An explanation of Operations Strategy and Competitiveness. It is related to Operation Management subject.

1. Unit 2: Operations Strategy
and Competitiveness
Eloy Algorri Ferrero
Laura Rodríguez-León Rodríguez
Manuela Valera Ortega Group 12

2. Index
1. Global strategies
2. A global view of operations
3. Developing missions and strategies
4. Achieving competitive advantage through operations
5. Ten strategic OM decisions
6. Dynamics of operations strategy
7. Strategy development and implementation
8. Global operations strategy options
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3. 6. Dynamics of operations strategy
Before establishing and implementing a strategy, an Operation
Manager should pay attention to:
•Resource view
•Porter´s value chain analysis
•Porter´s five forces model
•Environment
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4. Resources view
Financial Physical
Human Technological
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5. Porter’s value chain analysis
How does your organization create value?
How do you change business inputs into business outputs
in such a way that they have a greater value than the
original cost of creating those outputs?
Value Created and Captured
–
Cost of Creating that Value
= Margin
The higher the margin,
the more profitable the
company is likely to be
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6. Porter’s five forces
Helpful framework for classifying and analysing the features of
the industry to help companies understand and determine the
intensity of competition and the level of profitability.
Bargaining power
of customers and
suppliers
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7. DOES IT INFLUENCE
MY COMPANY?
If there are a few substitutes, we will find consumers insensitive to
price. Our company can raise its price.
The INTENSITY OF THREAT of substitute products depends on 2
factors:
1) Propensity of buyers to replace between alternatives
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2) Price-performance characteristics

8. If you are already inside:
When an industry earns a return on capital in excess of its cost of
capital, the industry acts as a magnet, and many other companies
will want to enter = more potential competitor.
If you are outside:
Are main factors which you must take into account.
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FACTORS:
DOES IT INFLUENCE
MY COMPANY?
• Capital requirement
• Economies of scale
• Absolute cost advantages
• Product differentiation
• Access to distribution channels
• Government and legal barriers
• Retaliation by established producers

9. WHAT DOES RIVALRY TAKE
INTO ACCOUNT?
Competition among the firms within the industry.
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FACTORS:
• Concentration
• Diversity of competitors
• Product differentiation
• Excess capacity and exit barriers
• Cost condition

10. • Price sensitive
• Size of buyers
• Concentration of buyers
• Buyer information
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• Size of suppliers
• Cartelisation
• Unions

11. Enviroment
The operations managers need to understand that firms are
operating in a system with many other external factors
(legal, political, economy…).
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12. 6. Dynamics of operations strategy
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13. 6. Dynamics of operations strategy
Everything from resources, to technology or product life cycles is in flux.
Even a product which is already launched suffers huge changes.
The analysis of all these factors will help the company find
the optimum use of its resources.
COMPANY
NEED:
Dynamic
Strategies
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14. Examples:
Faster processors, new
computer languages, changing
customer preferences, increased
security issues, and the Internet
all have driven changes at Microsoft.
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15. GAME:
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SITUATION:
A military-war truck/cars company is in
trouble!!!
The war is over and the company is facing huge
difficulties…
What can the company do?

16. Solution:
FROM war cars/trucks
to luxury cars
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17. Index
1. Global strategies
2. A global view of operations
3. Developing missions and strategies
4. Achieving competitive advantage through operations
5. Ten strategic OM decisions
6. Dynamics of operations strategy
7. Strategy development and implementation
8. Global operations strategy options
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18. 7. Strategy development and implementation
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Internal Factors
External Factors
This kind of analysis helps companies achieve its objectives
and determine what obstacles must be overcome or
minimised to achieve their desired results.

19. 7. Strategy development and implementation
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STRENGTHS
·Brand reputation
·Environment-friendly vehicles
·Quality products
·Highly-skilled workforce
·Corporate social responsability
·Strong brand presence in China
OPPORTUNITIES
· Positive attitude towards
“green” vehicles
·Expand brand portfolio
·Changing customer needs
WEAKNESSES
·High cost structure
·Perception of high prices
·Too few acquisitions and
strategic partnerships
THREATS
SWOT
·Intense competition
·Rising raw material prices
·Growing Euro exchange
rate

20. 7. Strategy development and implementation
7.1. Key success factors and core competencies
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7.2. Build and staff the organisation
7.3. Integrate OM with other activities

