slide1 l.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Operations Management Operations Strategy for Competitive Advantage Chapter 2 PowerPoint Presentation
Download Presentation
Operations Management Operations Strategy for Competitive Advantage Chapter 2

Loading in 2 Seconds...

play fullscreen
1 / 56

Operations Management Operations Strategy for Competitive Advantage Chapter 2 - PowerPoint PPT Presentation


  • 376 Views
  • Uploaded on

Operations Management Operations Strategy for Competitive Advantage Chapter 2. Outline. Global Company Profile: Komatsu Identifying Missions and Strategies Mission Strategy Achieving Competitive Advantage Through Operations Competing on Differentiation Competing on Cost

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Operations Management Operations Strategy for Competitive Advantage Chapter 2' - joben


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
slide1

Operations ManagementOperations Strategy for Competitive AdvantageChapter 2

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

outline
Outline
  • Global Company Profile: Komatsu
  • Identifying Missions and Strategies
    • Mission
    • Strategy
  • Achieving Competitive Advantage Through Operations
    • Competing on Differentiation
    • Competing on Cost
    • Competing on Response

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

outline continued
Outline - continued
  • Ten Strategic OM decisions
  • Issues in Operations Strategy
    • Research
    • Preconditions
    • Dynamics
  • Strategy Development and Implementation
    • Identify Critical Success Factors
    • Build and Staff the Organization
    • Integrate OM with Other Activities

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

learning objectives
Learning Objectives

When you complete this chapter, you should be able to :

  • Identify or Define:
    • Mission
    • Strategy
    • Ten Decisions of OM
  • Describe or Explain:
    • Specific approaches used by OM to achieve strategic concepts
    • Differentiation
    • Low Cost
    • Response

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

komatsu strategies
Komatsu Strategies
  • 1960s - licensed design and technology from others; improved quality
  • 1970s - became global enterprise and built export markets aided by increasing value of yen
  • 1980s - joint ventures with Dresser, and manufacturing outside Japan
  • 1990s - used the latest technology to improve quality and drive down costs; focused on electronic engine controls
  • 2000s - increased European presence through ownership and joint ventures

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

komatsu strategies6
Komatsu Strategies

Each strategy established in light of:

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

(related to environment)

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

mission

Mission - where are you going?

    • Organization’s purpose for being
    • Provides boundaries & focus
    • Answers ‘How can we satisfy people’s needs?’
    • Expressed in published statement

© 1995 Corel Corp.

Mission

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

sample mission circle k
Sample Mission - Circle K

As a service company, our mission is to:

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

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

sample mission merck
Sample Mission - Merck

The mission of Merck is to provide society with superior products and services - innovations and solutions that improve the quality of life and satisfy customer needs - to provide employees with meaningful work and advancement opportunities and investors with a superior rate of return

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

factors affecting mission
Factors Affecting Mission

Philosophy &

Values

Profitability

Environment

& Growth

Mission

Customers

Public Image

Benefit to

Society

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

mission strategy
Mission/Strategy
  • Mission - where you are going
  • Strategy - how you are going to get there

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

strategy

Action plan to achieve mission

  • Shows how mission will be achieved
  • Company has a business strategy
  • Functional areas have strategies

© 1995 Corel Corp.

Strategy

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

strategy process

Company

Mission

Business

Strategy

Functional Area

Strategies

Functional Area

Marketing

Operations

Fin./Acct.

Decisions

Decisions

Decisions

Strategy Process

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

competitive advantage through
Competitive Advantage Through:
  • Differentiation
  • Cost leadership
  • Quick response

better, cheaper, more responsive

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

competing on differentiation
Competing on Differentiation
  • Uniqueness - can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perception of value

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

competing on cost
Competing on Cost
  • Maximum value as perceived by customer
  • Does not imply low value or low quality

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

competing on response
Competing on Response
  • Flexible
  • Reliable
  • Rapid

Requires institutionalization within the firm of the ability to respond

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

competing on any basis
Competing On Any Basis
  • Probably requires the institutionalization within the firm of the ability to change, to adapt

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

om s contribution to strategy
OM’s Contribution to Strategy

Operations Decisions

Specific Strategy Used

Competitive Advantage

Examples

Quality

Product

Process

Location

Layout

Human Resource

Supply Chain

Inventory

Scheduling

Maintenance

FLEXIBILITY

Sony’s constant innovation of new products

Design

Compaq Computer’s ability to follow the PC market

Volume

Southwest Airlines No-frills service

LOW COST

DELIVERY

Pizza Hut’s five-minute guarantee at lunchtime

Speed

Differentiation

(Better)

Dependability

Federal Express’s “absolutely, positively on time”

QUALITY

Response

(Faster)

