Operations Management: Sustainability and
Supply Chain Management
Second Canadian Edition
Chapter 2
Operations Strategy in a
Global Environment
Copyright © 2017 Pearson Canada Inc. 2-1
Outline (1 of 2)
• Global Company Profile: Boeing
• A Global View of Operations and Supply Chains
• Developing Missions and Strategies
• Achieving Competitive Advantage Through
Operations
• Ten Strategic OM Decisions
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Outline (2 of 2)
• Issues in Operations Strategy
• Strategy Development and Implementation
• Global Operations Strategy Options
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Learning Objectives (1 of 2)
When you complete this chapter you should be able
to:
1. Define mission and strategy
2. Identify and explain three strategic approaches
to competitive advantage
3. Identify and define the 10 decisions of operations
management
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Learning Objectives (2 of 2)
When you complete this chapter you should be able
to:
4. Understand the significance of key success
factors and core competencies
5. Identify and explain four global operations
strategy options
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Some Boeing Suppliers (787) (1 of 2)
Firm Country Component
Latecoere France Passenger doors
Labinel France Wiring
Dassault France Design and PLM software
Messier-Bugatti France Electric brakes
Thales France Electrical power conversion
system and integrated
standby flight display
Messier-Dowty France Landing gear structure
Diehl Germany Interior lighting
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Some Boeing Suppliers (787) (2 of 2)
Firm Country Component
Rolls-Royce UK Engines
BAE SYSTEMS UK Electronics
Alenia Aeronautics Italy Upper centre fuselage and
horizontal stabilizer
Kawasaki Heavy Japan Forward fuselage, fixed
Industries section of wing, landing
gear well
Toray Industries Japan Carbon fibre for wing and
tail units
Chengdu Aircraft China Rudder
Group
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Global Strategies (1 of 2)
• Boeing – sales and production are worldwide
• Benetton – moves inventory to stores around the
world faster than its competition by building
flexibility into design, production, and distribution
• Sony – purchases components from suppliers in
Thailand, Malaysia, and around the world
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Global Strategies (2 of 2)
• Volvo – a Swedish company, it was controlled by
an American company, Ford, and is now owned by
Geely of China. The current Volvo S40 is built in
Belgium and shares its platform with the Mazda 3
built in Japan and the Ford Focus built in Europe
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Growth of World Trade
Figure 2.1
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Reasons to Globalize
Tangible Reasons to Globalize
Reasons 1. Reduce costs (labour, taxes, tariffs, etc.)
2. Improve the supply chain
3. Provide better goods and services
4. Understand markets
5. Learn to improve operations
Intangible
Reasons 6. Attract and retain global talent
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Reduce Costs
• Foreign locations with lower wage rates can lower
direct and indirect costs
– Maquiladoras
– World Trade Organization (WTO)
– North American Free Trade Agreement (NAFTA)
– APEC, SEATO, MERCOSUR, CAFTA
– European Union (EU)
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Improve the Supply Chain
• Locating facilities closer to unique resources
– Metal companies to Northern Ontario
– Auto design to California
– Athletic shoe production to China
– Perfume manufacturing in France
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Provide Better Goods and Services
• Objective and subjective characteristics of goods
and services
– On-time deliveries
– Cultural variables
– Improved customer service
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Understand Markets
• Interacting with foreign customers and suppliers
can lead to new opportunities
– Cell phone design from Europe
– Cell phone fads from Japan
– Extend the product life cycle
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Learn to Improve Operations
• Remain open to the free flow of ideas
– General Motors partnered with a Japanese auto
manufacturer to learn new approaches to production
and inventory control
– quipment and layout have been improved using
Scandinavian ergonomic competence
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Attract and Retain Global Talent
• Offer better employment opportunities
– Better growth opportunities and insulation against
unemployment
– Relocate unneeded personnel to more prosperous
locations
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Cultural and Ethical Issues
• Cultures can be quite different
• Attitudes can be quite different towards
– Punctuality
– Lunch breaks
– Environment
– Intellectual property
– Thievery
– Bribery
– Child labour
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Companies Want To Consider
• National literacy rate • Work ethic
• Rate of innovation • Tax rates
• Rate of technology change • Inflation
• Number of skilled workers • Availability of raw materials
• Political stability • Interest rates
• Product liability laws • Population
• Export restrictions • Number of miles of highway
• Variations in language • Phone system
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Developing Missions and Strategies
Mission statements tell an organization where it is
going
The Strategy tells the organization how to get there
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Mission
• Mission - where are you going?
– Organization’s purpose for being
– Answers ‘What do we provide society?’
– Provides boundaries and focus
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Royal Canadian Mounted Police
The RCMP is Canada’s national police service. Proud in our
traditions and confident in meeting future challenges, we
commit to preserve peace, uphold the law and provide
quality service in partnership with our communities.
