Strategy

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Strategy

  1. 1. Operations Strategy <ul><li>Strategy The science and art of conducting a military campaign on a broad scale; </li></ul><ul><li>A plan or technique to achieve some end. </li></ul><ul><li>Greek : strategos = general </li></ul><ul><li>( stratos = army) + ( agein = to lead) </li></ul>
  2. 2. Corporate Strategy <ul><li>To be successful, a company must attain and sustain a competitive advantage over other companies in the same industry. </li></ul><ul><li>How? </li></ul><ul><ul><li>“ The essence of strategy is what to do and what not to do” (M. Porter, 1996). </li></ul></ul><ul><li>Mission </li></ul><ul><li>Long term Goals </li></ul><ul><li>Complementary Functional Strategy </li></ul><ul><li>Supporting Management Practices </li></ul>
  3. 3. Corporate Strategy <ul><li>Long term future </li></ul><ul><li>defines the business the firm will pursue </li></ul><ul><li>opportunities and threats </li></ul><ul><li>strengths and weakness </li></ul><ul><li>growth and business strategies </li></ul>
  4. 4. Corporate Strategy <ul><li>defines the business the firm will pursue </li></ul><ul><li>opportunities and threats </li></ul><ul><li>strengths and weakness </li></ul><ul><li>growth and business strategies </li></ul><ul><li>Mission? </li></ul><ul><li>What business are we in? </li></ul><ul><li>Who are our customers? </li></ul><ul><li>What are our beliefs? </li></ul><ul><li>How do we measure success? </li></ul>
  5. 5. Corporate Strategy <ul><li>defines the business the firm will pursue </li></ul><ul><li>opportunities and threats </li></ul><ul><li>strengths and weakness </li></ul><ul><li>growth and business strategies </li></ul><ul><li>Environmental Scanning </li></ul><ul><li>Monitor trends in </li></ul><ul><ul><li>industry (technological change and competitors) </li></ul></ul><ul><ul><li>market place ( changing customer preferences) </li></ul></ul><ul><ul><li>society (political conditions) </li></ul></ul><ul><ul><li>vital resources (availability) </li></ul></ul>
  6. 6. Corporate Strategy <ul><li>defines the business the firm will pursue </li></ul><ul><li>opportunities and threats </li></ul><ul><li>strengths and weakness </li></ul><ul><li>growth and business strategies </li></ul><ul><li>Core competencies </li></ul><ul><ul><li>workforce </li></ul></ul><ul><ul><li>facilities, location </li></ul></ul><ul><ul><li>market, financial and operational know-how </li></ul></ul><ul><ul><li>systems and technology </li></ul></ul>
  7. 7. Corporate Strategy <ul><li>defines the business the firm will pursue </li></ul><ul><li>opportunities and threats </li></ul><ul><li>strengths and weakness </li></ul><ul><li>growth and business strategies </li></ul><ul><li>Global alliances? </li></ul><ul><li>Joint venture </li></ul><ul><li>licensing of technology </li></ul><ul><li>franchise </li></ul><ul><li>off-shore production </li></ul><ul><li>logistics partnership </li></ul>
  8. 8. Strategic Positioning <ul><ul><li>Defines those positions that a firm wants to occupy in the competitive product space. </li></ul></ul><ul><li>Competitive Dimensions </li></ul><ul><ul><li>Cost </li></ul></ul><ul><ul><li>Quality </li></ul></ul><ul><ul><li>Time </li></ul></ul><ul><ul><li>Flexibility/Variety </li></ul></ul>
  9. 9. Operational Effectiveness <ul><li>process infrastructure and management for expedient production and delivery of goods and services </li></ul><ul><li>Strategic Fit </li></ul><ul><ul><li>business strategy </li></ul></ul><ul><ul><li>operational strategy </li></ul></ul><ul><ul><li>management policies </li></ul></ul><ul><li>Strategic fit means consistency between the competitive advantage that a firm seeks and the process capabilities and managerial policies that it uses to achieve that advantage. </li></ul>
