Ch2 Operations Strategy and Competitiveness
Transcript of Ch2 Operations Strategy and Competitiveness
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Chapter 2
Operations Strategy and Competitiveness
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Strategic Planning
A process for getting from where the company is today to where company would like to be in the future.
A process for getting from “here” to “there.”
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Strategic Planning Steps
Preparing a mission statement Creating a vision Setting goals Formulating strategies Designing tactics Evaluating process and taking
corrective action Measuring results or outcomes
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Strategic Planning Steps
Mission What is our business? (Who we are?) Focus is on “today” (Here!)
Vision
What we hope to be.
Focus is on “future” (There!)
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Strategic Planning Steps
Goals What we must do to achieve vision.
Should be measurable.
Strategies In broad terms, what must we do to
achieve goal? Does not say how.
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Strategic Planning Steps Depends on opportunities and threats
Conduct environmental scan Also depends on companies strengths
(core competencies) and weakness Conducting an environmental scan
and identifying companies strengths and weakness is a SWOT analysis.
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SWOT
Internal S = StrengthsW=
Weakness
ExternalO =
OpportunitiesT = Threats
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Strategic Planning Steps
Tactics What must we do to make strategies
work? Evaluation and corrective action
Are tactic working? Are they moving you closer to achieving
goal? If not, take corrective action by changing
tactics.
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Strategic Planning Steps
Outcome Outcome of strategic planning process Tells us if strategic planning process was
successful. Was goal was achieved?
If not, repeat.
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Example 1: Strategic PlanMission Sue is a 17 yr. old high school
senior
Vision Be successful in business
Goal Become a CFO of a major co. at 35
Strategies Get a business degree
Tactics Go to CSUN, major in Finance, get internship with Fidelity Investments, become president of SFA, get 3.8 or better GPA
Evaluation/Corrective action
Are tactics working?
Outcome Position at age 35
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Example 2: Strategic PlanMission Ed is a 42 yr. old overweight
male
Vision Look better, feel better
Goal Lose 80 lbs. in 6 mos.
Strategies Diet, exercise
Tactics Go on Jenny Craig diet, join 24 Hr. Fitness Center, get a trainer, go to gym 5 days/wk.
Evaluation/Corrective action
Track weight loss weekly; adjust tactics if necessary
Outcome Weight lost at end of 6 mos.
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Example 3: Strategic PlanMission We are in business of selling
men’s dress shoes in SFV
Vision Expand market area to include So. Ca.
Goal Capture 30% of So. Ca. market in 1 yr.
Strategies Expand product line, increase marketing effort
Tactics Carry women’s shoes; carry more shoe lines including athletic shoes and sandals; Advertise in major newspapers.
Evaluation/Corrective action
Are tactics working?
Outcome Market share 1 year from now
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Starbuck’s Strategic Plan
Mission statement 'Establish Starbucks as the premier purveyor of
the finest coffee in the world while maintaining our uncompromising principles while we grow.‘
What’s wrong with Starbuck’s mission statement?
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Starbuck’s Strategic Plan
Goal To establish Starbuck’s as the most
recognized and respected brand in the world.
What is requirement that goal should meet?
Does Starbuck’s goal meet it?
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Starbuck’s Strategic Plan
To achieve this goal, the Starbuck’s plans to rapidly expand its retail operations, grow its specialty sales and other
operations, and selectively pursue opportunities to
leverage the Starbuck’s brand through the introduction of new products and
the development of new distribution channels.
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Starbuck’s Strategic Plan
Are these steps strategies or tactics?
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Answer
They are Strategies - board statement of what company will do to achieve goals, but doesn’t say how.
Tactics would tell us, for example, how the company plans to expand retail operations. For example, open more retail stores in
airports and malls.
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FedEx’s Mission
FedEx provides access to a growing global marketplace through a network of supply chain, transportation, business and related information services.
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Lexus has revolutionized the luxury motoring experience through its passionate commitment to the finest products and the most satisfying automobile ownership experience. We vow to value the customer as an important individual; to do things right the first time; and to always exceed expectations. We brought together these principles in the Lexus Covenant, which inspires our dealers and associates to treat customers as they would treat guests and to go to any lengths to serve them better.
Lexus’ Mission
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More on Lexus
“In order to make certain that a Lexus is a Lexus no matter where it is built, the entire workforce at Cambridge was trained to follow the Passionate Pursuit of Perfection that drives Lexus associates worldwide.”
