Chapter 3 - Operations Strategy

What is Strategy and what is Operations Strategy?

Strategic Decisions
Decisions which are widespread in their effect on the organization
Define the position of the organization relative to its environment
Move the organization closer to its long term goals

Operations Strategy
The pattern of strategic decisions and actions which set the role, objectives,
and activities of the operation

Operations
Are the resources that create products and services

Operational
Opposite of Strategic (Day to Day and Detailed)

Hayes and Wheelwright's Four Stages of Operations Contribution

Stage1: Internal Neutrality
Poorest level of contribution by the operations function
Attempts to aimprove by 'avoiding making mistakes'
Stage 2: External Neutrality
Comparing itself with similar companies or organizations in the outside
market
Measuring itself against its competitors' performance and trying to
implement best practice
Stage 3: Internally Supportive
Gaining a clear view of the company's competitive or strategic goals and
supporting it by developing appropriate operations resources
Stage 4: Externally Supportive
Forecasts likely changes in markets and supply, and it develops the
operations-based capabilities which will be required to compete in future
market conditions

Perspectives on Operations Strategy

1 Top-down reflection
Main influence will be whatever the business sees as its strategic
direction
2 Bottom-up activity
Many strategic ideas emerge over time from operational
experience.
Incorporate the ideas which come from each function's day-to-day
experience.
3 Translating market requirements into operations decisions
 No operation that continually fails to serve its markets adequately is
likely to survive in the long term.
Competitive Factors
Factors that define the customer's requirements
Order Winning Factors
Directly and significatntly contribute to winning business.
Key reasons for customers for purchasing a product or service.
Qualifying Factors
Aspects of competitiveness where the operation's performance
has to be above a particular level just to be considered by the
customer

Produce/Service Life Cycle

i Introduction Stage
When a product/service is first introduced
Few competitors offering the same product or service
Rapid and Dependable response to demand will help
keep demand bouyant
ii Growth Stage
As volume grows, competitors may enter the growing
market
Cost and productivity issues, as well with dependable
supply, are likely to be the operation's main concerns
iii Maturity Stage
More competitors dropping out of the market
Demand starts to level off
Operations are expected to get costs down in order to
maintain profits
iv Decline Stage
Sales will decline as more competitors are dropping out
of the market
Operations objectives will continue to be dominated by
cost

1 Exploiting the capabilities of operations resources in chosen markets

Resource Based View (RBV)

Firms with an 'above averate' strategic performance are likely to have
gained their sustainable competitive advantage because of the core
competencies of their resources

Strategic resources and sustainable competitive advantage

1 They are Scarce
2 They are not very Mobile
3 They are difficult to imitate or subsititue for

How can an Operations Strategy be put together?

Process of Operations Strategy
1 Formulation Process
Process of clarifying the various objectives and decisions that
make up the strategy, and the links between them
Attributes of a Good Operations Strategy
Comprehensive
Does it include all the important issues?
Coherent
Choices made in each decision area all direct the
operation to the same strategic direction
Correspondence
Strategies should correspond to the true priority of
each performance objective (Cost reduction,
Flexibility, etc)
Identifies Critical Issues
The more critical the decision, the more attention it
deserves
2 Implementation Process
Operations Strategy Implementation
The way strategies are executed

3 Important Issues in Achieving a Successful Implementation

1. Clarity of Strategic Decisions
If a strategy is ambiguous it is difficult to translate strategic
intent into specific actions
2. Motivational Leadership
Leadership is needed to bring sense and meaning to
strategic aspirations, maintain a sense of purpose over the
implementation period, and modify the implementation
plan in the light of experience
3. Project Management
Breaking a complex plan into a set of relatively distinct
activities
1 Monitoring Process
Organizations want to track ongoing performance to make sure
that the changes are proceeding as planned
2 Control Process
Strategic Control
Evaluation of the results from the monitoring process