COMPETITIVENESS

AND
OPERATIONS STRATEGY

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A COLD HARD FACT

Better quality, higher productivity, lower costs, and
the ability to respond quickly to customer needs
are more important than ever and
the bar is getting higher

2-2

CHAPTER FOCUS
Competitiveness
Strategy
Productivity

2-3

COMPETITIVENESS
Competitiveness:
How

effectively (the extent that) an organization

meets the wants and needs of customers relative to
others that offer similar goods or services
Organizations compete through some combination
of their marketing and operations functions
What do customers want?
How can these customer needs best be satisfied?

2-4

MARKETING INFLUENCES
COMPETITIVENESS BY:
Identifiying consumer needs and desires
Pricing
Advertising and promotion

2-5

OPERATIONS INFLUENCES
COMPETITIVENESS THROUGH (1 of 4):
1. Product and Service Design
2. Cost
3. Location
4. Quality and Reliability

2-6

OPERATIONS INFLUENCES
COMPETITIVENESS THROUGH (1 of 4):
5. Quick or Reliable Response
a. New Product Introduction Speed
b. Delivery Speed
c. Delivery Reliability
6. Service

2-7

OPERATIONS INFLUENCES
COMPETITIVENESS THROUGH (1 of 4):
7. Flexibility
a. in making alterations in design
b. in coping with changes in volume
c. in new product introduction
8. Inventory Management
2-8

OPERATIONS INFLUENCES
COMPETITIVENESS THROUGH (1 of 4):
9. Supply Chain Management
10. Service and Service Quality
11. Managers and Workers

2-9

WHY SOME ORGANIZATIONS FAIL? (1 of 2)

Too much emphasis on short-term financial
performance
Failing to take advantage of strengths and
opportunities
Failing to recognize competitive threats
Neglecting operations strategy

2-10

WHY SOME ORGANIZATIONS FAIL (2 of 2)

Too much emphasis in product and service
design and not enough on improvement
Neglecting investments in capital and human
resources
Failing to establish good internal
communications and cooperation
Failing to consider customer wants and needs

2-11

HIERARCHICAL PLANNING
Mission
Goals
Organizational Strategies
Functional Strategies
Tactics
2-12

HIERARCHICAL PLANNING
Mission
Goals
Organizational Strategies
Functional Goals
Finance
Strategies

Tactics
Operating
procedures

Marketing
Strategies
Tactics
Operating
2-13
procedures

Operations
Strategies
Tactics
Operating
procedures

MISSION
Mission - where you
are going?
The reason for the
existence for an
organization
Provides boundaries &
focus
1995 Corel Corp.

2-14

MISSION STATEMENT
States the purpose of the organization
The mission statement should answer
the question of What business are
we in?

2-15

MISSION STATEMENT OF THE HARD ROCK

CAFE
To spread the spirit of Rock n Roll by
delivering an exceptional entertainment
and dining experience. We are committed
to being an important, contributing member
of our community and offering the Hard
Rock family a fun, healthy, and nurturing
work environment while ensuring our longterm success.
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MCDONALDS MISSION STATEMENT

McDonald's brand mission is to "be our
customers' favorite place and way to eat." Our
worldwide operations have been aligned around
a global strategy called the Plan to Win
centering on the five basics of an exceptional
customer experience -- People, Products, Place,
Price and Promotion. We are committed to
improving our operations and enhancing our
customers' experience.
2-17

GOALS
The mission statement serves as the basis for
organizational goals
Goals
They provide detail and the scope of the mission
Goals can be viewed as organizational
destinations
They serve as the basis for organizational
strategies

2-18

STRATEGIES
Strategy
A plan for achieving organizational goals
Serves as a roadmap for reaching the
organizational destinations
Mission: Where you are going?
Strategy: How you are going to get there; an
action plan (shows how mission will be
achieved)
2-19