Conformance

Motorola’s automotive products ignition systems

Cost leadership

(Cheaper)

Motorola’s pagers

Performance

IBM’s after-sale service on mainframe computers

AFTER-SALE SERVICE

Fidelity Security’s broad line of mutual funds

BROAD PRODUCT LINE

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

10 decision areas of om
10 Decision Areas of OM
  • Goods & service design
  • Quality
  • Process & capacity design
  • Location selection
  • Layout design
  • Human resource and job design
  • Supply-chain management
  • Inventory
  • Scheduling
  • Maintenance

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

goods services and the 10 operations management decisions
Goods & Services and the 10 Operations Management Decisions

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

goods services and the 10 operations management decisions22
Goods & Services and the 10 Operations Management Decisions

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

goods services and the 10 operations management decisions23
Goods & Services and the 10 Operations Management Decisions

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

goods services and the 10 operations management decisions24
Goods & Services and the 10 Operations Management Decisions

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

process design

High

Moderate

Variety of Products

Low

Low Moderate High

Volume

Process Design

Customization at high Volume

Process-focused

Job Shops

(Print shop, emergency

room , machine shop,

fine dining

Mass Customization

(Dell Computer’s PC)

Repetitive (modular)

focus

Assembly line

(Cars, appliances, TVs,

fast-food restaurants)

Product-focused

Continuous

(steel, beer, paper, bread)

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

operations strategies for two drug companies
Operations Strategies for Two Drug Companies

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

operations strategies for two drug companies continued
Operations Strategies for Two Drug Companies - continued

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

operations strategies for two drug companies continued28
Operations Strategies for Two Drug Companies - continued

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

operations strategies for two drug companies continued29
Operations Strategies for Two Drug Companies - continued

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

characteristics of high roi firms
Characteristics of High ROI Firms
  • High quality product
  • High capacity utilization
  • High operating effectiveness
  • Low investment intensity
  • Low direct cost per unit

From the PIMS study of the Strategic Planning Institute

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

strategic options managers use to gain competitive advantage
Strategic Options Managers Use to Gain Competitive Advantage
  • 28% - Operations Management
  • 18% - Marketing/distribution
  • 17% - Momentum/name recognition
  • 16% - Quality/service
  • 14% - Good management
  • 4% - Financial resources
  • 3% - Other

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

strategic options managers use to gain competitive advantage32
Strategic Options Managers Use to Gain Competitive Advantage
  • 28% Operations Management
    • Low- cost product
    • Product-line breadth
    • Technical superiority
    • Product characteristics/differentiation
    • Continuing product innovation
    • Low-price/high-value offerings
    • Efficient, flexible operations adaptable to consumers
    • Engineering research development
    • Location
    • Scheduling

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

strategic options managers use to gain competitive advantage continued
Strategic Options Managers Use to Gain Competitive Advantage - continued
  • 18% Marketing/Distribution
  • 17% Momentum/name recognition
  • 16% Quality/service
  • 14% Good management
  • 4% Financial resources
  • 3% Other

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

preconditions to implement a strategy
Preconditions -To Implement a Strategy

One must understand:

  • Strengths & weaknesses of competitors and new entrants into the market
  • Current and prospective environmental, legal, and economic issues
  • The notion of product life cycle
  • Resources available with the firm and within the OM function
  • Integration of OM strategy with company strategy and with other functions.

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

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

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

stages in the product life cycle

Introduction

Growth rate

Growth

Maturity

Decline

Stages in the Product Life Cycle

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

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

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

strategy issues during product life
Strategy & Issues During Product Life

Introduction

Best period to increase market share

R&D engineering are critical

Product design and development are critical

Frequent product and process design changes

Over-capacity

Short production runs

High skilled-labor content

High production costs

Limited number of models

Utmost attentions to quality

Quick elimination of market-revealed design defects

  • Company Strategy & Issues
  • OM Strategy & Issues

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

strategy issues during product life39
Company Strategy

& Issues

OM Strategy

& Issues

Strategy & Issues During Product Life

Growth

Practical to change prices or quality image

Marketing is critical

Strengthen niche

Forecasting is critical

Product and process reliability

Competitive product improvements and options

Shift toward product oriented

Enhance distribution

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

strategy issues during product life40
Company Strategy

& Issues

OM Strategy

& Issues

Strategy & Issues During Product Life

Maturity

Poor time to increase market share

Competitive costs become critical

Poor time to change price, image, or quality

Defend position via fresh promotional and distribution approaches

Standardization

Less rapid product changes and more minor annual model changes

Optimum capacity

Increasing stability of manufacturing process

Lower labor skills

Long production runs

Attention to product improvement and cost cutting

Re-examination of necessity of design compromises

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

strategy issues during product life41
Company Strategy

& Issues

OM Strategy

& Issues

Strategy & Issues During Product Life

Decline

Cost control critical to market share

Little product differentiation

Cost minimization

Overcapacity in the industry

Prune line to eliminate items not returning

Good margin

Reduce capacity

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

strategy development and implementation
Strategy Development and Implementation
  • Identify critical success factors
  • Build and staff the organization

