02 Operations Strategy Essay

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Operations Strategy
Operations
strategy

Operations in context

Global network operations
Direct

Creating the agile supply chain

Steering operations

Design

Develop

Shaping products, services and systems

Improving the operation’s capabilities Deliver

Product/service design

Operations planning
& control
Operations Strategy – Slide 1

Planning and controlling ongoing operations

Managing the supply base

Creating the lean supply chain

Supplier relations
& selection

Key Topics


Strategic Importance of Operations



Operations Performance Objectives



Formulating Operations Strategies



…Global Operations Strategies

Operations Strategy – Slide 2

Operations Strategy
“Operations strategy is the pattern of decisions and actions that shape the long-term vision, objectives, and capabilities of the operation and its contribution the overall strategy.”
-Slack, et al. 2009

‘Strategos’
General’s Knowledge
Operations Strategy – Slide 3

The Art of War
Sun Tzu (c. 544 - 496 BC)

Strategic Positioning
Potential
Entrants

Buyers

Industry
Competitors

Suppliers

Substitutes

Porter’s 5 Forces

The key to understanding the competitiveness of firms and the range of strategic options open to them is a thorough appreciation of the environments in which they operate.
- Michael Porter. How competitive forces shape strategy? HBR. 1979

Operations Strategy – Slide 4

Burton’s 5 Sources of

Collaborative Advantages
Previously Unrelated
Industries
Prospective diversification alliances Buyers
Partnering with
Channels / buyers

Industry
Collaborators
Horizontal strategic alliances Substitutes and
Complements
Related diversification alliances Operations Strategy – Slide 5

Suppliers
Relational contracting, quasi-integration (Adapted from Burton, J. 1995.
Composite Strategy: the combination of collaboration and competition, Journal of General
Management, vol. 21, no. 1, 1-21)

A Resource Based View
(RBV) of Firm Strategy
4
3

1
Adapted from Grant (1998)

Operations Strategy – Slide 6

RENT-EARNING POTENTIAL
CAPABILITIES OF THE FIRM

Rules and Directives
Organisational Routines

Resources
Tangible

Intangible

Knowledge Management

2

Competitive Advantage
(Rents)

Strategic Importance of Operations
Why is operations strategy so important?
• It can provide sustainable competitive advantage
• Major investments may be required
• Fundamental changes may be crucial
• A high percentage of the budget is allocated within operations • Structural constraints of operations due to
 The length of time to build operations systems, e.g. factories
 The difficulty of altering them once installed
Wickham Skinner
"Manufacturing - Missing Link in Corporate Strategy“, HBR, 1969

Operations Strategy – Slide 7

Hayes & Wheelwright’s Four-Stage Model of

Increasing strategic impact

Operations Contribution
STAGE 4
Give an operations advantage

Redefining industry expectations STAGE 3
Link strategy with operations

Clearly the best in the industry
STAGE 2
Adopt best practice As good as the competitors Holding the organization back

STAGE 1
Correct the worst problems
Internally
neutral

Externally neutral Internally supportive Externally supportive Increasing operations capabilities
(Hayes and Wheelwright 1984)

Operations Strategy – Slide 8

Operations Performance Objectives:

A CAR WASH COMPANY
In this car wash we do our job:

Good, Quick and Cheap! but most people cannot do these
3 things well because:
If they do it Good and Quick, the price cannot be Cheap….
If they do it Good and Cheap, it cannot be done Quick….
If they do it Quick and Cheap, it cannot be Good….

Operations Strategy – Slide 9

Your satisfaction with our service is very important to us!

Generic Operations
Performance Objectives
The Operations function can provide a competitive advantage through its performance at a set of objectives.
Quality
Speed

Dependability
Flexibility
Cost
Innovativeness

Doing things RIGHT
Doing things FAST

Doing things ON TIME
Being ABLE TO
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