Is there any connection between Lexus and McDonald’s?
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CSUN College of Business/Econ Mission The College of Business and Economics at
California State University, Northridge is dedicated to educating the leaders of tomorrow.
By offering a challenging curriculum, smaller class sizes, state-of-the-art facilities, and nationally recognized programs, the College offers a truly unique educational experience.
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Developing an Operations Strategy Operations Strategy is a plan for using
the operational capabilities of a company to decide how it will compete.
Will it compete on Price, Quality, Time, Flexibility?
One, some or all?
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Competing on Price? Offering product at a lower price
relative to competition Works if there are many competitors
offering same product or service. If you of a product with a high degree
of customization, does it make sense for you to compete on price?
Must also have lower ??? relative to competitors.
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Competing on Quality? Quality of product Quality of service Both Does competing on quality mean
that a company can’t compete on price because it, if it offers better quality, it will charge a higher price?
Depends on how quality affects ??? If it increases ????, yes. If it decreases ???, not necessarily.
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Competing on Time? Time/speed one of most important
competition priorities
Time related issues involve Rapid delivery:
Focused on shorter time between order
placement and delivery
On-time delivery: Deliver product exactly when needed every
time
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Competing on Flexibility?
Product flexibility: Easily switch production from one item to
another Easily customize product/service to meet
specific requirements of a customer
Volume flexibility: Ability to ramp production up and down to
match market demands
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Measuring Productivity
Productivity = Output
Inputs
Productivity is a measure of how efficiently inputs are converted to output.
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Measuring Productivity
Partial measures output/(single input)
Multi-factor measures Uses some but not all inputs output/(multiple inputs)
Total measure uses all inputs output/($ value of all inputs)
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Measures of ProductivityMeasures of Productivity
Partial Output Output Output
measures Labor Machine Energy
Multifactor Output Output
measures Labor + Machine Labor + Capital + Energy
Total Goods or Services Produced
measure $ value of all inputs used to produce them
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Units of output per kilowatt-hourDollar value of output per kilowatt-hour
Energy Productivity
Machine Productivity
Labor Productivity
Examples of Partial Productivity Examples of Partial Productivity MeasuresMeasures
Units of output per labor-hourDollar value of output per labor-hour
Units of output per machine-hourDollar value of output per machine-hour
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Numerical Example
Output Labor Machine
Units 500 x x
Hours x 26 6
Cost/unit x $8 $3
Price/unit $15 x x
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Partial Measures
hrs.Labor
Produced UnitstyProductiviLabor
3.1926
500tyProductiviLabor
Explain meaning?
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Partial Measures
hrs.Labor
Output of ValueDollar tyProductiviLabor
46.288$hrs. 26
$7,500
hrs. 26
$15/unit x 500tyProductiviLabor
Explain meaning?
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Partial Measures
cost/hr.)(Labor x hrs.)(Labor
Produced Units
costLabor
Produced UnitstyProductiviLabor
4.2$8 x 26
50tyProductiviLabor
Explain meaning?
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hrs. Machine
Produced UnitstyProductivi Machine
Partial Measures
3.836
500tyProductivi Machine
Explain meaning?
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Multi-factor
cost/hr.)(Labor x hrs.)(Labor cost/hr.) (Machine x hrs.) (Machine
Produced Units
CostLabor Cost Machine
Produced UnitsMFP
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21.2
$8 x 26 $3 x 6
500
cost/hr.)(Labor x hrs.)(Labor cost/hr.) (Machine x hrs.) (Machine
Produced UnitsMFP
Multi-factor
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Measuring Productivity
Measure Outputs Inputs
Partial Units or dollars
Units or dollars
Multi-factor Units or dollars
Dollars
Total Units or dollars
Dollars
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Summary Output in units/Input in hrs. = Output
per input hour Output in $/Input in hrs. = X
Produced output worth $X per input hr. Output in units/Input in $ = Y
Produced Y units per $ spent on input Output in $/Input in $ = Z
Produced Z units per $ spent on input
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Bottleneck Operation
SandingMachine
SandingMachine PolishingPolishing
50 units/hr
30 units/hr
Bottleneck Bottleneck operationoperation
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Improving ProductivityEliminate bottleneck operationsEliminate non-value added stepsUse improved technology Improve quality
Less rework More good units produced the first time Productivity should measure number of good
units produced the first time