Kuliah 2 - Operation Strategy

F O U R T H E D I T I O N The McGraw-Hill Companies, Inc., 2003chapter 2DAVIS

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PowerPoint PresentationbyCharlieCookOperations Strategy:Defining How Firms Compete

Fundamentals of Operations Management 4e

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Chapter ObjectivesIntroduce the concept of operations strategy and its various components, and show how it relates to the overall business strategy of the firm.Illustrate how operations strategy pertains to adding value for the customer.Identify the different ways in which operations strategy can provide an organization with a competitive advantage.Introduce the concept of tradeoffs between different strategies and the need for a firm to align its operations strategy to meet the needs of the particular markets it is serving.


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Chapter Objectives (contd)Explain the difference between order-qualifiers and order-winners as they pertain to operations strategy.Describe how firms are integrating manufacturing and services to provide an overall bundle of benefits to their customers.


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Managerial IssuesDeveloping and Implementing Effective StrategiesMeeting the challenges of increased competition in a globalized business environment.Keeping up with technology advances.Learning to do more with less.Staying ahead of copycat competitors.Keeping an eye on the future.


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Operations Strategy An OverviewCorporate strategyOverall strategy adopted by the firm that defines the specific businesses in which the firm will compete and the way in which resources are acquired and allocated.


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Operations Strategy An OverviewStrategic Business Unit (SBU)A stand-alone business within a conglomerate (parent firm) that operates like an independent company.Business StrategyHow a strategic business unit (SBU) addresses the specific markets it serves and products it provides.


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Types of Business Strategies


Type

Definition

Low Cost

Producing the lowest cost products in the market.

Market Segmentation

Satisfying the needs of a particular market niche.

Product Differentiation

Offering products that differ significantly from the competition.

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Operations Strategy An OverviewFunctional StrategiesStrategy developed by a function (e.g., marketing) within an organization to support the business strategy.CompetitivenessA companys position in the marketplace relative to its competition.


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Operations Strategy An OverviewOperations StrategyHow the operations function contributes to competitive advantage.Competitive PrioritiesHow the operations function provides a firm with a competitive advantage.PrioritiesLow cost, high quality, fast delivery, flexibility, and service.


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*What is Operations Strategy?Operations StrategyDetermining how to best utilize the firms resources to achieve corporate objectives.Major long-term structural issuesHow big do we make the facilities?Where do we locate them?When do we build them?What type of process(es) do we install to make the products?


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Hierarchy of Operational PlanningExhibit 2.1


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Operations Strategy Means Adding Value for the CustomerValue is in the eye of the beholder What affects customer perceptions of value?If benefits exceed costs, the customer perceives value for the product or service.


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Maximizing Value Added in OperationsExhibit 2.2


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Operations Strategy Means Adding Value for the CustomerHow to add value:Reduce product costs to customer.Make the product more readily available.Provide faster service.Provide customers with additional relevant information.Customize the product to the customers specific needs.


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Trends Affecting Operations Strategy DecisionsGlobalizationGlobal village with hyper-competition:Continuous information technology advancesLower trade barriersLower transportation costsEmergence of newly industrialized countries (NIC) with high-growth markets and high standards of living


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Trends Affecting Operations Strategy Decisions (contd)TechnologyConnectivityanyone, anywhere, all the timeSpeedinstantaneous transactionsIntangibilityfocus on innovative services to gain competitive advantage (A superiority gained by an organization when it can provide the same value as its competitors but at a lower price, or can charge higher prices by providing greater value through differentiation. Competitive advantage results from matching core competencies to the opportunities)Simultaneous Competition on Multiple Competitive PrioritiesNo traditional trade-offs of priorities


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Competitive Priorities


Type

Priority

Low Cost

Providing low cost products.Controlling costs across the board.

Quality

Providing high quality products.Focus is on product and process quality.

Delivery

Providing products reliably and quickly.

Flexibility

Providing a wide variety of products (mass customization).How fast a firm can produce a new product line.

Service

Providing value-added service.How products are delivered and supported.

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*The Next Sources of Competitive Advantage?Two New TrendsThe use of environmentally friendly processes and environmentally friendly productsThe use of informationLarge quantities data can now be accurately stored and transmitted inexpensively.Competitive advantage can be gained through products and services that provide enhanced levels of feedback.


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Developing an Operations Strategy from Competitive PrioritiesFactory Focus and Trade-offsA factory could not focus on all four competitive priorities (cost, quality, delivery, and flexibility).Focusing performance on one priority limits/eliminates the ability to focus on another priority.Plant-within-a-Plant (PWP) concept (Skinner)Different locations with a facility would focus on their own competitive priority.


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Developing an Operations Strategy from Competitive Priorities (contd)Questioning the Trade-OffsWorld-class operations led to the establishment of a hierarchy among the competitive priorities.Increased competitive capabilities led to increased performance on all priorities by all competitors.Focus shifted from cost minimization to maximizing the value added.Customer value is enhanced by the focus on multiple priorities.


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Time Line for Operations StrategiesExhibit 2.3


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Example of Trade-Offs onSuperior Performance CurvesExhibit 2.4


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Order Qualifiers and Order WinnersOrder QualifiersThe minimum characteristics of a firm or its products that a firm must have to be considered as a source of purchase.Order WinnersThe characteristics of a firm that distinguish it from its competition so that it is selected as the source of purchase.ISO-9000 certification


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Distinguishing betweenOrder Qualifiers and Order WinnersExhibit 2.5


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Focusing on Core CapabilitiesCore CapabilitiesSpecific strengths that allow a company to achieve its competitive priorities.The skill or set of skills that the operations management function develops that allows the firm to differentiate itself from its competitors.Focusing is achieved by:Divesting non-critical activities.Subcontracting ancillary activities and services.


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Integration of Manufacturing and ServicesThe Customers Activity Cycle (CAC)


Component

Actions

Pre-purchase activities

Being responsive to customer inquires and the ability to demonstrate technical expertise.

Purchase activities

Actual sale and delivery of the product and collecting payment.

Post-purchase activities

After-sales service and product warranties

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*The Customers Activity CycleExhibit 2.6


Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Service Strategies for Manufacturing Firms (Wise and Baumgartner)


Service Strategy

Function

Embedded Services

Specific functions that are a part of the product itself.

Comprehensive Services

The manufactured product is married to additional services.

Integrated Solutions

Combining product and services into a seamless offering that addresses a specific customer requirement.

Distribution Control

Manufacturing goes downstream to assume responsibility for product distribution.

Fundamentals of Operations Management 4e The McGraw-Hill Companies, Inc., 20032*Additional Approaches for Integrating Manufacturing and ServicesDemonstration of Knowledge and ExpertiseReassuring customers by allowing them to view the production process and have access to production employees.Customer TrainingProviding product training to customers to build product loyalty and increased use of products.


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Kuliah 2 - Operation Strategy