CHAPTER 3

Operations Strategy
Competitive Advantage Competitive Priorities

 A firm’s ability to achieve market and  The strategic emphasis that a firm
financial superiority over its places on certain performance
competitors. measures and operational
 Requires: capabilities within a value chain
- Understanding of customer  Types:
NEEDs and EXPECTATIONS  Cost
- Build and leverage operational  Quality
capabilities to support desired  Time
competitive priorities  Flexibility
 Innovation
Understanding Customers Wants and
Need Cost

 Understood by segmenting  Help firm gain a competitive

customers based on their unique advantage
wants and needs - Low prices can be achieved by:
- Order Qualifiers: basic  High Productivity
customer expectations  High Capacity Utilization
 Minimum performance  Achieving economies of
level required to stay in scale
business  Efficient design and
- Order Winners: goods and operation of the supply
service features and chain
performance characteristics that  Improvement in Quality
differentiate one CBP from Time
another
 Help win the customers  Important source of competitive
advantage
 Customers demand:
Evaluating Goods and Services - Quick response
 Search attributes - Short waiting time
- Aspects of a good or service that - Consistency in Performance
a customer can determine prior  Reductions
to purchase - Accomplished by streamlining
 Experience attributes and simplifying processes and
- Aspects of a good or service that value chains
can be discerned only after - Drive improvements in quality,
making a purchase or during cost, and productivity
consumption or use Flexibility
 Credence attributes
- Aspects of a good or service that  Manifests in mass-customization
the customer believes in and strategies
cannot be discerned even after Mass Customization: ability
making a purchase and to make goods and services that
consumption global customers require at any
volume and time
 - Helps make decisions about the
competitive priorities that SBUs
Innovation need to pursue to gain
 Discovery and practical application competitive advantage
or commercialization of a device,
method, or idea that differs from  Functional Strategy
existing norms - Set of decision that each
 Innovative companies focus on: functional area develops to
- Outstanding product research, support its particular business
design, and development strategy
- High product quality
- Ability to modify production  Operations Strategy
facilities to produce new - Set of decisions made across
products frequently value chains that support
implementation of higher-level
OM and Strategic Planning business strategies
 Pattern or plan that integrates an - Developed by translating
organization’s major goals, policies, competitive priorities into
and action sequences into a operational capabilities
cohesive whole
 Effective Strategies Sustainability and Operations Strategy
- Develop around competitive
priorities  Type of an organizational strategy
- Provide focus for an organization and is also considered corporate
and exploits its core strategy by some companies
competencies - Requires innovation in value
 Core Competencies: chains, operations design, and
Strengths unique to an day-to-day management
organization activities
 Dimensions
Strategic Planning - Environmental
 Process of determining long-term - Social
goals, policies, and plans for an - Economic
organization Global Supply Chains and Operations
 Helps an organization build a strong Strategy
position to achieve its goals, despite
unforeseen external factors  Multinational Enterprise
- An organization that sources,
Levels of Strategy markets, and produces its goods
 Corporate Strategy and services in several countries
- Defines businesses in which to minimize costs, maximize
corporation participate and profit, customer satisfaction, and
develop plans for: social welfare.
 Acquisition and allocation Operations Design Choices
of resources among
strategic business units  Decisions made for determining the
(SBUs) process structures that are best
suited for producing goods or
 Business Strategy creating services
  Address:
- Types of processes
- Value chain integrations and
outsourcing
- Technology
- Capacity and facilities
- Inventory and service capacity
- Trade-offs
Infrastructure
 Focuses on nonprocess features
and the capabilities of an
organization
 Includes:
- Workforce
- Operating Plans and Control
Systems
- Quality Control
- Organization Structure
- Compensation Systems
- Learning and Innovation
Systems
- Support Services