Competitive Strategy

Describes how a firm intends to create & sustain

value for its shareholders
3 major components
 Operations effectiveness
 Customer management
 Product innovation
Aligned with the firm’s mission of serving the
customer
Needs of customers change over time, thus
requiring continuous change to strategy.
 Competitive Dimensions
Cost or Price - “Make the Product or
Deliver the Service Cheap”

Quality – “Make a Great Product or Deliver

a Great Service”
 Design quality
 Process quality

Delivery Speed – “Make the Product or

Deliver the Service Quickly”
 Competitive Dimensions
Delivery Reliability – “Deliver It When
Promised”
Coping with Changes in Demand –
“Change Its Volume”
Flexibility & New-Product Introduction
Speed – “Change It”
Other Product-Specific Criteria – “Support
It”
 Trade-Offs
Operation cannot excel simultaneously on all
competitive dimensions

Low-cost strategy is not compatible with either speed

of delivery or flexibility.

High quality is a trade-off to low cost

Trade-offs occur when more of one thing necessitates

the less of another.

Plant-within-a-plant (PWP)

Straddling
Order Winners & Order Qualifiers

Marketing-Operations Link
Order Winner
 A criterion that differentiates the products or services
of one firm from another.
Eg: Cost, Quality, Reliability or any other competitive
dimension discussed earlier
Order Qualifier
 A screening criterion that permits a firm’s products to
be even considered as possible candidates for
purchase
Order winning and order qualifying criteria may
change over time.
 Core Competencies & Core
Rigidities

Core Competency
 Something that a firm does better than its competitors
 Aka distinctive competence or competitive advantage
 Eg: exceptional service, higher quality, faster delivery,
lower cost
Core Rigidities
 Core competencies that are not being updated or
enhanced
 Paralyze a company & prevent it from changing to
meet emerging needs & environments
Core Competencies--Cautions and Reminders
Never take for granted that core competencies will
continue to provide a source of competitive advantage

All core competencies have the potential to become

Core Rigidities
Core Rigidities are former core competencies that sow
the seeds of organizational inertia and prevent the firm
from responding appropriately to changes in the
external environment
Strategic myopia and inflexibility can strangle the firm’s
ability to grow and adapt to environmental change or
competitive threats
Core Competencies What a firm Does...
Core Competencies must be: that is Strategically
Valuable
Valuable
Capabilities that either help a firm to exploit opportunities to
create value for customers or to neutralize threats in the
environment
Rare
Capabilities that are possessed by few, if any, current or potential
competitors

Costly to Imitate
Capabilities that other firms cannot develop easily, usually due to
unique historical conditions, causal ambiguity or social complexity

Non-substitutable
Capabilities that do not have strategic equivalents, such as firm-
specific knowledge or trust-based relationships
 Strategy Formulation
Defining a Primary Task
Assessing Core Competencies
Determining order winners & order
qualifiers
Positioning the firm
 Competing on Cost
 Competing on Quality
 Competing on Flexibility
 Competing on Speed
 Competing on Core-competency
 Operations Strategy
“Setting broad policies & plans for using the
resources of a firm to best support its long term
competitive strategy”
Involves decisions related to:
 Products & Services
 Selection & design of appropriate processes &
technology
 Locating the processes
 Infrastructure needed to support the process
Planning & control systems
QA & QC approaches
Human Resources
 Sourcing
Product & Service Decisions
Make-to-Order
Make-to-Stock
Assemble-to-Order
Process & Technology Decisions
Projects (construction projects, new
product development)
Batch production (printers, bakeries,
furniture, education)
Mass Production (automobiles, televisions,
PCs, fast food)
Continuous Production (refined oil, treated
water, paints)
 Locating the Processes
Capacity & facilities
 How much capacity to meet all demand/average demand/some
established level of demand?
 Large chunks or increments?
 How to handle excess demand – overtime/extra
shifts/subcontracting)
 When to build new facilities?
 Best size of facility? (few larger ones or many smaller ones)
 Focus areas of each facility (geography/product lines/customers)
 Location near markets or raw materials or labor sources?
 Overseas facilities decisions like licensing, joint venture,
partnership, alliance, merger?
Legal & cultural issues
Who should manage these facilities?
How should they be operated?
 Infrastructure to Support the
Processes
Planning & Control Systems
 Designed to support how the firm competes in
the market place
 IT systems must be able to support both
customer & worker demands
 Timely feedback loops
 Consistent decision making criteria
 Availability of quantitative tools/features to
support decision making
 Infrastructure to Support the
Processes
QA & QC approaches
 Targeted level of quality?
 How to measure?
 How to involve employees? (SOPs & Training)
 Responsibilities of Quality Department?
 Types of systems to ensure quality?
 How to maintain quality awareness?
 How to evaluate quality efforts?
 How to determine customer perception of quality?
 Effect of other functional area decisions on quality?
 Infrastructure to Support the
Processes
Human Resources
 Determining skill levels
 Degree of autonomy in decision making & operating the system
 Outlining training requirements
 Selection Criteria, Performance Evaluation Criteria
 Compensation, Incentives
 Salaried workers/hourly paid/piece rate
 Allow profit sharing? What basis?
 Individual tasks or team work?
 Supervised work or self managed teams?
 How many levels of management?
 Cross-training needed?
 Retention efforts?
 Sourcing
Vertical Integration
Horizontal Integration
 How much of each type of integration?
 Questions of dependence, competency building,
proprietary knowledge & cost
 Basis of in-house production & outsourcing
 How to select suppliers & how many?
 What type of relationship?
Arm’s length
Controlling
Partnership
Alliance
 How to ensure quality & dependability from suppliers?
 Strategic Fit
Fitting Operational Activities to Manufacturing
Strategy
 Translate required competitive dimensions into specific
performance requirements for operations
 Prioritize the dimensions:
Segment the market according to the product group
Identify the product requirements, demand patterns & profit
margins of each group
Determine the order winners & order qualifiers for each group
Convert order winners into specific performance requirements
 Make plans to ensure that operations capabilities are
sufficient to accomplish them
 Use internet to enhance performance
 Strategic Fit
Fitting Operational Activities to Services Strategy

 Operations strategy in services is generally

inseparable from corporate strategy
 Proper understanding of order winners and qualifiers
 Eg: Good location, availability of tellers and
availability of ATMs could be order qualifiers while
relationship banking & customer oriented banking
hours could be order winners
 Use of internet to replace or enhance the
conventional styles of doing business
Assessing Performance –
Measuring Productivity
KPIs
 Predict company’s performance
 Spot the need for changes in operations
Productivity
 Common measure of how well a country, industry or
business unit is using its resources (or factors of
production)
 Productivity = Outputs/Inputs
 2 ways to compare productivity
Comparison within industry or with industry data
Measure productivity over time within the same operation
 Productivity Measurement
Example
OUTPUT
1. Finished Units Rs. 10000 TOTAL MEASURE
2. Work in Process Total Output/Total Input = 13500/15193 =
2500 0.89
3. Dividends 1000
4. Bonds MULTIFACTOR MEASURES
5. Other Income Total Output/(Human + Material) =
13500/3153 = 4.28
Total Output 13500
INPUT Finished Units/(Human + Material) =
1. Human Rs. 3000 10000/3153 = 3.17

2. Material 153
3. Capital 10000 PARTIAL MEASURES

4. Energy 540 Total Output/Energy = 13500/540 = 25

5. Other Expenses 1500 Finished Units/Energy = 10000/540 =

18.52
Total Input 15193
The Balanced Score Card (BSC)
4 perspectives
 Financial
 Customer
 Internal
 Learning & Growth