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

swot analysis process
SWOT Analysis Process
  • Environmental Analysis
  • Determine Corporate Mission
  • Form a Strategy

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

swot analysis to strategy formulation
SWOT Analysis to Strategy Formulation

Mission

Internal

External

S

trengths

O

pportunities

Strategy

Internal

External

W

eaknesses

T

hreats

Competitive

Advantage

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

identifying critical success factors

Production/Operations

Finance/Accounting

Leverage

Cost of capital

Working capital

Receivables

Payables

Financial control

Lines of credit

Marketing

Service

Distribution

Promotion

Channels of distribution

Product positioning

(image, functions)

Identifying Critical Success Factors

Decisions Sample Options

Product Customized, or standardized

Quality Define customer expectations and how to achieve them

Process Facility size, technology

Location Near supplier or customer

Layout Work cells or assembly line

Human resource Specialized or enriched jobs

Supply chain Single or multiple source suppliers

Inventory When to reorder, how much to keep on hand

Schedule Stable or fluctuating productions rate

Maintenance Repair as required or preventive maintenance

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

critical success factors microsoft compaq
Critical Success FactorsMicrosoft & Compaq
  • They focus on one business
  • They are global
  • Their senior management is actively involved in defining and improving the product development process
  • They recruit and retain the top people in their fields.
  • They understand that speed to market reinforces product quality

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

activity mapping southwest airline s low cost competitive advantage

Courteous, but limited passenger service

Lean, productive employees

Competitive

Advantage:

Low Cost

Short haul, point-to-point routes, often to secondary airports

High aircraft utilization

Frequent, reliable schedules

Standardized fleet of Boeing 357 aircraft

Activity Mapping: Southwest Airline’s Low Cost Competitive Advantage

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

activity mapping southwest airline s low cost competitive advantage48
Activity Mapping: Southwest Airline’s Low Cost Competitive Advantage

Courteous, but limited passenger service

No seat assignments

No baggage transfers

Automated ticketing machines

No meals

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

activity mapping southwest airline s low cost competitive advantage49
Activity Mapping: Southwest Airline’s Low Cost Competitive Advantage

Lower gate costs at secondary airports

High number of flights, reduces employee idle time between flights

Short haul, point-to-point routes, often to secondary airports

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

activity mapping southwest airline s low cost competitive advantage50
Activity Mapping: Southwest Airline’s Low Cost Competitive Advantage

High number of flights reduces employee idle time between flights

Saturate a city with flights flowering administrative costs per passenger for that city

Frequent, reliable schedules

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

activity mapping southwest airline s low cost competitive advantage51
Activity Mapping: Southwest Airline’s Low Cost Competitive Advantage

Pilot training on only one type of aircraft

Reduced maintenance inventory required because of only one type of aircraft

Excellent supplier relations with Boeing has aided financing

Standardized fleet of Boeing 357 aircraft

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

activity mapping southwest airline s low cost competitive advantage52
Activity Mapping: Southwest Airline’s Low Cost Competitive Advantage

Flexible employees and standard planes aids scheduling

Flexible union contracts

Maintenance personnel trained on only one type of aircraft

15 minute gate turnarounds

High aircraft utilization

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

activity mapping southwest airline s low cost competitive advantage53
Activity Mapping: Southwest Airline’s Low Cost Competitive Advantage

High level of stock ownership

Hire for attitude, then train

High employee compensation

Empowered employees

Automated ticket machines

Lean, productive employees

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

activity mapping southwest airline s low cost competitive advantage54

Courteous, but limited passenger service

Lean, productive employees

Competitive

Advantage:

Low Cost

Short haul, point-to-point routes, often to secondary airports

High aircraft utilization

Frequent, reliable schedules

Standardized fleet of Boeing 357 aircraft

Activity Mapping: Southwest Airline’s Low Cost Competitive Advantage

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

vanguard s activity system

A broad array of mutual funds excluding some fund categories

Very low expenses passed on to client

Efficient investment management approach offering good consistent performance

Strict cost control

Straightforward client communication and education

Direct distributions

Vanguard’s Activity System

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

how it works

If competitive advantage, leads to achieving

Distinctive competencies affect

Company

Mission

Business

Strategy

Functional Area

Strategies

Marketing

Operations

Fin./Acct.

Decisions

Decisions

Decisions

How It Works

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458