2.6 & 2.7 & 2.8 Operations Strategy and Competitiveness
- 1. Unit 2: Operations Strategy and Competitiveness Eloy Algorri Ferrero Laura Rodríguez-León Rodríguez Manuela Valera Ortega Group 12
- 2. Index 1. Global strategies 2. A global view of operations 3. Developing missions and strategies 4. Achieving competitive advantage through operations 5. Ten strategic OM decisions 6. Dynamics of operations strategy 7. Strategy development and implementation 8. Global operations strategy options Operations Management I 1
- 3. 6. Dynamics of operations strategy Before establishing and implementing a strategy, an Operation Manager should pay attention to: •Resource view •Porter´s value chain analysis •Porter´s five forces model •Environment Operations Management I 2
- 4. Resources view Financial Physical Human Technological Operations Management I 3
- 5. Porter’s value chain analysis How does your organization create value? How do you change business inputs into business outputs in such a way that they have a greater value than the original cost of creating those outputs? Value Created and Captured – Cost of Creating that Value = Margin The higher the margin, the more profitable the company is likely to be Operations Management I 4
- 6. Porter’s five forces Helpful framework for classifying and analysing the features of the industry to help companies understand and determine the intensity of competition and the level of profitability. Bargaining power of customers and suppliers Operations Management I 5
- 7. DOES IT INFLUENCE MY COMPANY? If there are a few substitutes, we will find consumers insensitive to price. Our company can raise its price. The INTENSITY OF THREAT of substitute products depends on 2 factors: 1) Propensity of buyers to replace between alternatives Operations Management I 6 2) Price-performance characteristics
- 8. If you are already inside: When an industry earns a return on capital in excess of its cost of capital, the industry acts as a magnet, and many other companies will want to enter = more potential competitor. If you are outside: Are main factors which you must take into account. Operations Management I 7 FACTORS: DOES IT INFLUENCE MY COMPANY? • Capital requirement • Economies of scale • Absolute cost advantages • Product differentiation • Access to distribution channels • Government and legal barriers • Retaliation by established producers
- 9. WHAT DOES RIVALRY TAKE INTO ACCOUNT? Competition among the firms within the industry. Operations Management I 8 FACTORS: • Concentration • Diversity of competitors • Product differentiation • Excess capacity and exit barriers • Cost condition
- 10. • Price sensitive • Size of buyers • Concentration of buyers • Buyer information Operations Management I 9 • Size of suppliers • Cartelisation • Unions
- 11. Enviroment The operations managers need to understand that firms are operating in a system with many other external factors (legal, political, economy…). Operations Management I 10
- 12. 6. Dynamics of operations strategy Operations Management I 11
- 13. 6. Dynamics of operations strategy Everything from resources, to technology or product life cycles is in flux. Even a product which is already launched suffers huge changes. The analysis of all these factors will help the company find the optimum use of its resources. COMPANY NEED: Dynamic Strategies Operations Management I 12
- 14. Examples: Faster processors, new computer languages, changing customer preferences, increased security issues, and the Internet all have driven changes at Microsoft. Operations Management I 13
- 15. GAME: Operations Management I 14 SITUATION: A military-war truck/cars company is in trouble!!! The war is over and the company is facing huge difficulties… What can the company do?
- 16. Solution: FROM war cars/trucks to luxury cars Operations Management I 15
- 17. Index 1. Global strategies 2. A global view of operations 3. Developing missions and strategies 4. Achieving competitive advantage through operations 5. Ten strategic OM decisions 6. Dynamics of operations strategy 7. Strategy development and implementation 8. Global operations strategy options Operations Management I 16
- 18. 7. Strategy development and implementation Operations Management I 17 Internal Factors External Factors This kind of analysis helps companies achieve its objectives and determine what obstacles must be overcome or minimised to achieve their desired results.
