Service Operations Service Operations Management Management

Operations Strategy Operations Strategy

Lecture 2

Team MembersTeam MembersArzina Ackbar

Beryl Laure

Erica Rath

Karen Sham-Laye

Valentina Barra

Lecture OutlineLecture OutlineDefinition of business policy and

the role of business strategy

Definition of operations strategy

The development of an Operations Strategy

Operations Strategy Model

Characteristics of an effective operations strategy

Business Policy; Business Policy; Operations StrategyOperations Strategy

• Business Policy

• Business Strategy

• Operations Strategy

Developing a Business Developing a Business StrategyStrategy

MISSION;“To build a globally recognized brand

which, by inspiring exceptional experiences among our guests, instilling pride and integrity in our associates and enhancing both the physical and human environment in which we operate, will deliver attractive returns to our shareholders.”

ENVIRONMENTAL SCANING

CORE COMPETENCIES

Developing an Operations Developing an Operations StrategyStrategy

1. Developing a Business Strategy Environmental

Scanning: Monitoring the

business environment for market trends,

threats, and opportunities

Core Competencies:

Our unique strengths that help

us win in the marketplace

Mission: Statement that

defines what our business is; who

our clients are; and how our values

define our business

Business Strategy: Defined long-range plan

for the company

Identifying Competitive Identifying Competitive PrioritiesPrioritiesCommon priorities include:• Cost: Low production costs enables the company to

price its product below competitors- Eg: Lincoln Electric• reduced costs by $10 million a year for 10

years

• Quality: Higher performance or a more consistent product

can support a price premium- Eg: Ritz-Carlton• Every employee is empowered to satisfy a

guest’s wish • Teams at all levels set objectives and devise

quality action plans

• Time: Faster delivery or consistent on-time delivery can

support a price premium- Eg: Wal-Mart • replenishes its stock twice a week

• Flexibility: Highly customized products or volume flexibility

can support a price premium- Eg: Andersen Windows• number of products offered grew from 28,000

to 86,000• number of errors are down to 1 per 200

truckloads

Common priorities includeCommon priorities include: : cont…cont…

ExamplesExamples1. Custom Foot Shoe Store:• customer’s feet are scanned electronically

to capture measurements• custom shoes are mailed to the customer’s

home in weeks

2. Ritz-Carlton –Quality reports tracks:• guest room preventive maintenance cycles• percentage of check-ins with no waiting• time spent to achieve industry-best clean

room appearance

3. L.L. Bean • ships orders the day they are received

4. Southwest Airlines• direct flights mean no baggage transfers• $30 million annual savings in travel agent

commissions by requiring customers to contact the airline directly

5. Hewlett-Packard • produces electronic testing equipment in

five days

ExamplesExamples

Translate Priorities into Translate Priorities into DesignDesign

Factors that Influence Factors that Influence StrategyStrategy

InternalInternal External External

• Human resources • Economic conditions• Facilities and equip • Political conditions• Financial resources • Legal environment• Customers • Technology• Products and services • Competition• Technology • Markets• Suppliers

Example: British AirwaysExample: British Airways• Corporate Mission: To be the undisputed

leader in world travel

• Operations Mission: Deliver overall superior service and good value to the customer

• Distinctive Competence: Friendly, professional service

• Objectives: Well-trained, motivated employees

• Policies: Fast turnaround at counter, quick complaint responses, etc.

Characteristics of anCharacteristics of aneffective operations effective operations

strategy:strategy:• Internally and externally consistent with...

– corporate/business strategy– other functional strategies (marketing, finance)– pattern of structural/infrastructure investment– competitive environment (customers, competitors)

• Builds core operations capabilities– competitive advantages– new opportunities

• Timeless and enduring• Explicit recognition of trade-offs

– targets key performance dimensions– sets clear priorities/ promotes clarity

Understand TradeoffsUnderstand TradeoffsExample: Made-to-Order PizzaExample: Made-to-Order Pizza

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QUALITY & DESIGNFLEXIBILITY

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