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7/31/2019 Lecture 2 - Operations Strategy
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7/31/2019 Lecture 2 - Operations Strategy
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7/31/2019 Lecture 2 - Operations Strategy
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Todays competitive market
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Ford BMW
Renault Nissan
Toyota Audi
Mercedes Mitsubishi
Volkswagen GM
Hyundai Fiat
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What is the impact of this globalcompetition?
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What is a strategy?
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Strategic planning exercise Enables an organization to respond to the market needs
in the most effective manner By aligning various resources and activities in the
organization To deliver products & services that are likely to succeed
in the market
Operations Strategy Is a process by which key operations decisions are made
that are consistent with the overall strategic objectives ofa firm
Decisions in the operations function are made on thebasis of the inputs from the overall corporate strategy
Mahadevan (2007), Operations Management:
Theor & Practice Pearson Education
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Operations StrategyCustomer Needs CorporateStrategy
OperationsStrategy
Alignment
Core
Competencies
Decisions
Processes,Infrastructure, andCapabilities
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Steps in Developing a Manufacturing Strategy
1. Segment the market according to the product group.
2. Identify product requirements, demand patterns, and profit
margins of each group.
3. Determine order qualifiers and winners for eachgroup.(criterion for purchase by customer e.g. Brand)
4. Convert order winners into specific performance
requirements.(differentiation, e.g. warranty, quick response,
Lease)
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Operations Strategy - Wal-Mart(USA)
Corporate Strategy
(Gain competitive advantage by) providing customers access to
quality goods, when and where needed, at competitive prices
Operations Strategy
Short flow times
Low inventory levels
Operations Structure
Cross docking
EDI
Fast transportation system
Focused locations
Communication between
retail stores
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Wal-MartOperations Strategy
Inventory at retail stores turned over twice a week(Industry averages once every two weeks)
Improved targeting of products to markets
Sourcing of ProductsWorld-wide
Sales per square foot increased from $140 in 1991
to $250 in 2004 (Industry average increased from
$110 to $150). Sales revenue:$250bn
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Core Competence Competitiveness derives from an ability to build, at lower cost
and more speedily than competitors, the core competenciesthat spawn unanticipated products.
Core competencies are the collective learning in theorganization, especially how to coordinate diverseproduction skills and integrate multiple streams of
technologies. Core competence is about harmonizing streams of
technology.
Core competence is about the organization of work and thedelivery of value.
Companies need to do a better job of leveraging technologiesand offering a wider variety of products on the sametechnology platform.
.
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.
WHAT IT DOES BEST
WHAT IT CAN DO.. OTHERS CANNOT DO
WHAT WILL PERMIT IT TO ACHIEVE THE BESTIN THE WORLD
STATUS(GAP) W.R.T . WHAT IT CAN NOT DO
DEVELOP PLANS TO FULLY EXPLOIT
CAPABILITIES
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RELIANCE , AMUL , HLL, INFOSYS
MOTOROLA -
MCDONALD -
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OM Decisions
Strategic Decisions
Design Decisions
Operating Decisions
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Yamaha announces plans for a new factory, making it the worlds largestmotorcycle manufacturer (1981)
Honda responds Yamaha wo tsubusu!
(We will crush, squash, slaughter Yamaha)
Honda cut prices, increased advertising, flooded distribution channels
Both firms started with about 60 models
Yamaha introduced 37 product line changes during next 18 months
Honda introduced 113 new products, including new styles and newtechnologies (4-valve engines, composite materials, ...)
Yamaha decimated, despite drastic price cuts, has 12 month inventory ofunsold motor cycles
Yamaha capitulates, Pres. Eguchi publicly apologizes
Honda wins war with superior design, cycle times
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``
Peter Drucker
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The End