21. 7. Strategy development and implementation
7.1. Key success factors and core competencies
A successful strategy requires determining the firm’s critical success
factors and core competencies:
Key success factors (KSFs): activities that are necessary for a firm to
achieve its goals. They can be so significant that a firm must get them right
to survive in the industry. KSFs are often necessary, but not sufficient for
competitive advantage.
Core competencies: set of unique skills, talents, and capabilities that a
firm does at a world-class standard. They allow a firm to set itself apart
and develop a competitive advantage.
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Theory

22. 7. Strategy development and implementation
7.1. Key success factors and core competencies
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Example: McDonald’s
Play area
LAYOUT Effective drive-thru
Efficient kitchen
Consistency
Quality

23. 7. Strategy development and implementation
7.1. Key success factors and core competencies
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Practice: IKEA
http://www.youtube.com/watch?v=nzGMUU-mV8o

24. 7. Strategy development and implementation
7.1. Key success factors and core competencies
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Goal: competitive advantage
The idea is to build KSFs and core competencies that
provide a competitive advantage and support
a successful strategy and mission.
A core competence may be
A subset of KSFs
A combination of KSFs

25. 7. Strategy development and implementation
7.1. Key success factors and core competencies
Operations manager’s questions
What tasks must be done
particularly well for a
given strategy to succeed?
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Which activities will help
the OM function provide
a competitive advantage?
Which elements contain the highest
likelihood of failure, and which
require additional commitment of
managerial, monetary, technological,
and human resources?

26. 7. Strategy development and implementation
7.1. Key success factors and core competencies
Strategy development process
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Analyse the
environment
• Identify
strengths,
weaknesses,
opportunities and
threats (SWOT).
• Understand the
environment,
customers,
industry and
competitors.
Determine the
corporate mission
• State the reason
for the firm’s
existence.
• Identify the
value it wishes
to create.
Form a strategy
• Build a
competitive
advantage, such
as low price,
design or volume
flexibility, quality,
quick delivery,
dependability,
after-sale
services, or broad
product lines.
http://www.youtube.com/watch?v=sU3FLxnDv_A

27. 7. Strategy development and implementation
7.1. Key success factors and core competencies
These 10 OM decisions provide an excellent initial checklist for
determining KSFs and identifying core competencies within the
operations function.
Product Human resource
Quality Supply chain
OM decisions Process Inventory
Location Schedule
Layout Maintenance
For instance, the 10 decisions, related KSFs, and core competencies can
allow a firm to differentiate its product or service.
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10 OM decisions...

28. 7. Strategy development and implementation
7.1. Key success factors and core competencies
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IKEA’s activity map

29. 7. Strategy development and implementation
Once a strategy and key success factors
have been identified, the second step is
to group the necessary activities
into an organisational structure.
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7.2. Build and staff the organisation
Theory
The third step is to staff it with
personnel who will get the job
done. The manager works with
subordinate managers to build
plans, budgets, and programs
that will successfully implement
strategies that achieve missions.

30. 7. Strategy development and implementation
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7.3. Integrate OM with other activities
Theory
The operations function is most likely to be successful when the
operations strategy is integrated with other functional areas of the
firm, such as marketing, finance, information technology, and human
resources. In this way, all of the areas support the company’s objectives.
The operations manager’s job is to implement an OM strategy,
provide competitive advantage, and increase productivity.

31. Index
1. Global strategies
2. A global view of operations
3. Developing missions and strategies
4. Achieving competitive advantage through operations
5. Ten strategic OM decisions
6. Dynamics of operations strategy
7. Strategy development and implementation
8. Global operations strategy options
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32. 8. Global operations strategy options
Nowadays many operational strategies need an international dimension:
An international business is a company that takes part in
international trade or investment.
A multinational (MNC) is a company that has an extensive international
business, owning and controlling facilities in more than one country.
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33. 8. Global operations strategy options
Top 10 multinational companies by revenues in 2014*
RETAIL PETROLEUM
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https://www.youtube.com/watch?v=159v-_JEr0s
POWER
AUTOMOBILE COMODITIES
*Source: Forbes

