OPERATIONS MANAGEMENT

OPERATIONS STRATEGY FOR

COMPETITIVE ADVANTAGE

SHOULDICE HOSPITAL
Located In Toronto Canada World famous Hernia repair Hospital Rate of infection, complications and recurrence is less than 0.5% (12 times lower than competitors) Average recovery time 4 days, half compared to its competitors Patients from 115 countries Patients participation in all aspects Facilities designed to encourage exercise and rapid recovery Capacity properly planned 7000 surgeries in 5 operating rooms and 89 beds Lifetime support through annual follow up

MISSION STATEMENT OF FEDEX

FedEx will produce superior financial returns for shareowners by providing high value-added supply chain, transportation, business and related information services through focused operating companies. Customer requirements will be met in the highest quality manner appropriate to each market segment served. FedEx will strive to develop mutually rewarding relationships with its employees, partners and suppliers. Safety will be the first consideration in all operations. Corporate activities will be conducted to the highest ethical and professional standards.

MISSION STATEMENT - THE WALT DISNEY COMPANY

The mission of The Walt Disney Company is to be one of the world's leading producers and providers of entertainment and information. Using our portfolio of brands to differentiate our content, services and consumer products, we seek to develop the most creative, innovative and profitable entertainment experiences and related products in the world.

MISSION
Mission - where are you going? Organizations purpose for being Provides boundaries & focus Answers What do we provide to society?

FACTORS AFFECTING MISSION

Philosophy & Values Environment Mission Customers Public Image Profitability & Growth

Benefit to Society

MISSION/STRATEGY
Mission

- where you are going

Strategy

- how you are going to get there; an action plan

STRATEGY
Action plan to achieve mission Company has a business strategy Functional areas have strategies to exploit opportunities and strengths, neutralize threats and avoid weaknesses

STRATEGY PROCESS
Company Mission Business Strategy Functional Functional Area Area Strategies

Marketing Decisions

Operations Decisions

Fin./Acct. Decisions

STRATEGIES & COMPETITIVE ADVANTAGE

Ability

of the firm to outperform its industry i.e. to earn a high rate of profit than the industry norm achieve a competitive advantage, a firm must create more value than its competitors

To

Differentiation

Cost leadership
Response

COMPETING ON DIFFERENTIATION
Create

unique bundles of products/services that will be highly valued by customers encompass everything related to product or service that influences value

Can

Broad Product Line

Product features
Product Service Experience differentiation

COMPETITIVE SERVICE STRATEGIES (DIFFERENTIATION)

Making

the Intangible Tangible (memorable) Customizing the Standard Product Reducing Perceived Risk Giving Attention to Personnel Training Controlling Quality
Note: Differentiation in service means being unique in brand image, technology use, features, or reputation for customer service.
3-12

COMPETING ON COST
Maximize Does

value as defined by customers

not mean low value or low quality a low cost position relative to

Establishing

competitors through

Optimum utilization of resources Economies of scale

COMPETITIVE SERVICE STRATEGIES (OVERALL COST LEADERSHIP)

Seeking

Out Low-cost Customers Standardizing a Custom Service Reducing the Personal Element in Service Delivery (promote self-service) Reducing Network Costs (hub and spoke) Taking Service Operations Off-line

3-14

COMPETING ON RESPONSE
Flexibility

- ability to match changes Reliability - scheduling Timeliness - design, production, delivery

Requires institutionalization within the firm of the ability to respond

COMPETITIVE ENVIRONMENT OF SERVICES

Relatively

Low Overall Entry Barriers Economies of Scale Limited High Transportation Costs Erratic Sales Fluctuations No Power Dealing with Buyers or Suppliers Product Substitutions for Service High Customer Loyalty Exit Barriers

WINNING CUSTOMERS IN THE MARKETPLACE

Service Qualifier: To be taken seriously a certain level must be attained on the competitive dimension, as defined by other market players. Examples are cleanliness for a fast food restaurant or safe aircraft for an airline. Service Winner: The competitive dimension used to make the final choice among competitors. Example is price. Service Loser: Failure to deliver at or above the expected level for a competitive dimension. Examples are failure to repair auto (dependability), rude treatment (personalization) or late delivery of package (speed).

3-17

ISSUES IN OPERATIONS STRATEGY

Research Preconditions Dynamics

RESEARCH CHARACTERISTICS OF HIGH ROI ORGANIZATION

High

product quality High capacity utilization High operating efficiency Low investment intensity Low direct cost per unit

From the PIMS program of the Strategic Planning Institute

PRECONDITIONS
Strength and Weakness of competitors Possibility of new entrants, substitute products and commitment of suppliers and distributors Current and prospective environmental, technological legal and economic issues Product life cycle Resources available within firm and OM functions Integration of OM strategy and company strategy

DYNAMICS
Changes within the organizations
Changes in the environment

STRATEGY DEVELOPMENT AND IMPLEMENTATION

Understand

issues research, preconditions,

dynamics
Do

a SWOT Analysis

Form

a strategy for competitive advantage

critical success factors and supporting

Identify

activities
Group Build

activities into organizational structure

and staff the organization

STAGES IN THE PRODUCT LIFE CYCLE

Growth rate

Introduction
Growth
LED TV LCD TV Plasma TV Flat screen CRT TVs

Maturity

Decline

STRATEGY & ISSUES DURING PRODUCT LIFE

Introduction

Company Strategy & Issues

Best period to increase market share R&D engineering are critical Product design and development are critical Frequent product and process design changes Excess capacity Short production runs High production costs Utmost attention to quality Quick elimination of market-revealed design defects

OM Strategy & Issues

STRATEGY & ISSUES DURING PRODUCT LIFE

Growth

Company Strategy & Issues

Practical to change prices or quality image Marketing is critical Strengthen niche Forecasting is critical Product and process reliability Competitive product improvements and options Shift toward product oriented process Enhance distribution

OM Strategy & Issues

STRATEGY & ISSUES DURING PRODUCT LIFE

Maturity

Company Strategy & Issues

Poor time to increase market share Competitive costs become critical Poor time to change price or quality Defend position via fresh promotional and distribution approaches

OM Strategy & Issues

Standardization - Increasing stability of manufacturing process Less rapid product changes and more minor annual model changes Optimum capacity Long production runs Re-examination of necessity of design changes

STRATEGY & ISSUES DURING PRODUCT LIFE

Decline

Company Strategy & Issues

Cost control critical to market share

OM Strategy & Issues

Little product differentiation Cost minimization Overcapacity in the industry Prune line to eliminate items not returning a good margin Reduce capacity

CSFS OF MICROSOFT
It It

focuses on one business software thinks globally operates and sells management involved in product

Senior

development process
It

recruits and retains top people in its field on speed to market

Emphasizes

Activity Mapping: Southwest Airlines Low Cost Competitive Advantage

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