Strategic Importance of Operation Management


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Strategic Importance of Operation Management

  1. 1. By: Ot Chan Dy, BE & Msc.<br />Management Institute of Cambodia<br />1<br />Chapter 2:Operation Strategy<br />
  2. 2. After finish this chapter…<br />2<br />Define an operation strategy<br />Able to identify the 9 different competitive priorities used in operation strategies<br />Able to describe the role of operation strategy as source of competitive strength<br />
  3. 3. Contents<br />3<br />Coporate strategy<br />Market analysis<br />Modern day operation capabilities<br />Competitive priorities and capabilities <br />
  4. 4. Operation as strategic importance<br />4<br />Modern day organizations have to excel in<br />Mass customization<br />Lean production<br />Agile manufacturing<br />Customer-centric provision<br />Etc.<br />Depend on ability to actually do these things and it is reside within operations.<br />
  5. 5. Operation as strategic importance<br />5<br />Late 1990s, Toyota announceed their strategic intention to expand capacity and produce even more automobiles.<br />By 2004, Toyota had fulfilled their promise and become 2nd car producer in USA.<br />
  6. 6. Operation as strategic importance<br />6<br />Dell Computers have in-house capabilities that others have found difficult to imitate.<br />The problem with some organizations is that they don&apos;t have senior-level personnel in place who fully understand the potential that operation can have.<br />
  7. 7. Contents map<br />7<br />Coporate strategy<br />Market analysis<br />Modern day operation capabilities<br />Competitive priorities and capabilities <br />
  8. 8. Corporate strategy… <br />8<br />Corporate strategy specifies the businesses that the company will pursue, isolates new opportunities and threats in the environment, and identifies the growth objective.<br />Also address, how a firm can differentiate itself from the competition.<br />
  9. 9. Corporate strategy… <br />9<br />Choices could include producing standardized versus customized services or products or competing on the basis of cost advantage versus responsive service delivery.<br />Corporate strategy provides an overall direction that serves as the framework for carrying out all the organization&apos;s functions.<br />
  10. 10. Corporate strategy… <br />10<br />Strategic consideration:<br /> Developing corporate strategy involves three considerations: <br />Monitoring and adjusting to CHANGES<br />Identify and develop core competences<br />Develop core processes<br />
  11. 11. Corporate strategy… <br />11<br />Environmental scanning: <br />Environment CHANGES rapidly<br />Firm need to adapt to these changes<br />Scan by monitor trends in the socioeconomic environment incl. industry, marketplace, and society. <br />Scan for threats and opportunities<br />
  12. 12. Corporate strategy… <br />12<br />Environmental scanning: <br />Threats: new entrants, new products and services, low cost players, high quality product line etc.<br />Opportunities: economic trends, technological changes, new policies, living style, availability of new resources, collective power of customers and suppliers<br />
  13. 13. Corporate strategy… <br />13<br />Development of core competences:<br />Good managerial alone can not overcome changes<br />Success firms take the advantage of what they do well – unique strengths<br />Core competencies are the unique resources and strengths that an organization&apos;s management considers when formulating strategy.<br />
  14. 14. Corporate strategy… <br />14<br />Development of core competences:<br />Core competencies include:<br />Management of value<br />Capacity management<br />Workforce<br />Facilities<br />Market and financial know-how<br />System and technology<br />Integratationa and affiliation<br />
  15. 15. Corporate strategy… <br />15<br />Development of core processes:<br />Firm&apos;s core competencies should determine core processes<br />The four core processes<br />Customer relationship<br />New service/product innovation<br />Order fulfillment<br />Suppliers relationship<br />
  16. 16. Corporate strategy… <br />16<br />Development of core processes:<br />Products/Service development<br />Supplier Relationship<br />Order fulfillment<br />Customer relationship<br />
  17. 17. Corporate strategy… <br />17<br />Development of core processes:<br />Many companies have all four of these core processes esp. news paper industry.<br />Important point is every firm MUST evaluate their core competencies and chose to focus on thoses processes that provide greatest competative strengths.<br />
  18. 18. Corporate strategy… <br />18<br />Global strategies:<br />Identifying opportunities and threats today require a global prespective.<br />Global strategy may include buying foreign services or parts, combating threat from foreign competitors, or planning way to enter market beyond national boundaries.<br />
  19. 19. Corporate strategy… <br />19<br />Global strategies:<br />Two effective global strategies are:<br />Strategic alliances in the form of collaborating effort, joint venture, technology (know-how) licensing<br />Locating abroad<br />i<br />
