Upload
anthony-watkins
View
285
Download
6
Tags:
Embed Size (px)
Citation preview
Competitiveness and Operations Strategy
Competitiveness
CompetitivenessCompetitiveness
Competitiveness refers to how effective an organization is in the competition for customers’ purchases Primarily a function of how well the organization
(through its operations) meets the needs of customers
Competitiveness is relative to others that offer similar goods or services
What is competitive today may not be competitive tomorrow.
Competitiveness : Bases for Competition
Quality
Price
Time
Flexibility
Differentiation
Service
Business organizations compete with one another in a variety of ways. These includes
Managers and workersNote: Some of the dimensions, mentioned above might overlap. Ex: Several of the items on the list may come under the heading of “quality”.
Price is the amount a customer must pay for
the product or service. If all other factors are
equal, customers will choose the product or
service that has the lowest price.
Organizations that compete on price may
settle for lower profit margins, but most
focus on lowering costs of goods or
services.
Bases for Competition
Bases for Competition
Quality refers to materials and
workmanship as well as design
[Appearance, Performance & Function, After
sales service, etc].
Usually, it relates to a buyer’s perceptions of
how well the product or service will serve its
intended purpose.
Product or service differentiation refers to
any special features that cause a product or
service to be perceived by the buyer as more
suitable than a competitor’s product or service.
Example for Special Feature:
Design, Cost, Quality, Easy of use, Convenient Location, Warrantee
Bases for Competition (Contd.)
Flexibility is the ability to respond to changes. The better a company or department is at responding to changes, the greater its competitive advantage over another company that is not as responsive.
The changes might relate to increase or decrease in volume demanded, or to changes in the design of goods or
services.
Bases for Competition (Contd.)
Time refers to a number of different aspects of an organization’s operations, such as
how quickly a product or service is delivered to a customer
how quickly new products or services are developed and brought to the market,
the rate at which improvements in products or processes are made, etc.
Bases for Competition (Contd.)
Bases for Competition (Contd.)
Service might involve after-sale activities that perceived by customers as value added, such as
delivery,
setup,
warranty work,
technical support, or
extra attention while work is in progress such as
curtsey,
keeping the customer informed, and
attention to little details.
Managers and workers are the people at the heart and soul of an organization, and if they are competent and motivated, they can provide a distinct competitive edge by their skills and the ideas they create.
Example: One skill that is often overlooked is answering the telephone.
If the person answering the call is rude, not helpful, or cut off the call
produce a negative image to customers else [calls are handled promptly and cheerfully]
produce a positive image to customers and potentially, a competitive advantage. endif
Bases for Competition (Contd.)
Putting too much emphasis on short-term financial performance at the expense of research and
development.
Failing to take advantage of strengths and opportunities, and/or failing to recognize competitive threads.
Neglecting operations strategy.
Failing to establish good internal communications and cooperation among different functional areas.
Neglecting investments in capital and human resources.
Failing to consider customer wants and needs.
Causes of Poor CompetitivenessCauses of Poor Competitiveness
Mission/Strategy/Tactics
Mission/Strategy/Tactics
How does mission, strategies and tactics relate todecision making and distinctive competencies?
Strategy TacticsMission
Mission – The reason for existence of an organization
Organization’s purpose for being
Provides boundaries & focus
Answers ‘How can we satisfy people’s needs?’
Expressed in published statement
What business are we in?
To guide formulation of strategies for the organization as well as decision making at
all levels.
The mission statement is about
the kind of business the company wants to be in
who its customers are
its basic beliefs about business
its goals of survival, growth, and profitability
Mission Statement
Example: One goal of an organization may be to capture a certain %age of market share for a product; Another goal may be achieve a certain level of profitability.
Taken together, the goals and the mission, establish a destination for the organization.
University – discovering and disseminating knowledge
Bank – Safeguard and increase the value of its
customers’ investment
Manufacturer – Supply high quality products to a wide
market, while ensuring a satisfactory
profit
Telev. network – entertain, inform and educate the widest
possible audience
Example – Mission Statement
Sample Mission for a Service CompanySample Mission for a Service Company
Satisfy our customers’ immediate needs and
wants by providing them with a wide variety
of goods and services at multiple locations.
is to provide
(a) society with superior products and services - innovations and solutions that improve the quality of life and satisfy customer needs;
(b) employees with meaningful work and advancement opportunities and investors with a superior rate of return
Sample Mission for a Manufacturing CompanySample Mission for a Manufacturing Company
IBM-Mission Statement
We create, develop, and manufacture the industry’s most advanced information technologies, including computer systems, software, networking systems, storage devices, and microelectronics.
