Operations Management
Session 2 – Operations Strategy, Competitive Priorities & Alignment of Strategies
Dr. Ramesh Krishnan
IIM Kozhikode
2-1
[email protected] A Cold Hard Fact
Customized, better quality, higher productivity, lower costs,
and the ability to respond quickly to customer needs are
more important than ever, and…
the bar is getting higher
How organizations meets these needs and
differentiates themselves from the competitors?
Let’s try to understand
2-2
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.
• What do customers want?
• How can these customer needs best be satisfied?
Marketing’s Influence
Identifying consumer wants and/or needs
Pricing and quality
Advertising and promotion
2-3
Businesses Compete Using Operations
1. Innovation/ Product and service design
2. Cost
3. Location
4. Quality
5. Quick response
6. Flexibility
7. Service
8. Sustainability
Many of these competing priorities are interrelated.
2-4
Can you name some brands and its
Competitive Strategy?
• Cost Leadership (e.g., Walmart)
• Differentiation (e.g., Apple)
• Focus/Niche (e.g., Rolls-Royce in luxury cars)
• Innovation/Sustainability (e.g., Zara/Tesla
Corporate strategy defines the overall direction and scope of an entire organization—what
businesses the company should be in and how to manage the portfolio of businesses.
A competitive strategy is a long-term plan that a company adopts to gain a competitive
position in the market. (Cost leadership for Walmart)
Competitive priorities are the operational capabilities a company focuses on to support its
competitive strategy. (Speed & Flexibility for Zara)
A competitive advantage is the sustainable edge a company has over competitors that allows it
to generate higher profits or market share. (Cost-based due to EoS for Amazon)
If so, how their operations are performed, so
as they are able to maintain/achieve their
competitive strategy?
Operations Strategy
An operations strategy supports a company’s overall
business strategy to maximize profits.
Operations strategy is a guiding principle used to plan,
analyze, and execute a company’s operations.
Businesses use operations strategies to identify and
implement cost-effective processes for creating and
distributing products and services.
Let us look at some example to understand
better.
Air Deccan – India’s first low-cost airline
Pricing at 30-40 percent of regular airline services
Operations Strategy at Air Deccan
New distribution model – Hub and spoke (causes more delay) vs point-to-
point flying - More flying hours per aircraft.
Elimination of inter-airline arrangements for baggage – cost and delay
reduced
Airbus on heavy traffic routes and smaller aircraft for lower traffic routes
Computerised reservation system (CRS) & Ticket booking through call
centres – e-ticketing – eliminating ticket booking agencies – saving 7-10%
commission.
Outsourced facilities in all airports - on an hourly basis – reduced costs.
Local employment
Cutting out all frills – in-flight food, business class and lounges at the
airport
Source: Emerging landscape and new value propositions in the civil aviation sector
Activity Mapping of Southwest Airlines
Courteous, but
Limited Passenger
Service
Lean, Short Haul, Point-to-
Productive Point Routes, Often to
Employees Secondary Airports
Competitive Advantage:
Low Cost
High Frequent,
Aircraft Reliable
Utilization Standardized Fleet Schedules
of Boeing 737
Aircraft
Activity Mapping at Southwest Airlines
Key Success Factors Support activities
Let us do some activity…
Each group can select a company and quickly identify key aspects of its
operations strategy. The focus will be on understanding how the
company integrates its operations strategy with its business objectives
to achieve competitive advantage. Prepare an ACTIVITY MAP.
Some Example:
Dmart/ Big Bazaar/ Reliance Fresh
Tata Motors/ Mahindra/ …
Zudio/ Reliance/ Zara
HUL/ ITC/ P&G/ Nestle
Can refer to:
Company websites/Annual reports
Business News Articles
Key to Successfully Competing
Understand
What do customers want?
What is the best way to satisfy those wants?
Sample Operations Strategies
Organizational Strategy Operations Strategy Examples of Companies or Services
Low Price Low cost Southwest Airlines
Wal-Mart
Responsiveness Short processing times McDonald’s restaurants; Express Mail
On-time delivery FedEx
Differentiation: High performance design and/or Sony TV
High Quality high quality processing
Consistent quality Five-star restaurants/ hotels
Differentiation: Innovation Zara, Apple
Newness
Differentiation: Flexibility Burger King (Have it your way”)
Variety Volume McDonald’s (“Buses Welcome”)
Differentiation: Superior customer service Disneyland
Service Amazon
Differentiation: Convenience Supermarkets; mall stores; ATMs
Location
Differentiation: Energy-efficient operations Aditya Birla Group
Sustainability Patagonia
Core competencies –
• The special attributes or abilities that give an organization a competitive edge
• To be effective, core competencies and strategies need to be aligned
2-18
Strategic OM Decision Areas
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
Projects Costs, new products, services, or operating systems
2-19
Strategy Formulation Process
Cost/ differentiation
• Order qualifiers - Characteristics that customers perceive as minimum standards of acceptability for a product
or service to be considered as a potential for purchase
• Order winners - Characteristics of an organization’s goods or services that cause it to be perceived as better than
the competition (consumer response, speed, variety, service and convenience.) This changes over time.
Porter’s Generic Strategies
Strategy Description Example
Compete on lowest cost
Cost Leadership by achieving economies Walmart, McDonald's
of scale, efficiency, etc.
Offer unique value—
Differentiation features, brand, service, Apple, Nike
innovation
Target niche market with
Focus (Cost or Diff.) cost or differentiation Rolls Royce
advantage
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Resource-Based Strategic Options
How it provides competitive
Strategic Option Example
advantage
Continuously introducing
Innovation Leadership Tesla, Dyson
breakthrough products/services
Strong emotional, perceived, or
Brand Strength Coca-Cola, Louis Vuitton
symbolic value
Deep understanding of and
Customer understanding personalization for customer Amazon, Ritz-Carlton
needs
Streamlined, standardized, and
Operational Excellence Dell, Southwest Airlines
efficient operations
Competitive talent management,
Human Capital Strategy Google, Boston Consulting Group
knowledge workers
Control and visibility across the
Supply Chain Integration Zara, Toyota
supply chain
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Digital & Platform-Based Strategies
Strategy Description Example
Platform Business Connecting users,
Uber, Airbnb
Model providers, or services
Leveraging AI/data
Data-Driven
analytics to personalize Netflix, Spotify
Personalization
value
More users create more
Network Effects Facebook, WhatsApp
value
Copyright ©2021 McGraw-Hill.. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Copyright ©2021 McGraw-Hill.. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
For Practice - BMW and Maruti
BMW: Visit the company, research & development, and
production links on the company website. There are several
sub-links under these heads. Click on them to understand
various aspects of BMW’s operations.
Maruti: Maruti manufactures India’s largest-selling car.
Visit their website too.
After visiting both websites, prepare a report to answer the
following questions:
(a) How are the strategies of the two companies different?
(b) Which customer segment do they cater to?
(c) Why does BMW have different brands while Maruti
operates under one brand?
