heart and soul of an organization, and if they are competent and motivated, they can provide a distinct competitive edge by their skills and the ideas they create.

Example: One skill that is often overlooked is answering the telephone.

If the person answering the call is rude, not helpful, or cut off the call

produce a negative image to customers

else [calls are handled promptly and cheerfully]

produce a positive image to customers and potentially, a competitive advantage.

endif

slide12

Causes of Poor Competitiveness

  • Putting too much emphasis on short-term financial performance at the expense of research and development.
  • Failing to take advantage of strengths and opportunities, and/or failing to recognize competitive threads.
  • Neglecting operations strategy.
  • Neglecting investments in capital and human resources.
  • Failing to establish good internal communications and cooperation among different functional areas.
  • Failing to consider customer wants and needs.
mission strategy tactics

Mission

Strategy

Tactics

Mission/Strategy/Tactics

How does mission, strategies and tactics relate to

decision making and distinctive competencies?

slide15

Mission – The reason for existence of an organization

      • Organization’s purpose for being
      • Provides boundaries & focus
      • Answers ‘How can we satisfy people’s needs?’
      • Expressed in published statement
      • What business are we in?
      • To guide formulation of strategies for the organization as well as decision making at all levels.
slide16

Mission Statement

  • The mission statement is about
        • the kind of business the company wants to be in
        • who its customers are
        • its basic beliefs about business
        • its goals of survival, growth, and profitability

Example: One goal of an organization may be to capture a certain %age of market share for a product; Another goal may be achieve a certain level of profitability.

Taken together, the goals and the mission, establish a destination for the organization.

slide17

Example – Mission Statement

University – discovering and disseminating knowledge

Bank – Safeguard and increase the value of its customers’ investment

Manufacturer – Supply high quality products to a wide market, while ensuring a satisfactory profit

Telev. network – entertain, inform and educate the widest possible audience

sample mission for a service company
Sample Mission for a Service Company

Satisfy our customers’ immediate needs and wants by providing them with a wide variety of goods and services at multiple locations.

sample mission for a manufacturing company
Sample Mission for a Manufacturing Company

is to provide

(a) society with superior products and services - innovations and solutions that improve the quality of life and satisfy customer needs;

(b) employees with meaningful work and advancement opportunities and investors with a superior rate of return

ibm mission statement
IBM-Mission Statement

We create, develop, and manufacture the industry’s most advanced information technologies, including computer systems, software, networking systems, storage devices, and microelectronics.

We have two fundamental missions:

We strive to lead in the creation, development, and manufacture of the most advanced information technologies.

We translate advanced technologies into value for our customers as the world’s largest information services company. Our professionals worldwide provide expertise within specific industries, consulting services, systems integration, and solution development and technical support.

skynet worldwide courier mission statement
Skynet Worldwide Courier-Mission Statement

The Skynet Worldwide Courier Network sets the standard for international delivery and distribution services by consistently exceeding customer expectations.

Skynet delivers customer satisfaction by:

  • Integrating all aspects of the transportation process.
  • Personalizing service worldwide.
  • Investing in quality people and technology.
  • Innovating and adapting to meet customers unique and changing requirements.
strategies
Strategies

Each strategy established in light of:

  • threats and opportunities in the environment
  • strengths and weaknesses of the organization

(related to environment)

slide23

Strategies – are the roadmaps (plans) for reaching the goals

  • Action plan to achieve mission
  • Shows how mission will be achieved
  • Provide focus for decision making
  • Organization strategies, provides the overall direction for the organization.
        • The organizational strategies should support the goals and missions of the organization.
  • Functional strategies, relate to each of the functional areas of the organization.
        • The functional strategies should support the overall strategies of the organization.
slide25

Questions about organizational/competitive strategies

  • What is our industry like?
  • What are the future prospects?
  • What are our strengths?
  • Who are the competitors?
  • What are the competitors’ strength?
  • What flexibility do we have?

The answers to the above questions suggest a range of more detailed questions like

  • What products should we concentrate on?
  • What volume should we produce?
  • What quality should we provide?
  • Do we supply low or high cost products?
  • Are our products reliable?
  • Do we give fast deliveries?
  • Who are our biggest customers?
  • Do we have adequate financing?
slide26

Tactics – are the methods and actions used to accomplish strategies

  • are more specific in nature than strategies
  • provide guidance and direction for carrying out actual operations, which need the most specific and detailed plans and decision making in an organization.
  • tells ‘how to reach the destination, following the strategy roadmap.
operations strategy
Operations Strategy

is narrower in scope, dealing primarily with the operations aspect of the organization.

relates to Products, Processes, Methods, Operating Resources, Quality, Costs, Lead-Times and Scheduling.

can have a major influence on the competitiveness of an organization.