STRATEGIES
Organizations

have
Organizational (business) strategies
Overall strategies that relate to the
entire organization
Support the achievement of
organizational goals and mission
Functional level strategies
Strategies that relate to each of the
functional areas and that support
achievement of the organizational
strategy
2-20

TACTICS AND OPERATIONS

Tactics
The methods and actions taken to
accomplish strategies
The how to part of the process
Answers the question: How to reach the
destination, following the strategy road map
Operations
The actual doing part of the process
2-21

STRATEGY EXAMPLE
Rita is a high school student. She would like to
have a career in business, have a good job, and
earn enough income to live comfortably
Mission: Live a good life
Goal:
Successful career, good
income
Strategy: Obtain a college education
Tactics: Select a college and a major
Operations:
Register, buy books, take
courses, study, graduate, get
job
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CORE COMPETENCIES
Core Competencies
The

special attributes or abilities that give

an organization a competitive edge
To be effective core competencies and
strategies need to be aligned

2-23

SAMPLE STRATEGIES
Organizational Strategy

Operations Strategy

Examples of Companies or Services

Low Price

Low Cost

U.S. first-class postage

Wal-Mart

High Quality

High performance design and/or high

quality processing

Sony TV
Lexus, Cadillac,

Consistent Quality

Coca-Cola; Kodak, Motorola

Quick Response(rapid delivery)

McDonalds Restaurants
Express mail
FedEx; One-hour photo

Short Time

On-time delivery
Newness

Innovation

3M
Express mail

Flexibility

Variety
Volume

Burger King (Have it your way)

McDonalds (Buses Welcome)

Service

Superior customer service

Disneyland
IBM

Location

Convenience

2-24

Supermarkets, Banks, ATMs

Mall Stores

STRATEGY FORMULATION
Effective strategy formulation requires taking
into account:
Core competencies
Environmental scanning (SWOT)
Successful strategy formulation also requires
taking into account:
Order qualifiers
Order winners

1995 Corel Corp.

2-25

IDENTIFICATION OF CORE
COMPETENCIES

The special attributes or abilities that give an

organization a competitive edge. What the firm
does better than anyone else (critical success
factors, distinctive competencies)

Price
Quality
Time
Flexibility
Service
Location

Develop Distinctive
Competencies based on
customer needs and on
what the competitors doing
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ENVIRONMENTAL SCANNING
The consideration of events and trends that
present threats or opportunities for a company
Environmental Scanning is necessary to identify
Internal

Factors
Strengths and Weaknesses
External Factors
Opportunities and Threats
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ENVIRONMENTAL SCANNING:
KEY EXTERNAL FACTORS
Economic conditions
Political conditions
Legal environment
Technology
Competition
Customers and Markets
Suppliers
Distributors
2-28

ENVIRONMENTAL SCANNING:
KEY INTERNAL FACTORS
Resources available (human resources,
facilities and equipment, financial
resources)
Existing and potential products and
services
Technology
Stages of life cycles of current products

2-29

SWOT ANALYSIS TO STRATEGY

FORMULATION
Mission
Internal
Strengths

External
Opportunities
Strategy

Internal
Weaknesses

Competitive
Advantage

2-30

External
Threats

ORDER QUALIFIERS: DEFINED

Order qualifiers are the basic criteria that permit the
firms products to be considered as candidates for
purchase by customers.
These are the characteristics that customers perceive
as minimum standards of acceptability to be
considered as a potential purchase.

