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Chapter 2

Operations Strategy and Competitiveness

The Role of Operations Strategy

Provide a plan for the operations function that makes the best use of resources. Specifies the policies and plans for using the organizations resources Supports the long-term competitive strategy (Business Strategy)

Operations function is responsible for: Managing the resources needed to produce the companys goods and services.
Operations strategy: plan that specifies the design and use of resources to support the business strategy. Includes: location, size and type of facilities available; worker skills and talents required; use of technology, special processes needed, special equipment and quality control methods Operations strategy must be aligned with the companys business strategy and enable the company to achieve its long-term plan

Importance of Operations Strategy

Relationship between the business strategy and the functional strategies

Companies often do not understand the differences between operational efficiency and strategy Operational efficiency: performing tasks well, even better than competitors Strategy: plan for competing in the marketplace Operations strategy: to ensure all tasks performed are the right tasks

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Developing a Business Strategy

A business strategy is developed after taking into many factors and following some strategic decisions: Mission: what business in the company in Environmental scanning: analyzing and understanding the market Core competencies: identifying the companys strengths

Mission
Mission: statement that answers overriding questions. 1. What business will the company be in? 2. Who will the customers be? 3. What are the expected customers attributes? 4. How will the companys basic beliefs define the business?
The mission defines the company. In order to develop a long-term plan for a business, it must first know exactly what business you are in, what customers you are serving and what your companys values are. If a company does not have a well-defined mission it may pursue business opportunities about which it has no real knowledge or that are in conflict with its current pursuits or it may miss opportunities altogether

Environmental Scanning
Environmental scanning: process of monitoring the external environment for changes and trends to determine business opportunities and threats. To remain competitive, companies have to continuously monitor their environment and be prepared to change their business strategy, or long-range plan, in light of environmental changes

Environmental scanning allows a company to identify opportunities and threats. Through environmental scanning we could see gaps in what customers need and what competitors are doing to meet those needs. A study of these gaps could reveal an opportunity for our company and we could design a plan to take advantage of it. Our company may currently be a leader in its industry, but environmental scanning could reveal competitors that are meeting customer needs better, by offering a wider array of services. In this case, environmental scanning would reveal a threat and we would have to change our strategy so as not to be left behind. Economic trends: include recession, inflation, interest rates and general economic conditions. Suppose that a company is considering obtaining a loan in order to purchase a new facility. Environmental scanning could show that interest rates are particularly favorable and that this may be a good time to go ahead with the purchase. Political trends include changes in the political climatelocal, national and internationalthat could affect a company. Strategic alliances: companies change their strategies in order to take advantage of global opportunities, such as forming partnerships with international firms

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Chapter 2

Social trends: changes in society that can have an impact on a business. Example: awareness of the dangers of smoking, which has made smoking less socially acceptable. This trend has had a huge impact on companies in the tobacco industry. In order to survive, many of these companies have changed their strategy to focus on customers overseas where smoking is still socially acceptable or have diversified into other product lines.