  10. 10. Corporate Strategy, Competitive Priorities and Functional Inter-relationships <ul><li>Market analysis </li></ul><ul><li>segmentation </li></ul><ul><li>needs assessment </li></ul>Socioeconomic and business environment <ul><li>Corporate strategy </li></ul><ul><li>missions </li></ul><ul><li>goals </li></ul><ul><li>distinctive </li></ul><ul><li>Future directions </li></ul><ul><li>global strategy </li></ul><ul><li>new products/services </li></ul><ul><li>Competitive priorities </li></ul><ul><li>cost </li></ul><ul><li>quality </li></ul><ul><li>time </li></ul><ul><li>flexibility </li></ul><ul><li>Capabilities </li></ul><ul><li>current </li></ul><ul><li>needed </li></ul><ul><li>plans </li></ul>Functional area strategies
  11. 11. The Strategic Hierarchy <ul><li>Corporate/Business Strategy </li></ul><ul><ul><li>SWOT </li></ul></ul><ul><li>Functional Strategies </li></ul><ul><ul><li>marketing </li></ul></ul><ul><ul><ul><li>identify customers, products and competitors </li></ul></ul></ul><ul><ul><li>finance </li></ul></ul><ul><ul><ul><li>acquisition and allocation of resources </li></ul></ul></ul><ul><ul><li>operations </li></ul></ul><ul><ul><ul><li>configure and develop business processes for production and delivery of products </li></ul></ul></ul><ul><ul><ul><li>process capabilities must be aligned with desired product attributes </li></ul></ul></ul>
  12. 12. Matching Products and Process <ul><li>Hayes and Wheelwright (1979) </li></ul>
  13. 13. Developing an Operations Strategy (Terry Hill) <ul><li>1. Define corporate objectives. </li></ul><ul><li>2. Determine marketing strategies (strategic positioning). </li></ul><ul><li>3. Assess how different products qualify in their respective markets and win orders against competitors. </li></ul><ul><li>4. Establish appropriate operational processes for product manufacture and delivery. </li></ul><ul><li>5. Provide the operational infrastructure to support production/delivery. </li></ul>
  14. 14. Corporate Objectives <ul><li>Reflect nature of economy, markets, opportunity and company preference </li></ul><ul><li>Well-thought out, consistent, provide strategic direction </li></ul><ul><li>Sets boundaries and parameters against which inputs and targets can be measured </li></ul><ul><ul><li>profit vs sales and investment </li></ul></ul><ul><ul><li>absolute growth </li></ul></ul><ul><ul><li>market share growth </li></ul></ul><ul><ul><li>employee policies </li></ul></ul><ul><ul><li>environmental/social issues </li></ul></ul>
  15. 15. Marketing Strategy <ul><li>Establish market plans and control units </li></ul><ul><ul><li>bundle products with closely related market targets and similar marketing characteristics </li></ul></ul><ul><ul><li>shared marketing programmes </li></ul></ul><ul><li>Situational analysis of markets </li></ul><ul><ul><li>current and future volumes </li></ul></ul><ul><ul><li>define end-user characteristics </li></ul></ul><ul><ul><li>assess patterns of buying behaviour </li></ul></ul><ul><ul><li>examine industry practices and trends </li></ul></ul><ul><ul><li>identify key competitors and review the business relative strategic position </li></ul></ul><ul><li>Identify target markets and objectives </li></ul><ul><ul><li>in co-ordination with other functional strategies (operational support, investment needs) </li></ul></ul><ul><ul><li>product market segments: range, mix, volume </li></ul></ul><ul><ul><li>competitive priorities </li></ul></ul><ul><ul><li>innovation? Market-leader? </li></ul></ul>
  16. 16. Order Winners & Qualifiers <ul><li>Order Qualifiers are those (minimum) criteria that a company must meet to be considered as a possible supplier (e.g. ISO 9000). </li></ul><ul><li>Order winners are those criteria that wins the orders. </li></ul><ul><ul><li>Invariably due to re-directing competitive priorities </li></ul></ul><ul><li>Define relative importance (allocate weights) among order winning criteria </li></ul><ul><li>Monitor changing weights and criteria over time </li></ul>