We have two fundamental missions:
We strive to lead in the creation, development, and manufacture of the most advanced information technologies.
We translate advanced technologies into value for our customers as the world’s largest information services company. Our professionals worldwide provide expertise within specific industries, consulting services, systems integration, and solution development and technical support.
Skynet Worldwide Courier-Mission Statement
The Skynet Worldwide Courier Network sets the standard for international delivery and distribution services by consistently exceeding customer expectations.
Skynet delivers customer satisfaction by:
Integrating all aspects of the transportation process.
Personalizing service worldwide.
Investing in quality people and technology.
Innovating and adapting to meet customers unique and changing requirements.
StrategiesStrategies
Each strategy established in light of:
threats and opportunities in the environment
strengths and weaknesses of the organization (related to environment)
Strategies – are the roadmaps (plans) for reaching the goals
Action plan to achieve mission
Shows how mission will be achieved
Provide focus for decision making
Organization strategies, provides the overall direction for the organization.
The organizational strategies should support the goals and missions of the organization.
Functional strategies, relate to each of the functional areas of the organization.
The functional strategies should support the overall strategies of the
organization.
Strategic Planning HierarchyStrategic Planning Hierarchy
What business(es)/industries do wewant to be in?
How can we compete with thisbusiness/in this market?
How can this functional area supportthe business-level (SBU) strategy?
Corporate-LevelStrategic Planning
Functional-LevelStrategic Planning
Business-LevelStrategic Planning
Questions about organizational/competitive strategies
What is our industry like? What are the future prospects? What are our strengths? Who are the competitors? What are the competitors’ strength? What flexibility do we have?
The answers to the above questions suggest a range of more detailed questions like
What products should we concentrate on? What volume should we produce? What quality should we provide? Do we supply low or high cost products? Are our products reliable? Do we give fast deliveries? Who are our biggest customers? Do we have adequate financing?
Tactics – are the methods and actions used to accomplish strategies
are more specific in nature than strategies
provide guidance and direction for carrying out actual operations, which need the most specific and detailed plans and decision making in an organization.
tells ‘how to reach the destination, following the strategy roadmap.
Operations StrategyOperations Strategyis narrower in scope, dealing primarily with the operations aspect of the organization.
relates to Products, Processes, Methods, Operating Resources, Quality, Costs, Lead-Times and Scheduling.
can have a major influence on the competitiveness of an organization.
For operations strategy to be truly effective, it is important to link it to organization strategy. That is, both organization strategy and operations strategy should not be formulated independently.
Operations StrategyOperations StrategyExampleStrategy Process
Customer Needs
Corporate Strategy
Operations Strategy
Decisions on Processes and Infrastructure
More Product
Increase Org. Size
Increase Production Capacity
Build New Factory
There is an apparent relationship that exists from the mission down to actual operations, which is hierarchical in nature.
Strategic Planning and Execution
Mission
Goals
Organizational strategy
Functional strategies
Finance Marketing Operations
Tactics Tactics Tactics
Finance operations
Marketingoperations
Operationsoperations
Planning and decision making is hierarchical in
organization
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/Strategy/Tactics
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
Characteristics of Strategic Decisions
Long-term perspective/planning horizon
Made at top levels of organization
Involve a high degree of uncertainty about outcomes
Tend to focus on external factors
Can require significant cost and lead time to implement
Can be difficult to reverse once implemented
Cross functional/geographic/organizational boundaries
Choices and results can have a powerful (positive or negative) impact competitiveness and survival of the organization (“high stakes”)
Strategic Decisions in OperationsStrategic Decisions in Operations
Products Processes and
Technology
Capacity
Human Resources Quality
Facilities Sourcing
Services
Operating Systems
Note: Cross functional/geographic/organizational boundaries
Products & ServicesProducts & Services
Make-to-order Made to customer specifications after
order receivedMake-to-stock
Made in anticipation of demandAssemble-to-order
Add options according to customer specification
Processes & TechnologyProcesses & Technology
Project One-time production of product to customer order
Batch production Process many jobs at same time in batch
Mass production Produce large volumes of standard product for mass
market Continuous production
Very high volume commodity product
Product-Process MatrixProduct-Process MatrixV
olu
me
Low
Low High
High
Projects
BatchProduction
MassProduction
ContinuousProduction
Standardization
Service-Process MatrixV
olu
me
Vo
lum
e
LowLow
LowLow HighHigh
HighHigh
Professional Service
Service Shop
MassService
Service Factory
StandardizationStandardization
Capacity & Facilities How much capacity to provide
Size of capacity changes
Handling excess demand
Hiring/firing workers
Need for new facilities
Best size for facility?