34. 8. Global operations strategy options
The strategies that operations managers in international business
and MNC´s can follow could be:
o International Strategy (IS)
o Multinational or Multidomestic Strategy (MS)
o Global Strategy (GS)
o Transnational Strategy (TS)
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35. 8. Global operations strategy options
The international strategy matrix:
Global
Strategy
Transnational
Strategy
LOW LR HIGH LR
International
Strategy
Multidomestic
Strategy
• Horizontal axis refers to
local responsiveness (LR)
• Vertical axis refers to
cost reduction (CR)
HIGH CR
LOW CR
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36. 8. Global operations strategy options
The strategies that operations managers in international business
and MNC´s can follow could be:
o International Strategy (IS)
o Multinational or Multidomestic Strategy (MS)
o Global Strategy (GS)
o Transnational Strategy (TS)
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37. 8. Global operations strategy options
• International strategy
– It uses exports and licenses to penetrate the global market.
– Low local responsiveness.
– Low cost advantage.
– Easiest one because of the little change in existing operations.
GS TS
IS MS
Some companies that use this
strategy:
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38. 8. Global operations strategy options
Harley Davidson international strategy:
• Their products are sold in over 67 countries all around the world.
• It is imperative for Harley-Davidson to retain its “Made in
America” high-end brand while penetrating international markets.
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39. 8. Global operations strategy options
The strategies that operations managers in international business
and MNC´s can follow could be:
o International Strategy (IS)
o Multinational or Multidomestic Strategy (MS)
o Global Strategy (GS)
o Transnational Strategy (TS)
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40. 8. Global operations strategy options
Multidomestic strategy
– Decentralised authority with substantial autonomy at each business
(subsidiaries, franchises, joint ventures…).
– High local responsiveness, maximizing a competitive response to the
local market.
– Low cost advantage. GS TS
IS MS
Some companies that use this
strategy:
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41. 8. Global operations strategy options
Heinz multidomestic strategy:
• “Let´s export the management talent and processes, not necessarily
the product, to acommodate another market”.
• They make Ketchup without garlic and onion for Indians.
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42. 8. Global operations strategy options
Hard Rock Cafe multidomestical strategy:
• All restaurants share the same type of themes while still maintaining
certain differences towards different locations.
• Average menu includes classic American food like burgers or
chicken meat and lobster but for instance in Hawaii it also includes
fresh fish or tuna sandwiches.
• Customised t-shirts.
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43. 8. Global operations strategy options
The strategies that operations managers in international business
and MNC´s can follow could be:
o International Strategy (IS)
o Multinational or Multidomestic Strategy (MS)
o Global Strategy (GS)
o Transnational Strategy (TS)
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44. 8. Global operations strategy options
Global strategy
– High degree of centralisation to seek out standarisation.
– High cost advantages and economies of scale.
– Common strategy for “customer hidden products”.
– Cross-cultural learning.
– Low local responsiveness. GS TS
IS MS
Some companies that use this
strategy:
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45. 8. Global operations strategy options
Texas Instruments global strategy:
• Is the world leader company in selling semiconductors.
• They built optimus size plants all around the world with similar
processes and a strong communication among them.
Microsoft global strategy:
• Microsoft offers the same software programs around the world and
just adjust the programs to match local languages.
Apple global strategy:
https://www.youtube.com/watch?v=MoE9XxXUatA
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46. 8. Global operations strategy options
The strategies that operations managers in international business
and MNC´s can follow could be:
o International Strategy (IS)
o Multinational or Multidomestic Strategy (MS)
o Global Strategy (GS)
o Transnational Strategy (TS)
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47. 8. Global operations strategy options
Transnational strategy
– “Material, ideas and people cross national boundaries”.
– High differentiation.
– Key activities and resources are dispersed by specialised.
– High cost advantage.
– “World companies”. GS TS
IS MS
Some companies that use this
strategy:
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48. 8. Global operations strategy options
Nestlé transnational strategy:
• Country identity is not important.
• It is legally from Swiss but 95% of its assets are located outside
Switzerland.
• 98% of its sales are made outside Switzerland.
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49. 8. Global operations strategy options
Activity: relate the following companies to the international strategy
it follows:
TRANSNATIONAL
STRATEGY
MULTIDOMESTIC
STRATEGY
GLOBAL
STRATEGY
TRANSNATIONAL
STRATEGY
MULTIDOMESTIC
STRATEGY
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50. THANKS FOR YOUR
ATTENTION!!
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