  20. 20. McDonald vs. Jollibee in the Philippines<br />20<br />
  21. 21. Contents map<br />21<br />Coporate strategy<br />Market analysis<br />Modern day operation capabilities<br />Competitive priorities and capabilities <br />
  22. 22. Market Analysis<br />22<br />Market segmentation:<br />Market segmentation is a process of identifying groups of customers with enough in common to warrant the design and provision of services or products that larger group wants and needs.<br /> It is allow firm to incorporate the needs of customer into the design of the service or product and the processes for its production.<br />
  23. 23. Market Analysis<br />23<br />Market segmentation:<br />Characteristic use to determine market segments:<br />Demographic factors: age, income, education level, occupation, and location<br />Psychological factors: pleasure, fear, innovativeness, and boredom<br />Industry factors: specific technology, use certain materials, or participate in particular industry<br />
  24. 24. Market Analysis<br />24<br />Market segmentation:<br />Another important note: two customers may use the same product for very different reasons.<br />Identifying the key factors in each segment is the starting point in devising a customer-driven operation strategy.<br />
  25. 25. Market Analysis<br />25<br />Need Assessment:<br />What are the needs for each market segment?<br />How well competitors are addressing those needs?<br />Need assessment should include: tangible and intangible service or product attributes and features that a customer desires.<br />
  26. 26. Market Analysis<br />26<br />Need Assessment:<br />Market needs may be group as follow:<br />Service or Product Needs: price, quality, degree of customization<br />Delivery System Needs: availability, convennience, courtesy, safety, accuracy, reliability, delivery speed, and delivery dependability<br />
  27. 27. Market Analysis<br />27<br />Need Assessment:<br />Market needs may be group as follow:<br />Volume Needs: high or low vol, degree of variability in vol, and degree of predictability in vol.<br />Other Needs: reputation and num of year in business, after sale technical support, ability to invest in international financial market, competent legal services, and service or product design capability.<br />
  28. 28. 28<br />
  29. 29. Contents map<br />29<br />Coporate strategy<br />Market analysis<br />Modern day operation capabilities<br />Competitive priorities and capabilities <br />
  30. 30. Modern day operation capabilities<br />30<br />Transition of operation from craft – mass – agile<br />
  31. 31. Modern day operation capabilities<br />31<br />Craft era:<br />Low volume<br />High variety<br />Firm capable of flexibility<br />High level of skill and quality<br />
  32. 32. Modern day operation capabilities<br />32<br />Mass production:<br />High volume<br />Standard product<br />Produce at low cost without or less varieties<br />Work is largely de-skill<br />Repetitive and narrow in scope with little flexibility from workers<br />Automation is dedicated to small product range<br />Production/operation is views as low grade function in firm<br />
  33. 33. Modern day operation capabilities<br />33<br />Mass customization:<br />A firm&apos;s service or product strategy addresses certain competitive priorities that will win orders from customers.<br />One such competitive priority is variety.<br />
  34. 34. Modern day operation capabilities<br />34<br />Mass customization:<br />Considering the paint retailer! They are praticing a strategy known as mass customization.<br />Mass customization is a strategy whereby a firm&apos;s flexible processes generate a variety of service or product at reasonable low costs.<br />
  35. 35. Modern day operation capabilities<br />35<br />Mass customization:<br />Postponement:<br />A key to being mass customizer is postponing the task of differentiating a service or product for a specific customer until the last possible moment.<br />
  36. 36. Modern day operation capabilities<br />36<br />Mass customization:<br />Postponement apply to service:<br />The Ritz-Carlton Hotel, will record customers preferences and will add into its service to tailor made the preferences of the same customers when they check in again.<br />
  37. 37. Modern day operation capabilities<br />37<br />Mass customization:<br />Postponement apply to manufacturing:<br />HP postpones assemble of its printers with the country-specific power supply and packaging of appropriate manual until the last step in the process, which is perform by distributor in the region where printer is being delivered.<br />
  38. 38. Modern day operation capabilities<br />38<br />Mass customization:<br />Postponement apply to manufacturing:<br />Being a successful mass customizer such as HP may require the redesign of products or processes.<br />
  39. 39. Modern day operation capabilities<br />39<br />Mass customization:<br />Postponement apply to manufacturing:<br />Benneton, a major producer of sweater, rather than dyeing the yarn before manufacturing the sweater; it reverse this process to after and wait until there are orders (usually large retail buyers).<br />
  40. 40. 40<br />
  41. 41. 41<br />