Large or small facilities
Facility focus
Facility location
Global facility
Human Resources
Skill levels required Degree of autonomy Policies Profit sharing Individual or team work Supervision methods Levels of management Training
QualityQuality
Target level Measurement Employee involvement Training Systems needed to ensure quality Maintaining quality awareness Evaluating quality efforts Determining customer perceptions
SourcingSourcingDegree of vertical integrationSupplier selectionSupplier relationshipSupplier qualitySupplier cooperation
Decision Area Typical OPMA decisions
Strategic decisionsBusiness What business are we in?
Product What products are supplied?
Process How are products made?
Location Where are products made?
Capacity How large should facilities be?
Tactical decisionsLayout How should operations be arranged?
Planning When should a new product be introduced?
Quality Assurance How well should products be made?
Distribution How should distribution be organized: what transport should be used?
Maintenance How often should equipment be maintained a d replaced?
Operational decisionsScheduling In what order should products be made?
Inventory How much should be held in stock?
Reliability How often is equipment breaking down: what can be done to improve this?
Maintenance When can maintenance periods be scheduled?
Quality control Are products reaching designed quality?
Note: The distinction between strategic, tactical and operational decisions are not usually as clear as given above [Example: Quality – when company plan for a new product then quality is strategic decision; tactical when deciding how quality can be measured; etc.]
Strategy Formulation
To formulate an effective strategy, senior management must take into account the distinctive competencies of the organizations, and they must scan the environment [Internal and External Factors that relate to possible strength or weakness : Strategy Formulation ].
In formulating a successful strategy, organization must take into account both order qualifiers and order winners.
Competency Examples of Companies or Services
Price Low cost U.S. first-class postage
Motel-6, Red Roof Inns
Mail-order computers
Quality High Performance design and/or high quality
Sony TV
Lexus, Cadillac
Disneyland
Five-star restaurants or hotels
Consistent quality Coca-Cola PepsiCo
Kodak, Xerox, Motorola
Electrical Power
Time Rapid Delivery McDonald’s Restaurants
Express Mail
UPS
Domino’s Pizza
On-time Delivery One-hour photo, Federal Express, Express Mail
Flexibility Variety Burger Kind (“Have it your way”), Hospital emergency room
Volume McDonald’s (“Buses welcome”)
Toyota
Supermarkets (additional checkouts)
Service Superior customer service Disneyland
Hewlett-Packard
IBM
Nordstrom's
Location Convenience Supermarkets, dry cleaners
Mail stores
Service stations
Banks, ATMs
Examples of Distinctive Competencies
External Factors that relate to possible strength or weakness : Strategy Formulation
Economic Conditions: These include general health and direction of the economy, inflation, interest rates, tax laws, and tariffs.
Political Conditions: These include favorable or unfavorable attitudes towards the business, political stability or instability, and wars.
Legal Environment: These include antitrust laws, government regulations, trade restrictions, minimum wage laws, labour laws, and patents.
External Factors (Contd.)
Competition: This include the number and strength of competitors, the basis of competition (price, quality, special features), and the easy of market entry.
Markets: This include size, location, brand loyalties, easy of entry, potential for growth, long term stability, and demographics.
Technology: This can include the rate at which the product innovations are occurring, current and future process technology (equipment and material handling), and design technology.
Internal Factors that relate to possible strength or weakness : Strategy Formulation
Human Resources: These include the skills and abilities of managers and workers; special talents (creativity, designing, problem solving); loyalty to the organization; expertise; dedication; and experience.
Facilities and Equipment: Capacities, location, age, and cost to maintain or replace can have a significant impact on operations.
