Strategic Importance of Operation Management
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Transcript of Strategic Importance of Operation Management
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BY: OT C H A N DY, B E & M S C .M A NAG E M E N T I N S T I T U T E O F C A M B O D I A
Chapter 2:Operation Strategy
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After finish this chapter…
Define an operation strategy
Able to identify the 9 different competitive priorities used in operation strategies
Able to describe the role of operation strategy as source of competitive strength
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Contents
Coporate strategy
Market analysis
Modern day operation capabilities
Competitive priorities and capabilities
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Operation as strategic importance
Modern day organizations have to excel inMass customizationLean productionAgile manufacturingCustomer-centric provisionEtc.
Depend on ability to actually do these things and it is reside within operations.
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Operation as strategic importance
Late 1990s, Toyota announceed their strategic intention to expand capacity and produce even more automobiles.
By 2004, Toyota had fulfilled their promise and become 2nd car producer in USA.
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Operation as strategic importance
Dell Computers have in-house capabilities that others have found difficult to imitate.
The problem with some organizations is that they don't have senior-level personnel in place who fully understand the potential that operation can have.
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Contents map
Coporate strategy
Market analysis
Modern day operation capabilities
Competitive priorities and capabilities
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Corporate strategy…
Corporate strategy specifies the businesses that the company will pursue, isolates new opportunities and threats in the environment, and identifies the growth objective.
Also address, how a firm can differentiate itself from the competition.
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Corporate strategy…
Choices could include producing standardized versus customized services or products or competing on the basis of cost advantage versus responsive service delivery.
Corporate strategy provides an overall direction that serves as the framework for carrying out all the organization's functions.
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Corporate strategy…
Strategic consideration:Developing corporate strategy involves three considerations:
1. Monitoring and adjusting to CHANGES
2. Identify and develop core competences
3. Develop core processes
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Corporate strategy…
1. Environmental scanning: Environment CHANGES rapidly Firm need to adapt to these changes
Scan by monitor trends in the socioeconomic environment incl. industry, marketplace, and society.
Scan for threats and opportunities
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Corporate strategy…
1. Environmental scanning: Threats: new entrants, new products
and services, low cost players, high quality product line etc.
Opportunities: economic trends, technological changes, new policies, living style, availability of new resources, collective power of customers and suppliers
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Corporate strategy…
2. Development of core competences: Good managerial alone can not
overcome changes Success firms take the advantage of
what they do well – unique strengths Core competencies are the unique
resources and strengths that an organization's management considers when formulating strategy.
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Corporate strategy…
2. Development of core competences: Core competencies include:
Management of value Capacity management Workforce Facilities Market and financial know-how System and technology Integratationa and affiliation
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Corporate strategy…
3. Development of core processes: Firm's core competencies should
determine core processes The four core processes
Customer relationship New service/product innovation Order fulfillment Suppliers relationship
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Corporate strategy…
3. Development of core processes:
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Corporate strategy…
3. Development of core processes: Many companies have all four of these
core processes esp. news paper industry.
Important point is every firm MUST evaluate their core competencies and chose to focus on thoses processes that provide greatest competative strengths.
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Corporate strategy…
Global strategies:Identifying opportunities and threats
today require a global prespective.
Global strategy may include buying foreign services or parts, combating threat from foreign competitors, or planning way to enter market beyond national boundaries.
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Corporate strategy…
Global strategies:Two effective global strategies are:
1. Strategic alliances in the form of collaborating effort, joint venture, technology (know-how) licensing
2. Locating abroadi
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McDonald vs. Jollibee in the Philippines
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Contents map
Coporate strategyMarket analysisModern day operation capabilitiesCompetitive priorities and capabilities
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Market Analysis
Market segmentation:Market segmentation is a process of
identifying groups of customers with enough in common to warrant the design and provision of services or products that larger group wants and needs.
It is allow firm to incorporate the needs of customer into the design of the service or product and the processes for its production.
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Market Analysis
Market segmentation: Characteristic use to determine market segments:
Demographic factors: age, income, education level, occupation, and location
Psychological factors: pleasure, fear, innovativeness, and boredom
Industry factors: specific technology, use certain materials, or participate in particular industry
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Market Analysis
Market segmentation:Another important note: two customers
may use the same product for very different reasons.
Identifying the key factors in each segment is the starting point in devising a customer-driven operation strategy.
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Market Analysis
Need Assessment:What are the needs for each market
segment?
How well competitors are addressing those needs?
Need assessment should include: tangible and intangible service or product attributes and features that a customer desires.
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Market Analysis
Need Assessment:Market needs may be group as follow:
Service or Product Needs: price, quality, degree of customization
Delivery System Needs: availability, convennience, courtesy, safety, accuracy, reliability, delivery speed, and delivery dependability
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Market Analysis
Need Assessment:Market needs may be group as follow:
Volume Needs: high or low vol, degree of variability in vol, and degree of predictability in vol.
Other Needs: reputation and num of year in business, after sale technical support, ability to invest in international financial market, competent legal services, and service or product design capability.
