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Business Strategy

Context for Operations

Strategy

Chapter 1

McGraw-Hill/IrwinOperations Strategy Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

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What is strategy? Strategic thinking has its roots in

military strategy“The branch of military science dealing

with military command and the planning and conduct of a war.”

And has evolved to focus on business “An elaborate and systematic plan of

action.”

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Competitive Strategy: The Positioning View

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Competitive Strategy: The Positioning View

Options for firm positioning:Cost leadershipDifferentiationFocus

And, within each of the three:Variety-basedNeeds-basedAccess-based

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Competitive Strategy: The Positioning View

SWOT AnalysisStrengthsWeaknessesOpportunitiesThreats

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Concerns with the Positioning View Too narrowly focused on industry and

product economics rather than customer economics

Allows too few options for positioning. Looking at conflicts among positions might lead to new options.

Relies too much on analytical tools Does not acknowledge the need for

learning and adaptation over time

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Competitive Strategy: The Resource-Based View

Competitive advantage is derived from the firm’s development of unique bundles of resources and capabilities that are: Inimitable: are difficult or costly to imitate

or replicateValuable: allow the firm to improve its

market position relative to competitorsRare: in relatively short supply

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Competitive Strategy: The Resource-Based View

Resource: an observable, but not necessarily tangible, asset that can be valued and traded e.g., brand, patent, parcel of land, license Asset or input to production than an organization

owns, controls or has access to on a semi-permanent basis

Capability: not observable, and hence necessarily intangible, cannot be valued and changes hands only as part of an entire unit Processes, activities or functions performed within

a system Utilize the organization's resources

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Competitive Strategy: The Resource-Based View

Types of capabilitiesProcess-based

e.g., McDonald’sSystems- or coordination-based

e.g., Ritz-Carltone.g., Southwest Airlines

Organization-basede.g., Nucor Steel

Network-basede.g., Zarae.g., Dell

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Competitive Strategy: Integrating the Positioning and Resource-Based Views

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How Strategy Is Made

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Levels of Strategy-Making

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Business Strategy: Views the Firm Might Take

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Business Strategy: Focus on the Customer

Types of customer needsMust havesLinear satisfiersDelightersNeutral

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Business Strategy: Dimensions along which Customers Assess Performance Cost Quality Availability Features/Innovativeness Environmental performance

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Business Strategy: Dimensions along which Customers Assess Performance

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Business Strategy: Making Tradeoffs in Positioning

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Strategy-Making in Context

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Strategy-Making: Cross-Functional Participation

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Operations Strategy: Goals Cost Quality Availability Features/Innovativeness Environmental Performance

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Operations Strategy: Connecting Operations Goals to Customer Concerns

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Operations Strategy: Decision Categories

Structural decisions Vertical integration Process technology Capacity Facilities

Infrastructural decisions Sourcing Information technology Supply chain

coordination Business processes

and policies Capabilities

development Lean operation Quality Flexibility

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Strategy-Making: Step 1 Understand what position the firm wants to or

can take in the marketplace by learning about: Competitors Suppliers Complementary product or service offerings and

firms offering them Spaces outside the industry into which the firm

might expand Customer needs in terms of:

Cost Quality Availability Features/innovativeness Environmental performance

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Strategy-Making: Step 2 Understand what capabilities the firm has

to offer, can or should develop both within and across the key functional areas of the firm:OperationsMarketingResearch and developmentHuman resourcesFinance and accounting

As well as outside the firm with supply chain partners

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Strategy-Making: Step 3 Integrate or synthesize the activities

and capabilities of the functions to achieve:Coherent strategic fit in support of a

desired strategic directionDevelopment of a set of capabilities to

pursue a new strategic direction

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Integrated Strategy-Making Framework