https://www2.bc.edu/~xueme/MD021/.../operations%20strategy.

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MD 021 - Management and Operations

Operations Strategy

• Definitions of strategy and operations strategy

• Levels of strategy: corporate, business, functions

• Evaluating an operations strategy

• Example: McDonald's

1
 Definition of Strategy

Strategy is a deliberate search for a plan of action that will develop a business's
distinctive competence and compound it.

Definition of Operations Strategy

An operations strategy consists of a sequence of decisions that, over time,

enables a business unit to achieve a desired operations structure, infrastructure,
and set of specific capabilities in support of the competitive priorities.

2
 Order-Qualifiers and Order-Winners

Order-qualifiers are those criteria that a company must meet for a customer to
even consider it as a possible supplier. Companies need only be as good as
competitors.

Order-winners are those criteria that win the order. Companies need to be better
than their competitors.

3
 Levels of Strategy

What business
Corporate are we in?

How do we compete?
Divisional
(Business)

Role of each
Fin HR Mkt Prod Ops function?
Dev

4
 Components of the Operations Strategy

Structural decision Capacity

categories: Facilities
Vertical integration
Technology
Infrastructural decision Workforce
categories: Organization
Information/control systems
Capabilities: Unique to each firm
Competitive priorities: Cost
Quality
High-performance design
Consistent quality
Time
Fast delivery time
On-time delivery
Development speed
Flexibility
Customization
Volume flexibility

5
 Criteria for Evaluating an Operations Strategy

Consistency (internal and external)

Between the operations strategy and the overall
business strategy
Between the operations strategy and the other
functional strategies within the business
Among the decision categories that make up the
operations strategy
Between the operations strategy and the business
environment (resources available, competitive
behavior, governmental restraints, etc.)

Contribution (to competitive advantage)

Making trade-offs explicit, enabling operations to
set priorities that enhance the competitive
advantage
Directing attention to opportunities that
complement the business strategy
Promoting clarity regarding the operations strategy
throughout the business unit so its potential can be
fully realized
Providing the operations capabilities that will be
required by the business in the future

6
 Statement of
McDonald’s Operations Strategy

“To provide unmatched consistency in operations in

support of high product quality. This must be
accomplished with adequate speed, low cost, and
process innovation to accommodate changes in
consumer tastes.”

From the statement of McDonald’s operations

strategy, it is clear that both consistent and high-
performance quality are considered order winners,
while speed, cost, and innovation are considered
order qualifiers.

7
 McDonald’s Operations Strategy

Dimension Strategy
Capacity • Growth as needed through additional stores - but
capacity added carefully
• Well-utilized - franchisee's well-being depends on it
being used heavily
Facilities • Distributed facilities, each facility being very similar to
the next, all focused around the same menu - although
the uniformity is beginning to change
Process • High degree of process understanding, emphasis on
Technology "fool-proof" processes
• A leader in the technology of fast-food delivery
Vertical • Partnership arrangement
Integration • Long-term relationship with suppliers to promote
innovation and quality improvement
Workforce • Franchisees: well-trained, carefully selected,
entrepreneurs
• Operators: high-turnover, cheap
Organization • Guidelines provided by corporation, but franchisees
push to locally optimize
Control • Centralized buying
Systems • Bulk contracts
• "Push" system for basic supplies, "pull" system day-to-
day in the restaurants

Evaluation of the operations strategy:

• Internal and external consistency - Looking at the operations

strategy along the seven dimensions, they all support the
operations mission and the business strategy from the previous
page.

• Contribution to competitive advantage - Systemic strategy

creates unmatched consistency in operations that has been
difficult to imitate.