2. Operations Strategy

Operations Strategy

• A process by which key operations decisions are made that are consistent with the overall strategic objectives of the company.

• For example, the extent of capacity to be built into the system, the type of process and manufacturing technology to be used, the nature of products to be manufactured and the type of supply chain to configure.

Kmart Vs Wal-Mart

• Both chains started in 1962

• In 1987, Kmart had 2223 store to Wal-Mart’s 1198.

• Kmart’s sales were $25.63 billion to Wal-Mart’s $15.96 billion.

• By 1991, Wal-Mart’s sales exceeded Kmart’s

• In the year ending Jan 1996, Wal-Mart’s sales were $93.6 billion to Kmart’s $34.6 billion.

• During this time, Kmart emphasized on marketing and merchandising; Wal-Mart was investing millions in its operations to lower cost.

• Wal-Mart developed sophisticated distribution system that integrated its computer system with its distribution.

• Kmart’s employees lacked skills needed to plan and control inventory.

• Period form 1987 to 1995 Kmart’s market share declined from 34.5% to 22.7%, Wal-Mart’s increased from 20.1% to 41.6%.

Air Deccan – India’s first low cost airline

• Basic Strategy: To make air travel accessible to every Indian pricing their services at 30-40% of regular airline services.

• Service Delivery System– Uses airbuses on heavy traffic routes & smaller aircraft for lower traffic routes

– Elimination of in-flight food, business class and lounges at airports

– No refunds and compensation or accommodation facilities for missing a flight.

• Ticketing & Distribution System– Traditionally, 90% of ticketing is done through travel agents and agents gets a commission

of 7-10%, lock up of funds, multiple booking in flights by travel agents, high fluctuating occupancy levels, high cost in printing and distribution of tickets.

– Developed its own CRS (Computer Reservation System), has a call centre at Bangalore that can book tickets 24 hours, concept of e-ticketing.

• Adopted Point-to-Point flying model instead of (Hub & Spoke model)

• More flying hours per aircraft

• Elimination of inter-airline arrangements

• Outsources facilities in all airports due to poor utilization of resources

Firm level strengths & weaknesses

ORDER WINNERORDER QUALIFIERS

Generic Competitive Priorities:

Quality, Cost, Delivery, Flexibility

Competitive dynamics at the market place

Decisions for operations systems

Operations Strategy

Measure for operational excellence

Strategic options for sustaining competitive advantage

Corporate Strategy

Strategy formulation process







Operations Strategy



Corporate Strategy


Scanning the market place: Competitors

nature of offeringscustomer expectationstechnology change







Operations Strategy



Corporate Strategy


Order qualifying attributes: Minimum level of requirement for considering the product or service.

Order winning attributes: Potential to sufficiently motivate the customers to buy the product or service







Operations Strategy



Corporate Strategy








Operations Strategy



Corporate Strategy


Measures that help organization to evaluate how well the operations system is responding to the requirement of the market.

Eg. yield, percentage defects, process capability indices, lead time, delays, number of models introduced, process flexibility, process rate to sales rate ratio, average training time per employee, no. of suggestions per employee etc.







Operations Strategy



Corporate Strategy


Choices are made in the following domains:1.Product portfolio2.Process3.Technology4.Capacity5.Supply chain issues

Documents

2. Operations Strategy