2-31

ORDER WINNERS: DEFINED

Order winners are the criteria that differentiate the
products and services of the firm from others.
These are the characteristics of an organizations
goods or services that cause it to be perceived as
better than competitors products

2-32

A brand name car can be an

order qualifier

Repair services can be order winners

Examples: Warranty, Roadside Assistance,
Leases, etc
2-33

ORGANIZATION STRATEGY/
OPERATIONS STRATEGY
The organization strategy provides the overall
direction for the organization. It is broad in
scope covering the entire organization
Operations strategy is the approach consistent
with organization strategy that is used to guide
the operations function. It is narrower in scope,
dealing with the operations aspect of the
organization.
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Organization
Strategy

Relates to growth rate, market

share

Operations
Strategy

Relates to product design;

choice of location, technology,
new facilities

2-35

STRATEGIC PLANNING
Mission and
Vision

Voice of the
Business

Marketing
Strategy

Corporate
Strategy

Operations
Strategy

2-36

Voice of the
Customer

Financial
Strategy

OPERATIONS ROLE IN CORPORATE

STRATEGY
Provide support for overall strategy of a
firm
Serve as firms distinctive competence
Must be consistent
Must be consistent with overall strategy

2-37

IMPETUS FOR STRATEGY CHANGE

Changes in the organization
Stages inthe product life cycle
Changes in the environment

2-38

GLOBAL STRATEGY
Strategic decisions must be made with respect
to globalization
What works in one country may not work in
another
Strategies must be changed to account for
these differences
Other issues
Political, social, cultural, and economic
differences
2-39

STRATEGIC DECISIONS IN OPERATIONS

Products

Services

Processes,
Technology

Job design
Quality

Capacity

Facilities

Sourcing

2-40

Inventory

STRATEGIC OM DECISION AREAS

Decision Area

What the Decisions Affect

Product and service

design

Costs, quality, liability, and environmental issues

Capacity

Cost, structure, flexibility

Process selection and

layout

Costs, flexibility, skill level needed, capacity

Work design

Quality of work life, employee safety, productivity

Location

Costs, visibility

Quality

Ability to meet or exceed customer expectations

Inventory

Costs, shortages

Maintenance

Costs, equipment reliability, productivity

Scheduling

Flexibility, efficiency

Supply chains

Costs, quality, agility, shortages, vendor relations

Projects

2-41
Costs, new
products, services, or operating systems

TRADITIONAL STRATEGIES
Cost

minimization
Product differentiation

2-42

COMPETING ON COST
Eliminate all waste
Invest in

Updated facilities & equipment

Streamlining operations
Training & development

2-43

COMPETING BY DIFFERENTIATION
Please the customers by offering
unique goods or services that
make them feel special

2-44

QUALITY-BASED STRATEGIES
Quality-based strategy

Strategy that focuses on quality in all phases of an organization

Focuses on maintaining or improving the quality of an
organizations products or services
Understand customer attitudes toward and expectations of quality
Quality at the source
Pursuit of such a strategy is rooted in a number of factors:
Trying to overcome a poor quality reputation
Desire to maintain a quality image
A part of a cost reduction strategy

2-45

TIME-BASED STRATEGIES
Time-based strategies
Strategies

that focus on the reduction of time needed

to accomplish tasks
Competing on speed: fast moves, fast adaptations,
tight linkages
It is believed that by reducing time, costs are
lower, quality is higher,
productivity is higher,
time-to-market
is faster, and customer service
is improved
2-46

TIME-BASED STRATEGIES
Areas where organizations have achieved time
reductions:
Planning time
Product/service design time
Processing time
Changeover time
Delivery time
Response time for complaints
2-47

COMPETING ON FLEXIBILITY
Produce wide variety of
products
Introduce new products
Modify existing products
quickly
Respond to customer needs

2-48

AGILE OPERATIONS
Agile operations
A strategic

approach for competitive advantage

that emphasizes the use of flexibility to adapt and
prosper in an environment of change
Involves the blending of several core
competencies:
Cost
Quality
Reliability
Flexibility

2-49

THE BALANCED SCORECARD

APPROACH
A top-down management system that organizations can use to clarify their vision
and strategy and transform them into action

Develop objectives

Develop metrics and targets for each objective

Develop initiatives to achieve objectives

Identify links among the various perspectives

Finance

Customer

Internal business processes

Learning and growth

Monitor results

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THE BALANCED SCORECARD

2-51