CHAPTER TWO

OPERATIONS STRATEGY AND

COMPETITIVENESS

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2.0 INTRODUCTION
 Companies must be competitive to sell their goods and
services in the market place.

 Competitiveness is an important factor in determining

whether a company prospers, or fails.

 Business organizations compete with one another in

variety of ways i.e. by identifying operating priorities.

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 OPERATIONS STRATEGY AND COMPETITIVENESS…

 Competitiveness:
 How effectively 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.
Basic questions for Competitiveness
What do customers want?
How can these customer needs best be satisfied?

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 Competitive Priorities
A few basic identified operations priorities include:
1. Cost:- a firm must be the low-cost producer, but even
doing this not always guarantee profitability and
success.
2. Product quality and process reliability : Ability to
produce quality of Product.
3. Delivery speed (time)
4. Flexibility: - ability to respond to changes. The better a
company as able to respond to changes, over another
company that is not able to respond. Such as:
 Frequent new products/services.
 Wide range of products/services.
 Changing the volume of product/service deliveries.
 Changing the timing of product/service deliveries. 4
 Operations Strategy

 Operations strategy is concerned with setting broad

policies and plans for using the resources of the firm
to best support the firm’s long-term competitive
strategy.
 In large measure, strategies affect the ability of
organization to compete.

Strategies: - are plans for achieving goals.

What is the difference b/n organızatıon strategy and

operatıons strategy?
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organızatıon strategy vs operatıons 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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 Operations strategy
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

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 Operations Strategy….
Operations Strategy relates to:
products,
processes,
methods,
operating resources quality,
costs,
lead times,
 and scheduling.

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 STRATEGIC PLANNING
Mission and
Vision

Voice of the Corporate Voice of the

Business Strategy Customer

Marketing Operations Financial

Strategy Strategy Strategy
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 New strategies vs. Tradıtıonal Strategıes
TRADITIONAL STRATEGIES is based on :
1. Cost minimization and
2. Product differentiation

Cost minimization
 Eliminate all waste
 Invest in:
 Updated facilities & equipment
 Streamlining operations
 Training & development
Product differentiation
 by offering unique goods or services that make
customers feel special.

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 Operations Strategy….
New Strategies:
• many organizations are adopting new
strategies that are based on:

1. Quality and/or
2. Time.

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 New Strategies….
 Quality-based strategy
 Strategy that focuses on quality in all phases of an organization.
 Focuses on maintaining or improving the quality of an
organization’s 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.
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 New Strategies….

 Time-based strategies
It is 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.

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 Tıme-based strategıes….
Areas where organizations have achieved time reductions:

Planning time

Product/service design time

Processing time

Changeover time

Delivery time

Response time for complaints

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 Order Winners and Qualifiers strategies
 Order qualifiers are those competitive priorities that a
company has to meet if it wants to do business in a market.
 It is a characteristic of a product or service that is required in
order for the product/service even to be considered by a
customer.
e.g. Order qualifiers might be low price
 Therefore, firms must provide the qualifiers in order to get
into or stay in a market.
 To provide qualifiers, they need only to be as good as their
competitors.
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 Order Winners and Qualifiers strategies …
 Order winners are the competitive priorities that help a company,
win orders in the market.

 are the criteria that differentiate the products and services of one
firm from another.

 to provide order winners, firms must be better than their

competitors.
Eg. Consider a simple restaurant that makes and delivers pizzas. Order qualifiers
might be low price (say, less than $10.00) and quick delivery (say, under 15
minutes), because this is a standard that has been set by competing pizza
restaurants. The order winners may be “fresh ingredients” and “home-made
taste.” 16
 Operations Strategy in Manufacturing

 It must be linked vertically to the customer and horizontally

to other parts of the enterprise.
e.g financial ,human resources …
 manufacturing operations, relate enterprise resource
capabilities to satisfy those needs.
 Its framework is senior management's strategic vision of the
firm.

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 Operations Strategy in Manufacturing….

• The vision identifies, in general terms, the target market, the

firm's product line, its core enterprise and operations

capabilities to achieve operations strategy .

• Core capabilities: are those skills that

differentiate the manufacturing (or service firm)
from its competitors.

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 Developing a Manufacturing Strategy
• Objectives
 to translate required priorities into specific performance
requirements for 'operations.

 to make the necessary plans to assure that operations (and

enterprise) capabilities are sufficient to accomplish them.

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 Developing a Manufacturing Strategy …
The steps for developing priorities are
1. Segment the market according to the product group.

2. Identify the product requirements, demand patterns, and profit

margins of each group.

3. Determine the order winners and order qualifiers for each

group.

4. Convert order winners into specific performance requirements.

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 Operations Strategy in Services
• The 21st century has placed immense importance on the
service operations industry.

• b/c It's no longer good enough to have a solid product if the

consumer is unhappy with the services.

• Therefore, a service operations manager ensures that

customers feels respected by the company , and

• company itself feel respected and empowered while doing

their job.

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 Operations Strategy in Services….
• Any service organization depends upon its operations staff to
deliver quality service to both its customers and internal
employees.

• Operations strategy in service firms is generally inseparable

from the corporate strategy.

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 Steps in Developing a Service Strategy
1. Segment the market according to the product/Service group

 Eg .A person interested in buying a sedan car would rarely

show interest in buying an SUV car, the market segmentation
should be just and judicious.

2. Identify product/Service requirements, demand patterns, and

profit margins of each group .

 ( Market research department should be able to capture these

with the help of MIS systems).

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 Steps in Developing a Service Strategy…
3.Determine order qualifiers and winners for each group.

 (Order Qualifiers would meet customer requirements and

Order Winners would satisfy customers).

4. Convert order winners into specific performance requirements .

 Continuous improvement always helps

e.g it is what the Japanese has perfected through

KAIZEN)

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 Current Trends Affecting Operations Strategy
Decisions

• Two major trends that have significantly impact on role of

operations strategy within an organization are:

 Globalization and

 advances in technology, especially information

technology.

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 .

Globalization
 Bring s hyper-competition.

 provides new opportunities for companies in the form of

new, untapped markets .

 new sources for raw materials and components at

significantly lower costs.

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 .
Technology

• Help to improve processes and maintain up-to-date standards.

• can improve quality, reduce costs, and improve product delivery.
• Help to support the company’s chosen competitive priorities.
• replace traditional ways of doing business specially IT
/automation.

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 The End
• Thank you!

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