Ch2 Operations Strategy and Competitiveness

Chapter 2

Operations Strategy and Competitiveness

Strategic Planning

A process for getting from where the company is today to where company would like to be in the future.

A process for getting from “here” to “there.”

Strategic Planning Steps

Preparing a mission statement Creating a vision Setting goals Formulating strategies Designing tactics Evaluating process and taking

corrective action Measuring results or outcomes


Mission What is our business? (Who we are?) Focus is on “today” (Here!)

Vision

What we hope to be.

Focus is on “future” (There!)


Goals What we must do to achieve vision.

Should be measurable.

Strategies In broad terms, what must we do to

achieve goal? Does not say how.

Strategic Planning Steps Depends on opportunities and threats

Conduct environmental scan Also depends on companies strengths

(core competencies) and weakness Conducting an environmental scan

and identifying companies strengths and weakness is a SWOT analysis.

SWOT

Internal S = StrengthsW=

Weakness

ExternalO =

OpportunitiesT = Threats


Tactics What must we do to make strategies

work? Evaluation and corrective action

Are tactic working? Are they moving you closer to achieving

goal? If not, take corrective action by changing

tactics.


Outcome Outcome of strategic planning process Tells us if strategic planning process was

successful. Was goal was achieved?

If not, repeat.

Example 1: Strategic PlanMission Sue is a 17 yr. old high school

senior

Vision Be successful in business

Goal Become a CFO of a major co. at 35

Strategies Get a business degree

Tactics Go to CSUN, major in Finance, get internship with Fidelity Investments, become president of SFA, get 3.8 or better GPA

Evaluation/Corrective action

Are tactics working?

Outcome Position at age 35

Example 2: Strategic PlanMission Ed is a 42 yr. old overweight

male

Vision Look better, feel better

Goal Lose 80 lbs. in 6 mos.

Strategies Diet, exercise

Tactics Go on Jenny Craig diet, join 24 Hr. Fitness Center, get a trainer, go to gym 5 days/wk.


Track weight loss weekly; adjust tactics if necessary

Outcome Weight lost at end of 6 mos.

Example 3: Strategic PlanMission We are in business of selling

men’s dress shoes in SFV

Vision Expand market area to include So. Ca.

Goal Capture 30% of So. Ca. market in 1 yr.

Strategies Expand product line, increase marketing effort

Tactics Carry women’s shoes; carry more shoe lines including athletic shoes and sandals; Advertise in major newspapers.


Are tactics working?

Outcome Market share 1 year from now

Starbuck’s Strategic Plan

Mission statement 'Establish Starbucks as the premier purveyor of

the finest coffee in the world while maintaining our uncompromising principles while we grow.‘

What’s wrong with Starbuck’s mission statement?


Goal To establish Starbuck’s as the most

recognized and respected brand in the world.

What is requirement that goal should meet?

Does Starbuck’s goal meet it?


To achieve this goal, the Starbuck’s plans to rapidly expand its retail operations, grow its specialty sales and other

operations, and selectively pursue opportunities to

leverage the Starbuck’s brand through the introduction of new products and

the development of new distribution channels.


Are these steps strategies or tactics?

Answer

They are Strategies - board statement of what company will do to achieve goals, but doesn’t say how.

Tactics would tell us, for example, how the company plans to expand retail operations. For example, open more retail stores in

airports and malls.

FedEx’s Mission

FedEx provides access to a growing global marketplace through a network of supply chain, transportation, business and related information services.

Lexus has revolutionized the luxury motoring experience through its passionate commitment to the finest products and the most satisfying automobile ownership experience. We vow to value the customer as an important individual; to do things right the first time; and to always exceed expectations. We brought together these principles in the Lexus Covenant, which inspires our dealers and associates to treat customers as they would treat guests and to go to any lengths to serve them better.

Lexus’ Mission

More on Lexus

“In order to make certain that a Lexus is a Lexus no matter where it is built, the entire workforce at Cambridge was trained to follow the Passionate Pursuit of Perfection that drives Lexus associates worldwide.”

Is there any connection between Lexus and McDonald’s?

CSUN College of Business/Econ Mission The College of Business and Economics at

California State University, Northridge is dedicated to educating the leaders of tomorrow.