Financial Resources: Cash flow, access to additional funding, existing debt burden, and cost of capital are important considerations.
Customers: Loyalty, existing relationships, and understanding of wants and needs are important
Internal Factors (Contd.)
Product and Services: These include existing products and services, and the potential for new products and services.
Technology: This include existing technology, the ability to integrate new technology, and the probable impact of technology on current and future operations
Suppliers: Supplier relationships, dependability of suppliers, quality, flexibility, and service are typical considerations
Others: Other factors include patents, labour relations, company or product image, distribution channels, relationship with distributors, maintenance of facilities and equipment, access to resources, and access to markets.
Order Winners and Qualifiers
Within a given industry or market, certain competitive priorities can be identified as being either order winners or order qualifiers. Order Qualifiers –they are the basic criteria
that permit the firms products to be considered as candidates for purchase by customers.
A brand name car can be an “order qualifier”
Order winners –they are the criteria that differentiates the products and services of one firm from another.
Repair services can be “order winners” Examples: Warranty, Roadside Assistance, Leases, etc.
Order Winners and Qualifiers
To develop effective strategies for business, it is essential for organizations to determine what combinations of factors are important to customers, which factors are order qualifiers, and which are order winners.
Characteristics such as price, quality, delivery reliability, delivery speed can be order qualifier or order winner.
Characteristics which may be an order qualifier in some situations will become an order winner in another situation [example Quality]
It is also necessary to decide on the relative importance of each factors so that an appropriate actions can be given to the various factors.
Today’s Key Strategies for Operations
Quality-based strategies
Focus on satisfying the customer by integrating quality into all phases of the organization
Quality includes both products and processes such as design, production, and service after the sale
Time-based strategies
Gain competitive advantage by performing certain activities more quickly than competitors
Key Strategies for Operations (contd.)Key Strategies for Operations (contd.) Vertical integration and outsourcing
Make vs. buy
Strategic alliances
Supply chain management - Synchronization of the supply chain to achieve high performance
Suppliers, manufacturers, distribution channels, retailers and customers—all viewed as an integrated system
Cooperation between links, sharing of information
Focus on trade-off between cost and level of service
Time-based strategies
Planning time
Product/service design time
Processing time
Changeover time
Delivery time
Response time
Various Time-based strategies
Planning time: The time needed to react to competitive threat, to develop strategies and select tactics, to approve proposed changes to facilities, to adopt new technologies, and so on.
Product/service design time: The time needed to develop and market new or redesigned products or service
Processing time: The time needed to produce goods or provide services. This can involve scheduling, repairing equipment, wasted efforts, inventories, quality, training, etc.
Changeover time: The time needed to change from producing one type of product or service to another. This may involve new equipment settings and attachments, different methods, equipment, schedules or materials.
Delivery time: The time needed to fill order
Response time: These must be customer complaints about quality, timing of deliveries, and incorrect shipments. These might also be complaints from employees about working conditions (e,g., safety, lighting, heat or cold), equipment problems, or quality problems.
Time-based strategies (Contd.)
Impetus for Strategy ChangeImpetus for Strategy Change
Changes in the organization
Stages in the product life cycle
Changes in the environment
Stages in the Product Life CycleStages in the Product Life Cycle
Introduction
Growth
Maturity
Decline
Gro
wth
rate
Strategy and Issues During a Strategy and Issues During a Product’s LifeProduct’s Life
Introduction Growth Maturity Decline
Standardization
Less rapid product changes - more minor changes
Optimum capacity
Increasing stability of process
Long production runs
Product improvement and cost cutting
Little product differentiation
Cost minimization
Overcapacity in the industry
Prune line to eliminate items not returning good margin
Reduce capacity
Forecasting critical
Product and process reliability
Competitive product improvements and options
Increase capacity
Shift toward product focused
Enhance distribution
Product design and development critical
Frequent product and process design changes
Short production runs
High production costs
Limited models
Attention to quality
Best period to increase market share
R&D product engineering critical
Practical to change price or quality image
Strengthen niche
Cost control critical
Poor time to change image, price, or quality
Competitive costs become critical
Defend market position
OM
Str
ateg
y/Is
sues
Com
pany
Str
ateg
y/Is
sues
HDTV
CD-ROM
Color copiers
Drive-thru restaurants Fax machines
Station wagons
Sales
3 1/2” Floppy disks
Internet