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Contents map
Coporate strategyMarket analysisModern day operation capabilitiesCompetitive priorities and capabilities
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Modern day operation capabilities
Transition of operation from craft – mass – agile
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Modern day operation capabilities
Craft era:Low volume
High variety
Firm capable of flexibility
High level of skill and quality
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Modern day operation capabilities
Mass production: High volume Standard product Produce at low cost without or less varieties Work is largely de-skill Repetitive and narrow in scope with little
flexibility from workers Automation is dedicated to small product
range Production/operation is views as low grade
function in firm
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Modern day operation capabilities
Mass customization:A firm's service or product strategy
addresses certain competitive priorities that will win orders from customers.
One such competitive priority is variety.
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Modern day operation capabilities
Mass customization:Considering the paint retailer! They
are praticing a strategy known as mass customization.
Mass customization is a strategy whereby a firm's flexible processes generate a variety of service or product at reasonable low costs.
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Modern day operation capabilities
Mass customization:Postponement:
A key to being mass customizer is postponing the task of differentiating a service or product for a specific customer until the last possible moment.
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Modern day operation capabilities
Mass customization:Postponement apply to service:
The Ritz-Carlton Hotel, will record customers preferences and will add into its service to tailor made the preferences of the same customers when they check in again.
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Modern day operation capabilities
Mass customization: Postponement apply to manufacturing:
HP postpones assemble of its printers with the country-specific power supply and packaging of appropriate manual until the last step in the process, which is perform by distributor in the region where printer is being delivered.
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Modern day operation capabilities
Mass customization: Postponement apply to manufacturing:
Being a successful mass customizer such as HP may require the redesign of products or processes.
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Modern day operation capabilities
Mass customization: Postponement apply to manufacturing:
Benneton, a major producer of sweater, rather than dyeing the yarn before manufacturing the sweater; it reverse this process to after and wait until there are orders (usually large retail buyers).
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Modern day operation capabilities
Mass customization:Internet implication:
Internet has been a valuable technology for mass customization strategies.
Dell sells computer through web page that allow consumers to configure their computers from large variety of options.
Ford and GM also do the same
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Dell Online Store
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Mini Copper customization online
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Mass Customization
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Watch interview with Andrew Lippman, Founder of MIT Media Lab .
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Modern day operation capabilities
Mass customization:Internet implication:
Each of these ventures provide customers an enormous amount of choice in the service and product they buy.
But also put a lot of pressure on processes that must produce them.
So, flexibility and short response times are prized qualities for mass-customization processes.
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Contents map
Coporate strategyMarket analysisModern day operation capabilitiesCompetitive priorities and capabilities
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Competitive priorities and capabilities
Competitive capabilities
Cost 1. Low-cost operations
Quality 2. Top quality
3. Consistent quality
Time 4. Delivery speed
5. On-time delivery
6. Development speed
Flexibility 7. Customization
8. Variety
9. Volume flexibility
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Competitive priorities and capabilities
Cost: Lowering prices can increase demand for
services or products BUT it is also reduces profit.
Low-cost operation is delivering a service or producing a product at lowest possible cost to the satisfaction of process’s external and internal customers.
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Competitive priorities and capabilities
Quality: Quality is a dimension of a service or product
that is defined by external and internal customers.
Two important competitive priorities: Top quality Consistent quality
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Competitive priorities and capabilities
Time: Delivery speed: lead time is use to measure
this delivery speed.
On-time delivery: meeting delivery time as promise
Development speed: how quick the new service or product is introduce to the market.
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Competitive priorities and capabilities
Flexibility: Customization: is satisfying the unique needs of
each customer by changing service or product design.
Variety: is handling wide assortment of services or products efficiently. It is different from customization because service or product is not necessary unique.
Volume flexibility: is accelerating or decelerating the rate of production of services or products quickly to handle large fluctuations in demand.
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Contents map
Coporate strategyMarket analysisModern day operation capabilitiesCompetitive priorities and capabilities New product or service development
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New Product/Service Development
Essential to long term survival
Time change, people change, technology change service or product must also changes
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New Product/Service Development
New product/service Brand new
Major changes to existing services
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New Product/Service Development
Development strategies1. Product variety: must be able to capture
niches market. Require flexible processes to offer wide variety
without compromise cost, quality, or speed.
2. Design: aesthetic appeal, safety, ease of use, ease of maintenance.
Compete on this require top quality & speed of introduction to the market.
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New Product/Service Development
Development strategies3. Innovation: must be able to develop new
technology and translate into new products. Require significant research and development
by tech engineer and ability to move fast to market.
4. Service: providing value added services to complement the products.
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Smart phone innovation
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New Product/Service Development
Development strategies Market positioning:
Leader: be the first to introduce new service/product
Middle-of-the road: wait until leader have introduced a new service or product
Laggard: wait and see if service or product idea catches on in the market.
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New Product/Service Development
Benefit from new product/service:
Enhancing the profitability of existing offering
Attract new customers to the firm Improving the loyalty of existing customer Open new market
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New Product/Service Development
Development phases:
Design AnalysisDevelopme
ntFull launch
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New Product/Service Development
• Simple Innovation process
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New Product/Service Development
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New Product/Service Development
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New Product/Service Development
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New Product/Service Development
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New Product/Service Development
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The End
Q & A
THANKS
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Your home work
What is strategy exactly?
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