For operations strategy to be truly effective, it is important to link it to organization strategy. That is, both organization strategy and operations strategy should not be formulated independently.

operations strategy1
Operations Strategy

Strategy Process

Example

Customer Needs

More Product

Increase Org. Size

Corporate Strategy

Operations Strategy

Increase Production Capacity

Decisions on Processes

and Infrastructure

Build New Factory

slide29

There is an apparent relationship that exists from the

mission down to actual operations, which is

hierarchical in nature.

strategic planning and execution
Strategic Planning and Execution

Planning and decision making is hierarchical in organization

Mission

Goals

Organizationalstrategy

Functional strategies

Finance

Marketing

Operations

Tactics

Tactics

Tactics

Operations

operations

Finance

operations

Marketing

operations

mission strategy tactics1
Mission/Strategy/Tactics

Example: Rita is a high school student. She would like to have a career in business, have a good job, and earn enough income to live comfortably

Mission: Live a good life

  • Goal: Successful career, good income
  • Strategy: Obtain a college education
  • Tactics: Select a college and a major
  • Operations: Register, buy books, take courses, study, graduate, get job
characteristics of strategic decisions
Characteristics of Strategic Decisions

Made at top levels of organization

Involve a high degree of uncertainty about outcomes

Long-term perspective/planning horizon

Tend to focus on external factors

Can require significant cost and lead time to implement

Can be difficult to reverse once implemented

Cross functional/geographic/organizational boundaries

Choices and results can have a powerful (positive or negative) impact competitiveness and survival of the organization (“high stakes”)

strategic decisions in operations

Processes and Technology

Services

Products

Human Resources

Quality

Capacity

Operating Systems

Sourcing

Facilities

Strategic Decisions in Operations

Note: Cross functional/geographic/organizational boundaries

products services
Products & Services
  • Make-to-order
    • Made to customer specifications after order received
  • Make-to-stock
    • Made in anticipation of demand
  • Assemble-to-order
    • Add options according to customer specification
processes technology
Processes & Technology
  • Project
    • One-time production of product to customer order
  • Batch production
    • Process many jobs at same time in batch
  • Mass production
    • Produce large volumes of standard product for mass market
  • Continuous production
    • Very high volume commodity product
product process matrix

High

Continuous

Production

Mass

Production

Volume

Batch

Production

Projects

Low

Low

High

Standardization

Product-Process Matrix
service process matrix

High

Service Factory

Mass

Service

Volume

Service Shop

Professional Service

Low

Low

High

Standardization

Service-Process Matrix
capacity facilities
Capacity & Facilities
  • How much capacity to provide
  • Size of capacity changes
  • Handling excess demand
  • Hiring/firing workers
  • Need for new facilities
    • Best size for facility?
    • Large or small facilities
    • Facility focus
    • Facility location
    • Global facility
human resources
Human Resources
  • Skill levels required
  • Degree of autonomy
  • Policies
  • Profit sharing
  • Individual or team work
  • Supervision methods
  • Levels of management
  • Training
quality
Quality
  • Target level
  • Measurement
  • Employee involvement
  • Training
  • Systems needed to ensure quality
  • Maintaining quality awareness
  • Evaluating quality efforts
  • Determining customer perceptions
sourcing
Sourcing
  • Degree of vertical integration
  • Supplier selection
  • Supplier relationship
  • Supplier quality
  • Supplier cooperation
slide42

Note: The distinction between strategic, tactical and operational decisions are not usually as clear as given above [Example: Quality – when company plan for a new product then quality is strategic decision; tactical when deciding how quality can be measured; etc.]

slide43

Strategy Formulation

To formulate an effective strategy, senior management must take into account the distinctive competencies of the organizations, and they must scan the environment [Internal and External Factors that relate to possible strength or weakness : Strategy Formulation ].

In formulating a successful strategy, organization must take into account both order qualifiers and order winners.

slide45

External Factors that relate to possible strength or weakness : Strategy Formulation

Economic Conditions: These include general health and direction of the economy, inflation, interest rates, tax laws, and tariffs.

Political Conditions: These include favorable or unfavorable attitudes towards the business, political stability or instability, and wars.

Legal Environment: These include antitrust laws, government regulations, trade restrictions, minimum wage laws, labour laws, and patents.

slide46

External Factors (Contd.)

Technology: This can include the rate at which the product innovations are occurring, current and future process technology (equipment and material handling), and design technology.

Competition: This include the number and strength of competitors, the basis of competition (price, quality, special features), and the easy of market entry.

Markets: This include size, location, brand loyalties, easy of entry, potential for growth, long term stability, and demographics.

slide47

Internal Factors that relate to possible strength or weakness : Strategy Formulation

Human Resources: These include the skills and abilities of managers and workers; special talents (creativity, designing, problem solving); loyalty to the organization; expertise; dedication; and experience.