  42. 42. 42<br />
  43. 43. 43<br />
  44. 44. Modern day operation capabilities<br />44<br />Mass customization:<br />Internet implication:<br />Internet has been a valuable technology for mass customization strategies.<br />Dell sells computer through web page that allow consumers to configure their computers from large variety of options.<br />Ford and GM also do the same<br />
  45. 45. Dell Online Store<br />45<br />
  46. 46. Mini Copper customization online<br />46<br />
  47. 47. Mass Customization<br />47<br />
  48. 48. 48<br />Watch interview with Andrew Lippman, Founder of MIT Media Lab .<br />
  49. 49. Modern day operation capabilities<br />49<br />Mass customization:<br />Internet implication:<br />Each of these ventures provide customers an enormous amount of choice in the service and product they buy.<br />But also put a lot of pressure on processes that must produce them.<br />So, flexibility and short response times are prized qualities for mass-customization processes.<br />
  50. 50. Contents map<br />50<br />Coporate strategy<br />Market analysis<br />Modern day operation capabilities<br />Competitive priorities and capabilities <br />
  51. 51. Competitive priorities and capabilities<br />51<br />
  52. 52. Competitive priorities and capabilities<br />52<br />Cost:<br />Lowering prices can increase demand for services or products BUT it is also reduces profit.<br />Low-cost operation is delivering a service or producing a product at lowest possible cost to the satisfaction of process’s external and internal customers.<br />
  53. 53. Competitive priorities and capabilities<br />53<br />Quality:<br />Quality is a dimension of a service or product that is defined by external and internal customers.<br />Two important competitive priorities:<br />Top quality<br />Consistent quality<br />
  54. 54. Competitive priorities and capabilities<br />54<br />Time:<br />Delivery speed: lead time is use to measure this delivery speed.<br />On-time delivery: meeting delivery time as promise<br />Development speed: how quick the new service or product is introduce to the market.<br />
  55. 55. Competitive priorities and capabilities<br />55<br />Flexibility:<br />Customization: is satisfying the unique needs of each customer by changing service or product design.<br />Variety: is handling wide assortment of services or products efficiently. It is different from customization because service or product is not necessary unique.<br />Volume flexibility: is accelerating or decelerating the rate of production of services or products quickly to handle large fluctuations in demand.<br />
  56. 56. Contents map<br />56<br />Coporate strategy<br />Market analysis<br />Modern day operation capabilities<br />Competitive priorities and capabilities <br />New product or service development<br />
  57. 57. New Product/Service Development<br />57<br />Essential to long term survival<br />Time change, people change, technology change  service or product must also changes<br />
  58. 58. New Product/Service Development<br />58<br />New product/service<br />Brand new<br />Major changes to existing services<br />
  59. 59. New Product/Service Development<br />59<br />Development strategies<br />Product variety: must be able to capture niches market. <br /><ul><li>Require flexible processes to offer wide variety without compromise cost, quality, or speed.</li></ul>Design: aesthetic appeal, safety, ease of use, ease of maintenance.<br /><ul><li>Compete on this require top quality & speed of introduction to the market.</li></li></ul><li>New Product/Service Development<br />60<br />Development strategies<br />Innovation: must be able to develop new technology and translate into new products.<br /><ul><li>Require significant research and development by tech engineer and ability to move fast to market.</li></ul>Service: providing value added services to complement the products.<br />
  60. 60. Smart phone innovation<br />61<br />
  61. 61. New Product/Service Development<br />62<br />Development strategies<br />Market positioning:<br />Leader: be the first to introduce new service/product<br />Middle-of-the road: wait until leader have introduced a new service or product<br />Laggard: wait and see if service or product idea catches on in the market.<br />
  62. 62. New Product/Service Development<br />63<br />Benefit from new product/service:<br />Enhancing the profitability of existing offering<br />Attract new customers to the firm<br />Improving the loyalty of existing customer<br />Open new market<br />
  63. 63. New Product/Service Development<br />64<br />Development phases:<br />Design<br />Analysis<br />Development<br />Full launch<br />
  64. 64. New Product/Service Development<br />Simple Innovation process<br />65<br />
  65. 65. New Product/Service Development<br />66<br />
  66. 66. New Product/Service Development<br />67<br />
  67. 67. New Product/Service Development<br />68<br />
  68. 68. New Product/Service Development<br />69<br />
  69. 69. New Product/Service Development<br />70<br />
  70. 70. The End<br />71<br />Q & A<br />Thanks<br />
  71. 71. Your home work<br />72<br />What is strategy exactly?<br />etIyuT§sa®sþCaGVIeGayBitR)akd?<br />