Assignment 1

Ashish Agrawal
MBAe Vth Semester
Operations Management
Explain business strategy and functional strategy. Relate with some
practical examples.
A Business Strategy may come from the core management or from an independent
unit. A business strategy is less about coordination of operating units and more
about developing and sustaining competitive advantage for the goods and services
produced.
A business strategy deals with:

Positioning the business against rivals

Anticipating changes in demand and technologies and adjusting the strategy
to accommodate them
Influencing the nature of competition through strategic actions such as
vertical integration etc

Michal Porter has identifies three major categories of business level strategies that
can be implemented at the business level to create a competitive advantage and
defend against the adverse effects of business environment.
1. Cost leadership strategy:
The generic strategy call for being the low cost producer in an industry for a
given level of quality. The firm has option to match industry prices and earn
higher profits or sell below the industry price to gain market share.
Example: Toyota
2. Differentiation Strategy:
This strategy call for development of a product or service that offers unique
attributes that are values by customers and the customers perceive to be
better that competitors. The value added by uniqueness of the product may
allow the charge premium prices. The higher prices cover the extra cost
incurred in offering the unique product. Such strategy requires: Leading
scientific research, highly skilled and creative product development
team/reputation for quality and development
Examples: Apple, Bugatti,
3. Focus Strategy:
The strategy concentrates on a narrow segment and within that segment
attempts to achieve either a cost advantage or differentiation. The premise is
that the needs of the group can either be serviced by focusing entirely upon
them.
Example: Ducati, Harley Davidson
Firms often try to mix two of the above strategies.

A functional level strategy is concerned with making improvements to

business functions that support the business strategy.
They are basically related to defining strategies of IT, Marketing, human
Resources and operations.
Functional level strategy is a response to operational level strategy. It
advocates for the business to see its management decisions as specific to a
functional area of the organization, such as marketing, human resources,
finance, information management and public relations.
Examples: In 2008, Swiss Life Group, a Zurich-based insurance company (ranked
#373 on the Fortune Global 500 list) announced a change in its Information
Technology functional strategy priorities. The implications of this was a decision to
considerably scale back the number of IT projects in order to reduce costs through
re-prioritization. This was successful as shown in this November 2010
announcement,

2.

Explain 10 OM critical decisions.

1. Goods and Services: designing the transformations process of that include
factors of cost, quality and human resources must be made in the initial
stage.
2. Quality: what level of quality and capacity should be decided
3. Process and Capacity design: it is critical to know and be prepared for
production or service capacity according to the market demand and growth
4. Location: The factor which may influence a majority of capital investment
should be studied carefully with pros and cons of location to the industry.
5. Layout: Once the goods/services and capacity is decided it is important to
make optimal use of the location through a layout design.
6. Human Resource: Job design and Job description become crucial elements to
make things run, therefore equal amount of thought should be given to the
quality of manpower required to run the operations
7. Supply Chain Management: Decisions have to be made of what materials to
be produced from where should they be procured and how is the delivery
going to take place at minimum cost possible.
8. Inventory: Based on the supply chain management and product forecast
sufficient inventory has to be maintained. Holding inventory can be a big cost
to the organization and therefore needs to be taken care of efficiently.
9. Scheduling: efficient way of allocation, control and management of materials,
capital goods and machines to efficiently produce the final goods from the
input available. Schedule are more formal in goods production with short,
medium and long term planning to accommodate demands.
10.Repair and Maintenance: Decisions must be made regarding the desired level
of reliability, stability and systems must be established by management.
Such as a Preventive maintenance schedule, training and development of
such manpower.