Figure 2.2
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Hard Rock Cafe
Our Mission: To spread the spirit of rock ’n’ roll by creating
authentic experiences that rock
Figure 2.2
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Arnold Palmer Hospital
Arnold Palmer Hospital for Children provides state-of-the-art,
family centered healthcare focused on restoring the joy of
childhood in an environment of compassion, healing, and
hope.
Figure 2.2
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Factors Affecting Mission
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Strategic Process
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Strategy
• Action plan to achieve mission
• Functional areas have strategies
• Strategies exploit opportunities and strengths,
neutralize threats, and avoid weaknesses
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Strategies for Competitive Advantage
• Differentiation – better, or at least different
• Cost leadership – cheaper
• Response – rapid response
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Competing on Differentiation
Uniqueness can go beyond both the physical
characteristics and service attributes to encompass
everything that impacts customers’ perception of
value
• Safeskin gloves – leading edge products
• Walt Disney Magic Kingdom – experience
differentiation
• Hard Rock Café – dining experience
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Competing on Cost
Provide the maximum value as perceived by
customer. Does not imply low quality.
• Porter Airlines – secondary airports, few fare
options, smaller crews, no expensive ticket offices
• Walmart – small overhead, shrinkage, distribution
costs
• Franz Colruyt – no bags, low light, no music,
doors on freezers
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Competing on Response
• Flexibility is matching market changes in design
innovation and volumes
– A way of life at Hewlett-Packard
• Reliability is meeting schedules
– German machine industry
• Timeliness is quickness in design, production, and
delivery
– Johnson Electric, Pizza Hut, Motorola
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Achieving Competitive Advantage Through
Operations
Figure 2.4
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Ten Strategic OM Decisions
1. Goods and service 6. Human resources and
design job design
2. Quality 7. Supply-chain
management
3. Process and capacity
design 8. Inventory
4. Location selection 9. Scheduling
5. Layout design [Link]
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Goods and Services and the 10 OM
Decisions (1 of 4)
Operations
Decisions Goods Services
Goods and service Product is usually Product is not tangible
design tangible
Quality Many objective Many subjective
standards standards
Process and capacity Customer not involved Customer may be
design directly involved
Capacity must match
demand
Table 2.1
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Goods and Services and the 10 OM
Decisions (2 of 4)
Operations
Decisions Goods Services
Location selection Near raw materials and Near customers
labour
Layout design Production efficiency Enhances product and
production
Human resources and Technical skills, Interact with customers,
job design consistent labour labour standards vary
standards, output based
wages
Table 2.1
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Goods and Services and the 10 OM
Decisions (3 of 4)
Operations
Decisions Goods Services
Supply chain Relationship critical to Important, but may not
final product be critical
Inventory Raw materials, work-in- Cannot be stored
process, and finished
goods may be held
Scheduling Level schedules Meet immediate
possible customer demand
Table 2.1
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Goods and Services and the 10 OM
Decisions (4 of 4)
Operations
Decisions Goods Services
Maintenance Often preventive and Often “repair” and takes
takes place at place at customer’s site
production site
Table 2.1
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Managing Global Service Operations
Requires a different perspective on:
• Capacity planning
• Location planning
• Facilities design and layout
• Scheduling
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Issues In Operations Strategy
• Resources view
• Value-chain analysis
• Porter’s five forces model
• Operating in a system with many external factors
• Constant change
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Product Life Cycle (1 of 2)
Figure 2.5
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Product Life Cycle (2 of 2)
Figure 2.5
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SWOT Analysis
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Strategy Development Process
Figure 2.6
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Strategy Development and Implementation
• Identify key success factors
• Build and staff the organization
• Integrate OM with other activities
The operations manager’s job is to implement an OM
strategy, provide competitive advantage, and increase
productivity
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Key Success Factors
Figure 2.7
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Four International Operations Strategies
(1 of 4)
Figure 2.9
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Four International Operations Strategies
(2 of 4)
Figure 2.9
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Four International Operations Strategies
(3 of 4)
Figure 2.9
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Four International Operations Strategies
(4 of 4)
Figure 2.9
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Ethics: Ranking Corruption
Rank Country 2011 CPI Score (out of 10)
1 New Zealand 9.5
2 Denmark, Finland 9.4
Least
5 Singapore 9.2 Corrupt
6 Norway 9.0
8 Australia, Switzerland 8.8
10 Canada 8.7
12 Hong Kong 8.4
14 Germany, Japan 8.0
16 UK 7.8
24 USA 7.1
32 Taiwan 6.1
43 South Korea 5.4
60 Malaysia 4.3
75 China 3.6
112 Vietnam 2.9 Most
143 Russia 2.4 Corrupt
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Summary
• Global operations provide challenges and
opportunities
• Organizations identify their strengths and
weaknesses
• Missions and strategies are then developed
• Competitive advantages can be achieved from
global operations
• OM managers have huge impact on the decision
making
Copyright © 2017 Pearson Canada Inc. 2 - 51
