Operations Strategy and Competitiveness - Review Notes

Online MBA Management Theory Handbook 

Main Sections

1. Operations Strategy 

2. Operations Competitive Dimensions

3. The Corporate Strategy Design Process

4. Strategic Fit—Fitting Operational Activities to Strategy

5. Attacking Through Operations

6. Productivity Measurement

For a company to be considered world class, it must recognize that the ability to compete in the marketplace depends on developing an operations strategy aligned with the mission of serving the customer. This article  describes how a company's competitiveness is improved through operations strategy. The relative position of the firm to other firms in both local and global markets is assessed to develop strategy. The competitive dimensions of operations are cost, product quality and reliability, delivery speed, delivery reliability, coping with demand change, flexibility, and new product introduction speed. Central to the concept of operations strategy is the notion of operations focus and trade-offs.

The interface between marketing and operations is necessary to provide a business with an understanding of its markets from both perspectives. Operations strategy must be linked vertically to the customer and horizontally to other parts of the enterprise (In Industry 4.0 technologies, vertical integration and horizontal integration are being emphasized as objectives and also as technologies). The article  describes the steps for prioritizing competitive dimensions. 

Operations strategy is also relevant  in service firms. Example is Southwest Airlines where  operational activities support  overall strategy.  Wal-Mart  attacks the market by using operations.

Productivity is an important dimension of operations. Productivity measures include partial measures, multifactor measures, and total measures of productivity. These measures provide benchmarks to indicate how well the company is doing and are used to plan and measure improvement.

What is Operations Strategy?

Operations strategy involves decisions that are related to the specifications and design of the product or service, design of a production process and the infrastructure needed to support the process, the role of inventory in the process, and locating the process. Operations strategy decisions are part of corporate planning process that coordinates the goals of operations with those of marketing and that of larger organization.

Strategic operation decisions have to win the customer approval in absolute sense and they have to win in the competitive scenario, that means they have to win the customer approval in a relative sense (their offer must be superior to a section of the target market customers relative to the offers of competitors).

Quality (which includes product benefits and features, reliability, durability),  price and ease of purchase and servicing are the three operations related categories that customers use to evaluate before purchasing. Price is related to operations to the extent cost influences the price. Otherwise price is a marketing decision based on customer demand schedules and operations is not directly involved in pricing decision. But whenever operations is able to reduce costs, pricing decision is reconsidered. Hence cost is a strategic variable. Industrial engineering the discipline that specially focuses on rational cost management and industrial engineering strategy is also to be created by an organization along with operations strategy.

Competitive operations strategy development calls for research and improvement of operations processes on continuous basis and also monitoring of developments in competitor organizations. Benchmarking needs to be done periodically to understand the progress made by others and to initiate actions to catch up on parameters where there is a gap. Cost, product scope, product quality, delivery speed, delivery reliability, new product introductions are some of the operations related parameters in which competitors try to improve and gain competitive advantage. Industrial engineers have this responsibility of continuous improvement of engineering and other related operations elements/procedures based on new technology developments, bench-marking information, productivity studies,  work group discussions and day-to-day ideas and suggestions by everybody in the organization. 

Order qualifiers and Order winners

Terry Hill coined these terms. Order qualifiers are criteria that place a company's products in consideration for purchase. If order qualifiers are not present in a company's product they do not enter the purchase evaluation process of significant number of customers. The absence of order qualifiers are mentioned by buyers as the reason for ignoring some brands or offerings.

Order winners are the features which results in getting orders. Order winners are given as reasons for purchase by the buyers from among the alternatives considered for purchase. Both these criteria keep changing and operations people have to redesign their processes to match them.

Operations Strategy - Important Issues

What is Operations Strategy? - Operations Strategy Defined

Operations strategy is concerned with setting broad policies and plans for acquiring and using the resources of a firm to best support its long-tern business creation, survival and competitive strategy

Operations strategy involves decisions that are related to the specifications and design of the product or service, design of a production process,  the infrastructure needed to support the process, locating the process or facilities and the circulating assets (role of inventory in the process). 

Operations Competitive Dimensions

Competitive Dimensions

Cost/Price: Productivity improvement and management of the high order is required.

Quality

Delivery reliability

Coping with changes in demand

Flexibility and New Product introduction speed

Product Support Services

    1. Technical liasion and support
    2. Coordinating ability and striking to launch dates in project business.
    3. Product maintenance for a long-period of time.
    4. Other product related dimensions: colors available, sizes available, product mix available

Attacking Through Operations

Walmart improved its operations. It was able to attack Kmart successfully in head to head to competition later in the same locations.

Chapter Sections

Competitive Dimensions
The Notion of Trade-Offs
Plant-within-a-Plant (PWP) Defined
Straddling Defined
Order Winners and Qualifiers
Order Winner Defined
Order Qualifiers Defined
The Marketing-Operations Link

The Corporate Strategy Design Process
The Financial Perspective
The Customer Perspective
The Internal Perspective
The Learning and Growth Perspective

Strategic Fit—Fitting Operational Activities to Strategy
Activity-System Maps Defined
A Framework for Operations Strategy in Manufacturing
Core Capabilities Defined
Developing a Manufacturing Strategy
Operations Strategy in Services
Internet Compliments Strategy

Attacking Through Operations

Productivity Measurement
Key Performance indicators (KPI) Defined
Productivity Defined
How Does Wall Street Evaluate Operations Performance?

Conclusion


Summaries of all Chapters of Operation Management

Top 100 Management Theory Articles of the blog


Updated 19.9.2024,   17 March 2020, 16 March 2019,  4,12.2014, 10.2.2012

MBA Core Management Knowledge - One Year Revision Schedule