Chapter 2: Operations Strategy in a

Global Environment
 Outline
 Developing Missions and
Strategies
 Achieving Competitive Advantage
Through Operations
 Issues in Operations Strategy
 Strategy Development and
Implementation
 Global Operations Strategy Options
Developing Missions and
Strategies
Mission statements tell an
organization where it is going

The Strategy tells the

organization how to get there
 Mission

 Mission - where are

you going?
 Organization’s
purpose for being
 Answers ‘What do
we provide society?’
 Provides boundaries
and focus
 Telfer School of
Management Vision
The Telfer School of Management at the
University of Ottawa aims to be recognized
as a leading institution for management
education and innovative research.
Through its academic programs, offered in
both English and French, the Telfer School
seeks to prepare its students to assume
leadership positions in today’s global
economy and to instill in them the highest
standards of integrity, ethics and social
consciousness.
 Royal Canadian Mounted
Police
The RCMP is Canada’s national police
service. Proud in our traditions and
confident in meeting future challenges,
we commit to preserve peace, uphold
the law and provide quality service in
partnership with our communities.
 Factors Affecting Mission
Philosophy
and Values

Profitability
Environment
and Growth
Mission

Customers Public Image

Benefit to
Society
 Strategy
 Action plan to
achieve mission
 Functional areas
have strategies
 Strategies exploit
opportunities and
strengths, neutralize
threats, and avoid
weaknesses
Strategies for Competitive
Advantage
 Differentiation – better, or at
least different
 Cost leadership – cheaper
 Response – rapid response
 Competing on
Differentiation
Uniqueness can go beyond both the
physical characteristics and service
attributes to encompass everything
that impacts customers’ perception
of value
 Safeskin gloves – leading edge products
 Walt Disney Magic Kingdom –
experience differentiation
 Hard Rock Café – dining experience
 Competing on Cost
Provide the maximum value as
perceived by customer. Does not
imply low quality.
 Porter Airlines – secondary airports,
few fare options, smaller crews, no
expensive ticket offices
 Walmart – small overhead, shrinkage,
distribution costs
 Franz Colruyt – no bags, low light, no
music, doors on freezers
 Competing on Response
 Flexibility is matching market changes in
design innovation and volumes
 A way of life at Hewlett-Packard
 Reliability is meeting schedules
 German machine industry
 Timeliness is quickness in design,
production, and delivery
 Johnson Electric, Pizza Hut, Motorola
OM’s Contribution to Strategy
Strategy Development Process
Analyze the Environment
Identify the strengths, weaknesses, opportunities, and threats.
Understand the environment, customers, industry, and competitors.

Determine the Corporate Mission

State the reason for the firm’s existence and 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 service, broad product lines.
 Strategy Development and
Implementation
 Identify key success factors
 Build and staff the organization
 Integrate OM with other activities

The operations manager’s job is to implement

an OM strategy, provide competitive
advantage, and increase productivity
 Product Life Cycle
Introduction Growth Maturity Decline
Best period to Practical to change Poor time to Cost control
Company Strategy/Issues

increase market price or quality change image, critical

share image price, or quality

R&D engineering is Strengthen niche Competitive costs

critical become critical
Defend market
position Drive-thru
Internet search engines restaurants
CD-ROMs
iPods LCD and
Xbox 360 plasma TVs
Sales
Avatars

Boeing 787 Analogue

TVs
Twitter
 Product Life Cycle
Introduction Growth Maturity Decline
Product design Forecasting Standardization Little product
and critical differentiation
Fewer product
development
Product and changes, more Cost
OM Strategy/Issues

critical
process minor changes minimization
Frequent reliability Optimum Overcapacity
product and
Competitive capacity in the
process design
product industry
changes Increasing
improvements
stability of Prune line to
Short production and options process eliminate
runs Increase capacity items not
Long production
High production returning
Shift toward runs
costs good margin
product focus Product
Limited models Enhance improvement and Reduce
capacity
Attention to distribution cost cutting
quality
 Examples of Operations Strategy
Amazon:

1. Why is Amazon building more warehouses

as it grows? How many warehouses should
it have and where should they be located?
2. What advantages does selling books via the
Internet provide over a traditional
bookstore? Are there any disadvantages to
selling via the Internet?
3. Should Amazon stock every product it sells?
4. What advantage can bricks-and-mortar
players derive from setting up an online
channel? How should they use the two
channels to gain maximum advantage?
5. What advantages/disadvantages does the
online channel enjoy in the sale of
shoes/diapers relative to a retail store?
6. For what products does the online channel
offer the greater advantage relative to retail
stores? What characterizes these products?
 Global Strategies
 Boeing – sales and production are
worldwide
 Benetton – moves inventory to stores
around the world faster than its
competition by building flexibility into
design, production, and distribution
 Sony – purchases components from
suppliers in Thailand, Malaysia, and
around the world Global Strat
egy at
 Reasons to Globalize

Reasons to Globalize
Tangible 1. Reduce costs (labour, taxes, tariffs, etc.)
Reasons 2. Improve the supply chain
3. Provide better goods and services
4. Understand markets
Intangible 5. Learn to improve operations
Reasons 6. Attract and retain global talent
 Reduce Costs
 Foreign locations with lower wage
rates can lower direct and indirect
costs
 Maquiladoras
 World Trade Organization (WTO)
 North American Free Trade
Agreement (NAFTA)
 APEC, SEATO, MERCOSUR, CAFTA
 European Union (EU)
Improve the Supply Chain
 Locating facilities closer to
unique resources
 Metal companies to Northern
Ontario
 Auto design to California
 Athletic shoe production to China
 Perfume manufacturing in France
 Provide Better Goods
and Services
 Objective and subjective
characteristics of goods and
services
 On-time deliveries
 Cultural variables
 Improved customer service
 Understand Markets
 Interacting with foreign customers
and suppliers can lead to new
opportunities
 Cell phone design from Europe
 Cell phone fads from Japan
 Extend the product life cycle
 Learn to Improve
Operations
 Remain open to the free flow of
ideas
 General Motors partnered with a
Japanese auto manufacturer to
learn new approaches to
production and inventory control
 Equipment and layout have been
improved using Scandinavian
ergonomic competence
Attract and Retain Global
Talent
 Offer better employment
opportunities
 Better growth opportunities and
insulation against unemployment
 Relocate unneeded personnel to
more prosperous locations
 Summary
 Global operations provide challenges and
opportunities
 Organizations identify their strengths and
weaknesses
 Missions and strategies are then developed
 Competitive advantages can be achieved
from global operations
 OM managers have huge impact on the
decision making