Facilities and Equipment: Capacities, location, age, and cost to maintain or replace can have a significant impact on operations.

Financial Resources: Cash flow, access to additional funding, existing debt burden, and cost of capital are important considerations.

Customers: Loyalty, existing relationships, and understanding of wants and needs are important

slide48

Internal Factors (Contd.)

Product and Services: These include existing products and services, and the potential for new products and services.

Technology: This include existing technology, the ability to integrate new technology, and the probable impact of technology on current and future operations

Suppliers: Supplier relationships, dependability of suppliers, quality, flexibility, and service are typical considerations

Others: Other factors include patents, labour relations, company or product image, distribution channels, relationship with distributors, maintenance of facilities and equipment, access to resources, and access to markets.

order winners and qualifiers
Order Winners and Qualifiers

Within a given industry or market, certain competitive priorities can be identified as being either order winnersororder qualifiers.

  • Order Qualifiers –they are the basic criteria that permit the firms products to be considered as candidates for purchase by customers.
    • A brand name car can be an “order qualifier”
  • Order winners –they are the criteria that differentiates the products and services of one firm from another.
    • Repair services can be “order winners” Examples: Warranty, Roadside Assistance, Leases, etc.
slide50

Order Winners and Qualifiers

  • To develop effective strategies for business, it is essential for organizations to determine what combinations of factors are important to customers, which factors are order qualifiers, and which are order winners.
    • Characteristics such as price, quality, delivery reliability, delivery speed can be order qualifier or order winner.
    • Characteristics which may be an order qualifier in some situations will become an order winner in another situation [example Quality]
  • It is also necessary to decide on the relative importance of each factors so that an appropriate actions can be given to the various factors.
today s key strategies for operations
Today’s Key Strategies for Operations
  • Quality-based strategies
    • Focus on satisfying the customer by integrating quality into all phases of the organization
      • Quality includes both products and processes such as design, production, and service after the sale
  • Time-based strategies
    • Gain competitive advantage by performing certain activities more quickly than competitors
slide52

Key Strategies for Operations (contd.)

  • Vertical integration and outsourcing
    • Make vs. buy
    • Strategic alliances
  • Supply chain management - Synchronization of the supply chain to achieve high performance
    • Suppliers, manufacturers, distribution channels, retailers and customers—all viewed as an integrated system
    • Cooperation between links, sharing of information
    • Focus on trade-off between cost and level of service
slide53

Time-based strategies

Planning time

Product/service design time

Processing time

Changeover time

Delivery time

Response time

slide54

Various Time-based strategies

Planning time: The time needed to react to competitive threat, to develop strategies and select tactics, to approve proposed changes to facilities, to adopt new technologies, and so on.

Product/service design time: The time needed to develop and market new or redesigned products or service

Processing time: The time needed to produce goods or provide services. This can involve scheduling, repairing equipment, wasted efforts, inventories, quality, training, etc.

slide55

Time-based strategies (Contd.)

Changeover time: The time needed to change from producing one type of product or service to another. This may involve new equipment settings and attachments, different methods, equipment, schedules or materials.

Delivery time: The time needed to fill order

Response time: These must be customer complaints about quality, timing of deliveries, and incorrect shipments. These might also be complaints from employees about working conditions (e,g., safety, lighting, heat or cold), equipment problems, or quality problems.

impetus for strategy change
Impetus for Strategy Change
  • Changes in the organization
  • Stages in the product life cycle
  • Changes in the environment
stages in the product life cycle

Introduction

Growth rate

Growth

Maturity

Decline

Stages in the Product Life Cycle
strategy and issues during a product s life

Decline

Maturity

Introduction

Growth

Practical to change price or quality image

Strengthen niche

Best period to increase market share

R&D product engineering critical

Cost control critical

Poor time to change image, price, or quality

Competitive costs become critical

Defend market position

Fax machines

Drive-thru restaurants

3 1/2” Floppy disks

Company Strategy/Issues

CD-ROM

Sales

Station wagons

Internet

Color copiers

HDTV

Little product differentiation

Cost minimization

Overcapacity in the industry

Prune line to eliminate items not returning good margin

Reduce capacity

Standardization

Less rapid product changes - more minor changes

Optimum capacity

Increasing stability of process

Long production runs

Product improvement and cost cutting

Product design and development critical

Frequent product and process design changes

Short production runs

High production costs

Limited models

Attention to quality

Forecasting critical

Product and process reliability

Competitive product improvements and options

Increase capacity

Shift toward product focused

Enhance distribution

OM Strategy/Issues

Strategy and Issues During a Product’s Life