  17. 17. Procedure for Establishing Order-winners and Qualifiers <ul><li>Separate business into different segments </li></ul><ul><li>Focus on a sample product and/or customer from each segment and focus on two future time periods </li></ul><ul><li>Provide actual and forecast sales volume </li></ul><ul><li>Identify qualifiers and order winners (with weights) for each sample product/customer </li></ul><ul><ul><li>identify qualifiers that are potential order-winners </li></ul></ul><ul><ul><li>identify qualifiers that are order-losing sensitive </li></ul></ul><ul><li>iterative </li></ul><ul><li>integrative </li></ul>
  18. 18. Process Choice <ul><li>Design and choice of operational process for manufacture and delivery of products </li></ul><ul><li>Choice should reflect the volume and order-winning criteria involved </li></ul><ul><li>reflect current and future trade-offs </li></ul>
  19. 19. Infrastructure <ul><li>Procedures,systems, controls, organizational issues </li></ul>
  20. 20. Outputs of Manufacturing Strategy <ul><li>Review of implications for manufacturing processes and infrastructure support for current and future products </li></ul><ul><li>Assess degree of match between capabilities and order-winning and order-qualifying needs </li></ul><ul><li>Continual monitor changes in match and mismatch </li></ul><ul><li>Necessary operational re-design, infrastructure investments, change schedule integrated into corporate strategy in co-ordination with other functional strategies </li></ul>
  21. 21. Strategy Drivers <ul><li>Market-driven </li></ul><ul><ul><li>starts with key competitive priorities and then develops processes to support them </li></ul></ul><ul><li>Process-driven </li></ul><ul><ul><li>starts with given set of process capabilities and then identifies market positions that can be supported </li></ul></ul><ul><li>Focussed strategy </li></ul><ul><ul><li>targeting limited but congruent set of objectives in terms of demand and supply </li></ul></ul><ul><ul><li>broad corporate strategy; focussed business strategies </li></ul></ul>
  22. 22. Historical Evolution of Strategy and Process Management <ul><li>B.C. to 1765 </li></ul><ul><ul><li>commerce limited by transportation (slow) speed and costs </li></ul></ul><ul><ul><li>artisan system, guilds </li></ul></ul><ul><li>1765: industrial revolution </li></ul><ul><ul><li>factory system </li></ul></ul><ul><ul><li>Adam Smith: division of labour, functional specialisation </li></ul></ul><ul><ul><li>James Watt: steam engine, machines replace labour </li></ul></ul><ul><li>1810 - 1913: mass production </li></ul><ul><ul><li>Eli Whitney: interchangeable parts, no more custom fitting </li></ul></ul><ul><ul><li>Ford: assembly line (Model T: 12.5 -> 1.5 hrs) </li></ul></ul><ul><li>1930: product variety </li></ul><ul><ul><li>General Motors: ‘A car for every purpose and every price’ </li></ul></ul><ul><li>1970: quality </li></ul><ul><ul><li>Toyota: kanban, TQM </li></ul></ul><ul><li>2000 : supply chain management </li></ul><ul><ul><li>delivery speed, availability, customization </li></ul></ul>
  23. 23. Operations Management as a Competitive Weapon <ul><li>Dell vs. IBM </li></ul><ul><li>HP: </li></ul><ul><ul><li>modular design </li></ul></ul><ul><ul><li>re-designed production/distribution process </li></ul></ul><ul><li>Michael Hammer: </li></ul><ul><ul><li>“ re-engineering the supply chain is the key to manufacturing success in the new millennium” </li></ul></ul><ul><ul><li>“ inventory is a substitute for information </li></ul></ul>
  24. 24. Summary <ul><li>Tool kit: </li></ul><ul><ul><li>Linear optimisation (Solver) </li></ul></ul><ul><ul><li>Integer linear optimisation (Solver) </li></ul></ul><ul><ul><li>Multi-objective </li></ul></ul><ul><ul><ul><li>goal programming (Solver) </li></ul></ul></ul><ul><ul><ul><li>AHP (Excel, ExpertChoice) </li></ul></ul></ul><ul><ul><li>Decision Analysis (TreePlan) </li></ul></ul><ul><ul><li>Queuing (Excel worksheet) </li></ul></ul><ul><ul><li>Simulation (Excel, CrystalBall) </li></ul></ul><ul><li>Implementation </li></ul><ul><li>Strategic Fit </li></ul>
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