- 19. 7. Strategy development and implementation Operations Management I 18 STRENGTHS ·Brand reputation ·Environment-friendly vehicles ·Quality products ·Highly-skilled workforce ·Corporate social responsability ·Strong brand presence in China OPPORTUNITIES · Positive attitude towards “green” vehicles ·Expand brand portfolio ·Changing customer needs WEAKNESSES ·High cost structure ·Perception of high prices ·Too few acquisitions and strategic partnerships THREATS SWOT ·Intense competition ·Rising raw material prices ·Growing Euro exchange rate
- 20. 7. Strategy development and implementation 7.1. Key success factors and core competencies Operations Management I 19 7.2. Build and staff the organisation 7.3. Integrate OM with other activities
- 21. 7. Strategy development and implementation 7.1. Key success factors and core competencies A successful strategy requires determining the firm’s critical success factors and core competencies: Key success factors (KSFs): activities that are necessary for a firm to achieve its goals. They can be so significant that a firm must get them right to survive in the industry. KSFs are often necessary, but not sufficient for competitive advantage. Core competencies: set of unique skills, talents, and capabilities that a firm does at a world-class standard. They allow a firm to set itself apart and develop a competitive advantage. Operations Management I 20 Theory
- 22. 7. Strategy development and implementation 7.1. Key success factors and core competencies Operations Management I 21 Example: McDonald’s Play area LAYOUT Effective drive-thru Efficient kitchen Consistency Quality
- 23. 7. Strategy development and implementation 7.1. Key success factors and core competencies Operations Management I 22 Practice: IKEA http://www.youtube.com/watch?v=nzGMUU-mV8o
- 24. 7. Strategy development and implementation 7.1. Key success factors and core competencies Operations Management I 23 Goal: competitive advantage The idea is to build KSFs and core competencies that provide a competitive advantage and support a successful strategy and mission. A core competence may be A subset of KSFs A combination of KSFs
- 25. 7. Strategy development and implementation 7.1. Key success factors and core competencies Operations manager’s questions What tasks must be done particularly well for a given strategy to succeed? Operations Management I 24 Which activities will help the OM function provide a competitive advantage? Which elements contain the highest likelihood of failure, and which require additional commitment of managerial, monetary, technological, and human resources?
- 26. 7. Strategy development and implementation 7.1. Key success factors and core competencies Strategy development process Operations Management I 25 Analyse the environment • Identify strengths, weaknesses, opportunities and threats (SWOT). • Understand the environment, customers, industry and competitors. Determine the corporate mission • State the reason for the firm’s existence. • Identify the value it wishes to create. Form a strategy • Build a competitive advantage, such as low price, design or volume flexibility, quality, quick delivery, dependability, after-sale services, or broad product lines. http://www.youtube.com/watch?v=sU3FLxnDv_A
- 27. 7. Strategy development and implementation 7.1. Key success factors and core competencies These 10 OM decisions provide an excellent initial checklist for determining KSFs and identifying core competencies within the operations function. Product Human resource Quality Supply chain OM decisions Process Inventory Location Schedule Layout Maintenance For instance, the 10 decisions, related KSFs, and core competencies can allow a firm to differentiate its product or service. Operations Management I 26 10 OM decisions...
- 28. 7. Strategy development and implementation 7.1. Key success factors and core competencies Operations Management I 27 IKEA’s activity map
- 29. 7. Strategy development and implementation Once a strategy and key success factors have been identified, the second step is to group the necessary activities into an organisational structure. Operations Management I 28 7.2. Build and staff the organisation Theory The third step is to staff it with personnel who will get the job done. The manager works with subordinate managers to build plans, budgets, and programs that will successfully implement strategies that achieve missions.
- 30. 7. Strategy development and implementation Operations Management I 29 7.3. Integrate OM with other activities Theory The operations function is most likely to be successful when the operations strategy is integrated with other functional areas of the firm, such as marketing, finance, information technology, and human resources. In this way, all of the areas support the company’s objectives. The operations manager’s job is to implement an OM strategy, provide competitive advantage, and increase productivity.
