MGT 563
OPERATIONS STRATEGIES
Dr. Aneel SALMAN
Department of Management Sciences
COMSATS Institute of Information Technology,
Islamabad
Recap Lecture 07
• Current Trends in Trade
• Emerging business models
• Operations Manager
Operations performance can make or
break any organisation
• Operations strategy, and the resulting performance
that it brings can either ‘make’ or ‘break’ any
business.
• Not just because the operations function is large
and, in most businesses, represents the bulk of its
assets and the majority of its people, but because
the operations function gives the ability to compete
by providing the ability to respond to customers
and by developing the capabilities that will keep it
ahead of its competitors in the future.
‘Stakeholder’ perspective on
operations performance
• Stakeholders are the people and groups who have a
legitimate interest in the operation’s strategy. Some
are internal, for example the operation’s employees
• External, for example customers, society or
community groups, and a company’s shareholders.
External stakeholders may have a direct commercial
relationship with the organisation, for example
suppliers and customers; others may not, for
example, industry regulators.
Stakeholders
Corporate Social Responsibility
(csr)
• CSR is essentially about how business takes account
of its economic, social and environmental impacts
in the way it operates – maximising the benefits
and minimising the downsides . . . Specifically, we
see CSR as the voluntary actions that business can
take, over and above compliance with minimum
legal requirements, to address both its own
competitive interests and the interests of wider
society.’
• ‘Corporate Social Responsibility . . . is listening and
responding to the needs of a company’s
stakeholders. This includes the requirements of
sustainable development. We believe that building
good relationships with employees, suppliers and
wider society is the best guarantee of long-term
success. (Marks & Spencer)
Five generic performance objectives
Quality
Speed
Dependability
Flexibility
Cost
Being RIGHT
Being FAST
Being ON TIME
Being ABLE TO CHANGE
Being PRODUCTIVE
The operations function can provide a competitive advantage through its
performance at the five competitive objectives
Operations strategy at Flextronics and Ryanair
For each of these companies:
• What do they have to be good at to compete in their
markets?
• How do their operations help them to achieve this?
Operations strategy at Flextronics
Operations strategic
decisions
• Industrial parks, with
– low cost but close
locations
– and co-located
suppliers
Flextronics
Market requirements
• Low costs
• Responsiveness
• Flexibility
Operations strategy at Ryanair
Operations strategic
decisions
• Stripped down service
• One technology
• Cheap airport
locations
• Fast turnround
Ryanair
Market
requirements
• Low prices
• Reliability
• Basic service
What is strategy?
• Setting broad objectives that direct an enterprise
towards its overall goal.
• Planning the path (in general rather than specific
that will achieve these goals.
terms)
• Stressing long-term rather than short-term objectives.
• Dealing with the total picture rather than stressing
individual activities.
• Being detached from, and above, the confusion and
distractions of day-to-day activities.
Strategic decisions
Strategic decisions are those decisions which: are
widespread in their effect on the organization to which
the strategy refers, define the position of the
organization relative to its environment and move the
organization closer to its long-term goals.
‘Operations’ is not the same as ‘operational’
‘Operations’ are the resources that create products and
services.
‘Operational’ is the opposite of strategic, meaning day-to-day
and detailed.
So, one can examine both the operational and the strategic
aspects of operations.
How is operations strategy different to operations
management?
The time
scale is
longer
Demand
Short-term
for example,
capacity decisions
1–12 months
Operations strategy
Long-term
for example, capacity
decisions
Demand
Operations management
1–10 years
How is operations strategy different to operations
management? (Continued)
Operations management
Micro-level
of the process
The level of
analysis is
higher
Operations strategy
Macro-level
of the total operation
How is operations strategy different to operations
management? (Continued)
Operations management
Detailed
The level of
aggregation
is higher
Operations strategy
Aggregated
For example:
For example:
‘Can we give tax services to
the small business market in
Antwerp?’
‘What is our overall
business advice capability
compared with other
capabilities?’
How is operations strategy different to operations
management? (Continued)
Operations management
Concrete
The level of
abstraction
is higher
For example:
‘How do we improve out
purchasing procedures?’
Operations strategy
Philosophical
For example:
‘Should we develop
strategic alliances with
suppliers?’
What is the role of the operations function?
