Type author
Jones
& Robinson
names here
Operations Management
Chapter 2
Winning Customers and
Competing Effectively
© Oxford University Press, 2012. All rights reserved.
Learning Objectives
• Explain the concept of order qualifiers (OQs) and order
winners (OWs)
• Explain how firms compete on the basis of OQs and
OWs
• Understand how operations are affected by market
structure and identify alternative structures
• Identify alternative approaches to industrial market
segmentation and customer market segmentation and
explain the implications of this for operations
management
Jones & Robinson: Operations Management
Order Qualifiers
• Order qualifying factors are characteristics
of a product or service that are required for
them even to be considered by a customer,
such as holding a recognized quality standard
(e.g. ISO 9000) or being able to fly directly to
a customers destination airport. Having more
of these factors will not normally give firms
opportunities to do more business.
Jones & Robinson: Operations Management
Order Winners
• Order winning factors are those
characteristics which directly contribute to
winning business from customers, such as
speed of delivery or the flexibility to increase
or decrease production output to meet
demand.
They are the key reasons for customers to
purchase goods or services and improving
the performance of these factors may result in
increased business
Jones & Robinson: Operations Management
Competing on OQs and OWs
• *Neely’s (2008) approach to Operations
•
•
•
•
•
strategy and Order Winners and Order
Qualifiers, considering the 5 internal
performance priorities:
Cost
Quality
Dependability
Flexibility
Speed
* Neely,A. (2008) 'Business Performance Measurement: Unifying Theory and Integrating Practice'
Jones & Robinson: Operations Management
Competing on Cost
Jones & Robinson: Operations Management
Competing on Quality
Jones & Robinson: Operations Management
Competing on Flexibility
Jones & Robinson: Operations Management
Competing on Dependability
Jones & Robinson: Operations Management
Competing on Speed
Jones & Robinson: Operations Management
Turning Ows into Operations Strategies
• Lean production / Toyota – cost and quality (BLUE)
• Low cost airlines / easyJet – cost and
dependability(PINK)
• Agile manufacturing / Benetton – flexibility and
speed(GREEN)
• Mass customization / Dell – flexibility and
cost(YELLOW)
• eCommerce / Amazon.com – flexibility and
speed(WHITE)
Jones & Robinson: Operations Management
Market Structures
Markets typically have certain characteristics,
such as:
• Relative strength of buyers and sellers,
• Level of industry concentration
• Degree of collusion amongst sellers and /or
buyers,
• level and forms of competition,
• extent of product differentiation,
• ease of entry into and exit from the market.
Jones & Robinson: Operations Management
Types of Market Structure
• Perfect Competition: many buyers and sellers, none
being able to influence prices.
• Imperfect competition: many buyers and sellers, but
due to buyers imperfect knowledge of prices some
opportunities for sellers to control prices
• Oligopoly: several large sellers who have some control
over market mechanisms.
• Duopoly: two dominant sellers with considerable
control over supply and prices
• Monopoly: single seller with considerable control over
supply and prices
• Oligopsony: several large buyers with some control
over demand and prices
• Monopsony: single buyer with considerable control
over demand and prices
Jones & Robinson: Operations Management
Industrial Market Segmentation
Macro and Micro segmentation:
• Bonoma and Shapiro (1984) suggested that both macro
and micro criteria could be combined into a multi-step
approach, considering most of the criteria in a specific
sequence:
• Demographics: industry, company size, customer
location
• Operating variables: company technology,
product/brand use status, customer capabilities
• Purchasing approaches: purchasing function, power
structure, buyer-seller relationships, purchasing policies,
purchasing criteria
• Situational factors: urgency of order, product
application, size of order
Jones & Robinson: Operations Management
Customer Market Segmentation
• Geographic variables include such criteria as
region of the world, country, population density;
climate type; or degree of urbanization.
• Demographic variables include gender, age, family
size and type, income, occupation, education level,
religion and ethnicity.
• Psychographic (or lifestyle) variables are based on
consumers’ activities, interests, attitudes, opinions,
and values.
• Behavioural variables are based on how consumers
act towards certain products and services.
Jones & Robinson: Operations Management
Summary
• Order Qualifiers (OQs) are characteristics of a
product or service that are required even to be
considered by a customer.
• Order Winners (OWs) are those factors which
contribute directly to winning business from
customers.
• Firms can either compete on a combination of a
number of factors such as cost, quality, flexibility,
dependability and speed, or they can compete on the
same OWs as their competitors but do it better.
Jones & Robinson: Operations Management
Summary
• Markets are structures which allow the exchange of
goods and services. Alternative structures are
perfect competition; imperfect competition; oligopoly;
duopoly; monopoly; oligopsony; monopsony.
• Industrial markets can be segmented by:
–
–
–
–
–
Demographics
Operating variables
Purchasing approaches
Situation factors
Buyer’s personal characteristics
Jones & Robinson: Operations Management
Summary
• Customer markets can be segmented by:
– Geographic approaches – physical location
– Demographic approaches – social and economic factors
– Psychographic approaches – attitudes and values
– Behavioural approaches – how the product or service is used
Jones & Robinson: Operations Management