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CH 2 Operations Strategy New 2013

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0% found this document useful (0 votes)
37 views27 pages

CH 2 Operations Strategy New 2013

Uploaded by

Tedros Abreham
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
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Unit 2 :Operations Strategy

Kahsu Mebrahtu (Assistant Prof.)


Mekelle University, College of Business and
Economics, Department of Management
 Study objectives:
1. To describe the scope of Operations
management
2. To describe the strategic management
process and
3. To explain the operations strategy
development
What is Strategy ?
Strategy is how the mission of a company is
accomplished .

It unites an organization.

It provides consistency in decisions, and


keeps the organization moving in the right
direction
Processes of Strategy Formulation
1.Environmental scanning
2. Internal Environment Analysis
3. Development of corporate level
strategies
4. Development of business level
strategies
5. Development of Functional level
strategies
Con…
Environmental Scanning
This includes studying the nature of :
 the industry, the market place , the
competitors , the legal and political
environment, technology, the nature of
competitors
 The sources and power of influence
 Identifying the business’s possible
opportunities and threats from the environment
Con…
Internal Environment Analysis
This involves:
 Identifying the firm’s resources and
defining their weaknesses and strengths
 Identifying the firm’s possible sources of
capabilities
 Defining the firm’s possible comparative
advantages
 Defining the competitive advantages of the
business
Corporate and Business Level Strategies
Corporate Level Strategies
 Expansion
 Stability
 Retrenchment strategies
Business Level Strategies
 Cost leadership
 Differentiation strategies
 Market niche strategies
Functional Level Strategies
Marketing strategies
Production Strategies
Finance Strategies
Logistics Strategies etc.
End Results of the Strategic Formulation:
At the end of the strategy formulation, the firm
should able to:
1. Defining its primary task-this is the purpose
of the firm- what the firm is in the business
of doing .
e.g Ehio-trans is in the business of
transportation
2. Assessing core competencies (distinctive
competence)- is what a firm does better than any
one else
Con…
3. Determining order winners and order
qualifiers.
 This helps to determine what customers
influence their purchase decision.
Order qualifiers- are the characteristics of a
product or service that qualify it to be
considered for purchase by a customer.
E.g. brand name , reliability, design features,
gas mileage
Order winner- is the characteristics of a
product or service that wins orders in the
marketplace –the final factor in the
Example
A brand name car can
be an “order qualifier”
Others like
reliability, design
features, gas
mileage
Repair services can be “order winners”
Examples: Warranty, roadside Assistance,
Leases, etc.

Kahsu Mebrahtu , MU, CBE , MBA


Programm 11
Con…
Positioning the Firm- No firm can be all things to all
people !!!
 Hence a firm should choose one or two
important things on which to concentrate and
doing them extremely well- this is named as
strategic positioning.

A firm’s positioning strategy defines how


it will compete in the market place –what
unique value it will deliver to the
customer.
E.g. competing on cost, quality, flexibility,
speed
Operations Strategy
Operations strategy is defined as the set of
decisions that are warranted in the
operational processes in order to support the
competitive strategies of the business.
Operations strategy is designed to give the
firm a competitive advantages in the products
or services that are served to the customers .
It is the road map of the operations function
Con….
Operations strategy decisions
include:
 The capacity decisions
 The type of processes and

manufacturing technologies to be
adopted in the production
processes
 The nature of products to be

produced
 And the like
Developing Operations Strategy

Corporate Strategy

Global Business Competencies


Environment Business Strategy

Product or service plans

Competitive Priorities [cost, time, Quality ,


Flexibility]

Operations Strategy
 Product systems[make to stock,/order, assemble to order
 Product plans
 Outsourcing
 Process decisions
 Quality decisions
 Capacity decisions , technology , resource planning , operating
decisions
Operations Strategy Development Processes

1.Developing operations
mission
2. Developing operations
objectives
3. Developing operations
priorities( core competencies)
4. Developing operations
policies
Operations Objectives
Usually the operations Objectives are :
 Cost
 Quality
 Delivery
 Flexibility
Con…

Cost- this is the ability to reduce the costs of


production.
 This can include reducing cost of labor,
material, overhead expenses etc.
 This can ensure lower price and higher
profitability

Quality-this includes higher product


performance, superior features, greater
durability, convenient services
Con…
Time /Delivery
This includes : faster delivery time, on-time
delivery, seedy product development , reliable
delivery.

Flexibility- this is the ability to provide a wide


variety of products , quick changes in volume
of production
This can include:
 customization
 Volume flexibility
Core Competencies /Distinctive
Competencies/competitive Priorities
Core competencies are the unique capabilities
of the business organization apart from its
competitors .

These competitive competencies should not


be copied and imitated by others .

For example the lowest price, the best


quality, highly flexible production system
Elements /components of Operations Strategy
1. Designing of the production system
. Customized product design
. Standard product design
2. Facilities for production and services
3. product or service design and development
4. technology selection, development and
process development
5. Allocation of resources
6. Focus on facilities planning
Operations Strategy at Wal-
Mart

Copyright 2006 John Wiley & Sons, Inc. 2-22


Strategic Decisions in Operations
 Products and Services
 Make-to-stock
 Assemble-to-order
 Make-to-order

 Processes & Technology/Production Systems


 Project type
 Batch production
 Mass production
 Continuous Production
 Assembly Production
Con…
 Human Resources
 Skill levels and degree of autonomy required in
production
 Selection criteria and training requirements
 Setting up policies on performance evaluations
 Compensation and incentives
Quality
 What is the target level of quality for the
products /services ?
 How will it be measured?
 How will employees be involved with quality ?
Con…
 Sourcing –decision on make or buy decision
 On what basis should particular items be made
in house?
 When should items be outsourced?
 How should suppliers be selected ?
 How many suppliers should be used?
Reading Assignment II:
 Read on the following topics & bring a
hand written report:
1. Operations Strategies of : Technology
Strategy, Capacity strategy, Facility location
strategy ,Process strategy , Quality
strategy
2. Issues and trends in operations
THANK YOU !!!

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