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2 Operations Strategy in a Global Environment2

SCM 352

Outline

• Global Company Profile: Boeing• Global View of Operations• Developing Mission and Strategies• Achieving Competitive Advantage Through

Differentiation, Cost, Response• Four Worldwide Operations Strategies

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Examples of Global Strategies

• Boeing – both sales and production are worldwide.

• Haier – A Chinese company, produces compact refrigerators (one-third of the US market) and wine cabinets (half of the US market) in South Carolina

• Sony – purchases components from suppliers in Thailand, Malaysia, and around the world

Boeing 787 Dreamliner

http://www.boeing.com/commercial/787family/

Boeing 737 Assembly Plant

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Reasons to Globalize Operations

Tangible

Intangible

1. Reduce costs (labor, taxes, tariffs, etc.)2. Improve the supply chain3. Provide better goods and services4. Attract new markets5. Learn to improve operations6. Attract and retain global talent

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Cultures can be quite differentAttitudes can be quite different towards

PunctualityLunch breaksEnvironmentIntellectual property

ThieveryBriberyChild labor

Cultural and Ethical Issues

Ranking Corruption

http://www.transparency.org/

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The Role of

• Maquiladoras

• World Trade Organization (WTO)

• North American Free Trade Agreement (NAFTA)

• European Union (EU)

• Mercosur

• APE

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Match Product & Parent

• Braun Household Appliances• Firestone Tires• Godiva Chocolate• Haagen-Dazs Ice Cream• Jaguar Autos• Lotus Autos• MGM Movies• Lamborghini Autos• Alpo Petfoods

1. Volkswagen2. Bridgestone3. Campbell Soup4. Tata Motors5. Proctor & Gamble6. Nestlé7. Pillsbury8. Sony9. Proton

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Match Product & Country

• Braun Appliances• Firestone Tires• Godiva Chocolate• Haagen-Dazs Ice Cream• Jaguar Autos• Lotus Autos• MGM Movies• Lamborghini Autos• Alpo Pet Foods

1. Germany

2. Japan

3. United States

4. Switzerland

5. India

6. Malaysia

7. UK

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Developing Mission & Strategy

Mission statements tell an organization where it is going

The Strategy tells the organization how to get there

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Mission

• Mission - where are you going?

Organization’s purpose for beingAnswers ‘What do we provide society?’Provides boundaries and focus

• Xerox?

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Mission of the Hard Rock Café

• To spread the spirit of Rock ‘n’ Roll by delivering an exceptional entertainment and dining experience. We are committed to being an important, contributing member of our community and offering the Hard Rock family a fun, healthy, and nurturing work environment while ensuring our long-term success.

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Strategy

© 1995 Corel Corp.

• Action plan to achieve mission

• Functional areas have strategies

• Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses

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Strategies for Competitive Advantage

Differentiation – better, or at least differentCost leadership – cheaperResponse – rapid response

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Safeskin gloves – leading edge products

Competing on Differentiation

• Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perception of value

Walt Disney Magic Kingdom –experience differentiationHard Rock Cafe – dining experience

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• Provide the maximum value as perceived by customer. Does not imply low quality.

Southwest Airlines –secondary airports, no frills service, efficient utilization of equipment

Competing on Cost

Wal-Mart – small overheads, shrinkage, distribution costs

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Competing on Response

Flexibility is matching market changes in design innovation and volumes

A way of life at Hewlett-PackardReliability is meeting schedules

German machine industryTimeliness is quickness in design, production, and delivery

MotorolaFedExPizza Hut

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Product Life Cycle

Best period to increase market

share

R&D engineering is critical

Practical to change price or quality

image

Strengthen niche

Poor time to change image, price, or quality

Competitive costs become criticalDefend market

position

Cost control critical

Introduction Growth Maturity Decline

Com

pany

Str

ateg

y/Is

sues

Internet search engines

Sales

Drive-through restaurants

CD-ROMs

Analog TVs

iPods

Boeing 787

LCD & plasma TVs

Twitter

Avatars

Xbox 360

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Product Life Cycle

Product design and

development critical

Frequent product and

process design changes

Short production runs

High production costs

Limited modelsAttention to

quality

Introduction Growth Maturity Decline

OM

Str

ateg

y/Is

sues

Forecasting critical

Product and process reliability

Competitive product

improvements and options

Increase capacityShift toward

product focusEnhance

distribution

StandardizationFewer product changes, more minor changes

Optimum capacity

Increasing stability of

processLong production

runsProduct

improvement and cost cutting

Little product differentiation

Cost minimizationOvercapacity

in the industry

Prune line to eliminate items not returning

good marginReduce capacity

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Strategy

Analysis

Internal Strengths

Internal Weaknesses

External Opportunities

External Threats

Mission

SWOT Analysis

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Southwest Airline’s Low Cost Competitive Advantage

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4 Worldwide StrategiesC

ost R

educ

tion

Con

side

ratio

nsHigh

Low

HighLowLocal Responsiveness Considerations

(Quick Response and/or Differentiation)

Standardized productEconomies of scale

Cross-cultural learning

Examples:Texas Instruments

CaterpillarOtis Elevator

Global Strategy Transnational StrategyMove material, people, ideas across national boundaries

Economies of scaleCross-cultural learning

ExamplesCoca-Cola

Nestlé

International Strategy

Import/export or license existing

product

ExamplesU.S. Steel

Harley Davidson

Multidomestic StrategyUse existing

domestic model globallyFranchise, joint ventures,

subsidiaries

ExamplesHeinz The Body ShopMcDonald’s Hard Rock Cafe

Thank You

Questions? ?