By offering a challenging curriculum, smaller class sizes, state-of-the-art facilities, and nationally recognized programs, the College offers a truly unique educational experience.

Developing an Operations Strategy Operations Strategy is a plan for using

the operational capabilities of a company to decide how it will compete.

Will it compete on Price, Quality, Time, Flexibility?

One, some or all?

Competing on Price? Offering product at a lower price

relative to competition Works if there are many competitors

offering same product or service. If you of a product with a high degree

of customization, does it make sense for you to compete on price?

Must also have lower ??? relative to competitors.

Competing on Quality? Quality of product Quality of service Both Does competing on quality mean

that a company can’t compete on price because it, if it offers better quality, it will charge a higher price?

Depends on how quality affects ??? If it increases ????, yes. If it decreases ???, not necessarily.

Competing on Time? Time/speed one of most important

competition priorities

Time related issues involve Rapid delivery:

Focused on shorter time between order

placement and delivery

On-time delivery: Deliver product exactly when needed every

time

Competing on Flexibility?

Product flexibility: Easily switch production from one item to

another Easily customize product/service to meet

specific requirements of a customer

Volume flexibility: Ability to ramp production up and down to

match market demands

Measuring Productivity

Productivity = Output

Inputs

Productivity is a measure of how efficiently inputs are converted to output.


Partial measures output/(single input)

Multi-factor measures Uses some but not all inputs output/(multiple inputs)

Total measure uses all inputs output/($ value of all inputs)

Measures of ProductivityMeasures of Productivity

Partial Output Output Output

measures Labor Machine Energy

Multifactor Output Output

measures Labor + Machine Labor + Capital + Energy

Total Goods or Services Produced

measure $ value of all inputs used to produce them

Units of output per kilowatt-hourDollar value of output per kilowatt-hour

Energy Productivity

Machine Productivity

Labor Productivity

Examples of Partial Productivity Examples of Partial Productivity MeasuresMeasures

Units of output per labor-hourDollar value of output per labor-hour

Units of output per machine-hourDollar value of output per machine-hour

Numerical Example

Output Labor Machine

Units 500 x x

Hours x 26 6

Cost/unit x $8 $3

Price/unit $15 x x

Partial Measures

hrs.Labor

Produced UnitstyProductiviLabor

3.1926

500tyProductiviLabor

Explain meaning?

Partial Measures

hrs.Labor

Output of ValueDollar tyProductiviLabor

46.288$hrs. 26

$7,500

hrs. 26

$15/unit x 500tyProductiviLabor

Explain meaning?

Partial Measures

cost/hr.)(Labor x hrs.)(Labor

Produced Units

costLabor

Produced UnitstyProductiviLabor

4.2$8 x 26

50tyProductiviLabor

Explain meaning?

hrs. Machine

Produced UnitstyProductivi Machine

Partial Measures

3.836

500tyProductivi Machine

Explain meaning?

Multi-factor

cost/hr.)(Labor x hrs.)(Labor cost/hr.) (Machine x hrs.) (Machine

Produced Units

CostLabor Cost Machine

Produced UnitsMFP

21.2

$8 x 26 $3 x 6

500

cost/hr.)(Labor x hrs.)(Labor cost/hr.) (Machine x hrs.) (Machine

Produced UnitsMFP

Multi-factor


Measure Outputs Inputs

Partial Units or dollars

Units or dollars

Multi-factor Units or dollars

Dollars

Total Units or dollars

Dollars

Summary Output in units/Input in hrs. = Output

per input hour Output in $/Input in hrs. = X

Produced output worth $X per input hr. Output in units/Input in $ = Y

Produced Y units per $ spent on input Output in $/Input in $ = Z

Produced Z units per $ spent on input

Bottleneck Operation

SandingMachine

SandingMachine PolishingPolishing

50 units/hr

30 units/hr

Bottleneck Bottleneck operationoperation

Improving ProductivityEliminate bottleneck operationsEliminate non-value added stepsUse improved technology Improve quality

Less rework More good units produced the first time Productivity should measure number of good

units produced the first time

Ch2 Operations Strategy and Competitiveness

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