Operations as
implementer of
strategy
Operations as
supporter of
strategy
Operations as
driver of strategy
Operations implements
strategy
Operations supports
strategy
Operations drives
strategy
The strategic role of the operations function
The 3 key attributes
of operations strategy
Implementing
Operations contribution
be Dependable
Operationalize strategy
explain Practicalities
Supporting
be Appropriate
Understand strategy
Contribute to decisions
Driving
be Innovative
provide Foundation of strategy
Develop long-term Capabilities
The 4 stage model of operations contribution
Increasing strategic impact
Redefining
industry
expectations
STAGE 4
Give an
operations
advantage
Clearly the
best in the
industry
STAGE 3
Link strategy
with operations
STAGE 2
Adopt best
practice
As good as
competitors
Holding the
organization
back
STAGE 1
Correct the
worst problems
Internally
neutral
After Hayes and
Wheelwright
Driving
strategy
Supporting
strategy
Implementing
strategy
Externally
neutral
Internally
supportive
Increasing operations capabilities
Externally
supportive
The four perspectives on operations strategy
Top-down
perspective
What the business
wants operations to
do
Operations
resources
perspective
What operations
resources can do
Operations
strategy
What day-to-day
experience suggests
operations should do
Bottom-up
perspective
Market
requirement
perspective
What the market
position requires
operations to do
Top-down and bottom-up perspectives of strategy
Corporate strategy
Business strategy
Operations strategy
Emergent sense of what the
strategy should be
Operational experience
The strategy hierarchy
Key strategic
decisions
Influences on
decision-making
Corporate
strategy
What business to be in?
What to acquire?
What to divest?
How to allocate cash?
Economic environment
Social environment
Political environment
Company values and ethics
Business
strategy
What is the mission?
What are the strategic
objectives of the firm?
How to compete?
Customer/market dynamics
Competitor activity
Core technology dynamics
Financial constraints
How to contribute to the
strategic objectives?
How to manage the
function’s resources?
Skills of function’s staff
Current technology
Recent performance of the
function
Functional
strategy
Sales
volume
The effects of the product / service life cycle
Time
Introduction
Growth
Maturity
Decline
Slow growth in
sales
Rapid growth in
sales volume
Sales slow and
level off
Market needs
largely met
Customers
Innovators
Early adopters
Bulk of market
Laggards
Competitors
Few/none
Increasing
numbers
Stable number
Declining
numbers
Customization
or frequent
design changes
Increasingly
standardized
Emerging
dominant types
Possible move to
commodity
standardization
Volume
Variety of
product/
service
design
Sales
volume
The effects of the product / service life cycle (Continued)
Time
Introduction
Likely order
winners
Likely
qualifiers
Dominant
performance
objectives
Product/ service
characteristics
Growth
Maturity
Decline
Availability
quality
Low price
dependable
supply
Low price
Quality
range
Price
range
Quality
range
Dependable
supply
Flexibility
quality
Speed
dependability
quality
Cost
dependability
Cost
Different competitive factors imply different
performance objectives
Competitive factors
If the customers value these …
Performance objectives
Then, the operations will need to
excel at these …
Low price
Cost
High quality
Quality
Fast delivery
Speed
Reliable delivery
Dependability
Innovative products and services
Flexibility (products/services)
Wide range of products and services
Flexibility (mix)
The ability to change the timing or
quantity of products and services
Flexibility (volume and/or delivery)
Order-winning, qualifying and less important
competitive factors
Order-winning factors
+ve
Competitive
benefit
Neutral
–ve
Performance
Order-winning, qualifying and less important
competitive factors (Continued)
Qualifying factors
+ve
Competitive
benefit
Neutral
–ve
Performance
Order-winning, qualifying and less important
competitive factors (Continued)
Less important factors
+ve
Competitive
benefit
Neutral
–ve
Performance
Mintzberg’s concept of emergent strategy
Intended strategy
Unrealized strategy
Deliberative
strategy
Realized strategy
Emergent
strategy
Reconciling market requirements and operations
resources
Market
requirements
Operations
resources
What you
HAVE
in terms of
operations
capabilities
What you
DO
to maintain
your
capabilities
and satisfy
markets
What you
WANT
from your
operations to
help you
‘compete’
Strategic
reconciliation
What you
NEED
to ‘compete’
in the market
The challenge of operations strategy
formulation
An operations strategy should be:
Appropriate…
Comprehensive…
Coherent…
Consistent over time…
An implementation agenda is needed
When to start?
Where to start?
How fast to proceed?
How to co-ordinate the implementation
programme?
The five P’s of operations strategy
implementation
Purpose — a shared understanding of the motivation,
boundaries and context for developing the operations
strategy.
Point of Entry — the point in the organization where the process
of implementation starts.
Process — How the operations strategy formulation process is
made explicit.
Project Management — The management of the
implementation.
Participation — Who is involved in the implementation.