- 31. Index 1. Global strategies 2. A global view of operations 3. Developing missions and strategies 4. Achieving competitive advantage through operations 5. Ten strategic OM decisions 6. Dynamics of operations strategy 7. Strategy development and implementation 8. Global operations strategy options Operations Management I 30
- 32. 8. Global operations strategy options Nowadays many operational strategies need an international dimension: An international business is a company that takes part in international trade or investment. A multinational (MNC) is a company that has an extensive international business, owning and controlling facilities in more than one country. Operations Management I 31
- 33. 8. Global operations strategy options Top 10 multinational companies by revenues in 2014* RETAIL PETROLEUM Operations Management I 32 https://www.youtube.com/watch?v=159v-_JEr0s POWER AUTOMOBILE COMODITIES *Source: Forbes
- 34. 8. Global operations strategy options The strategies that operations managers in international business and MNC´s can follow could be: o International Strategy (IS) o Multinational or Multidomestic Strategy (MS) o Global Strategy (GS) o Transnational Strategy (TS) Operations Management I 33
- 35. 8. Global operations strategy options The international strategy matrix: Global Strategy Transnational Strategy LOW LR HIGH LR International Strategy Multidomestic Strategy • Horizontal axis refers to local responsiveness (LR) • Vertical axis refers to cost reduction (CR) HIGH CR LOW CR Operations Management I 34
- 36. 8. Global operations strategy options The strategies that operations managers in international business and MNC´s can follow could be: o International Strategy (IS) o Multinational or Multidomestic Strategy (MS) o Global Strategy (GS) o Transnational Strategy (TS) Operations Management I 35
- 37. 8. Global operations strategy options • International strategy – It uses exports and licenses to penetrate the global market. – Low local responsiveness. – Low cost advantage. – Easiest one because of the little change in existing operations. GS TS IS MS Some companies that use this strategy: Operations Management I 36
- 38. 8. Global operations strategy options Harley Davidson international strategy: • Their products are sold in over 67 countries all around the world. • It is imperative for Harley-Davidson to retain its “Made in America” high-end brand while penetrating international markets. Operations Management I 37
- 39. 8. Global operations strategy options The strategies that operations managers in international business and MNC´s can follow could be: o International Strategy (IS) o Multinational or Multidomestic Strategy (MS) o Global Strategy (GS) o Transnational Strategy (TS) Operations Management I 38
- 40. 8. Global operations strategy options Multidomestic strategy – Decentralised authority with substantial autonomy at each business (subsidiaries, franchises, joint ventures…). – High local responsiveness, maximizing a competitive response to the local market. – Low cost advantage. GS TS IS MS Some companies that use this strategy: Operations Management I 39
- 41. 8. Global operations strategy options Heinz multidomestic strategy: • “Let´s export the management talent and processes, not necessarily the product, to acommodate another market”. • They make Ketchup without garlic and onion for Indians. Operations Management I 40
- 42. 8. Global operations strategy options Hard Rock Cafe multidomestical strategy: • All restaurants share the same type of themes while still maintaining certain differences towards different locations. • Average menu includes classic American food like burgers or chicken meat and lobster but for instance in Hawaii it also includes fresh fish or tuna sandwiches. • Customised t-shirts. Operations Management I 41
- 43. 8. Global operations strategy options The strategies that operations managers in international business and MNC´s can follow could be: o International Strategy (IS) o Multinational or Multidomestic Strategy (MS) o Global Strategy (GS) o Transnational Strategy (TS) Operations Management I 42
- 44. 8. Global operations strategy options Global strategy – High degree of centralisation to seek out standarisation. – High cost advantages and economies of scale. – Common strategy for “customer hidden products”. – Cross-cultural learning. – Low local responsiveness. GS TS IS MS Some companies that use this strategy: Operations Management I 43
- 45. 8. Global operations strategy options Texas Instruments global strategy: • Is the world leader company in selling semiconductors. • They built optimus size plants all around the world with similar processes and a strong communication among them. Microsoft global strategy: • Microsoft offers the same software programs around the world and just adjust the programs to match local languages. Apple global strategy: https://www.youtube.com/watch?v=MoE9XxXUatA Operations Management I 44
- 46. 8. Global operations strategy options The strategies that operations managers in international business and MNC´s can follow could be: o International Strategy (IS) o Multinational or Multidomestic Strategy (MS) o Global Strategy (GS) o Transnational Strategy (TS) Operations Management I 45
- 47. 8. Global operations strategy options Transnational strategy – “Material, ideas and people cross national boundaries”. – High differentiation. – Key activities and resources are dispersed by specialised. – High cost advantage. – “World companies”. GS TS IS MS Some companies that use this strategy: Operations Management I 46
- 48. 8. Global operations strategy options Nestlé transnational strategy: • Country identity is not important. • It is legally from Swiss but 95% of its assets are located outside Switzerland. • 98% of its sales are made outside Switzerland. Operations Management I 47
- 49. 8. Global operations strategy options Activity: relate the following companies to the international strategy it follows: TRANSNATIONAL STRATEGY MULTIDOMESTIC STRATEGY GLOBAL STRATEGY TRANSNATIONAL STRATEGY MULTIDOMESTIC STRATEGY Operations Management I 48
- 50. THANKS FOR YOUR ATTENTION!! Operations Management I 49