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Alex Hill and Terry Hill. Operations Strategy Alex Hill and Terry Hill.

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Presentation on theme: "Alex Hill and Terry Hill. Operations Strategy Alex Hill and Terry Hill."— Presentation transcript:

1 Alex Hill and Terry Hill

2 Operations Strategy Alex Hill and Terry Hill

3 Learning objectives Understand LEVELS of strategy within business Distinguish between day-to-day and strategic ROLES Identify how different levels of strategy INTERFACE with each other Appreciate importance of understanding MARKETS Understand different strategic APPROACHES DEVELOP and IMPLEMENT an operations strategy

4 Lecture outline INTRODUCTION What is STRATEGY? LEVELS of strategy within a business DEVELOPING a strategy IMPLEMENTING a strategy Critical REFLECTIONS SUMMARY

5 What is strategy? DIRECTION WHAT to do

6 What is strategy? HOW to do it IMPLEMENTATION DIRECTION WHAT to do

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8 >KEY IDEA Operations strategy concerns developing the CAPABILITIES of an organisation to reflect the NEEDS of its customers and markets

9 Levels of strategy CORPORATE

10 Levels of strategy CORPORATE BUSINESS UNIT

11 FUNCTIONAL Levels of strategy CORPORATE BUSINESS UNIT

12 Where to INVEST or DIVEST SALES REVENUE priorities Corporate DIRECTION OF TOTAL BUSINESS IMPLEMENTATION Allocation of investment FUNDS Levels of strategy

13 MARKETS in which it competes Where to GROW its business Nature of COMPETITION Relevant COMPETITIVE CRITERIA DIRECTION OF BUSINESS UNIT IMPLEMENTATION WHICH functional tasks to invest in HOW to invest in these tasks Levels of strategy Business unit

14 DIRECTION OF FUNCTION Support COMPETITIVE DIMENSIONS within a market for which it is solely or partly RESPONSIBLE Levels of strategy Functional IMPLEMENTATION Meeting competitive REQUIREMENTS Selecting APPROACHES to attain improvement goals Implement the PLAN

15 Levels of strategy Functional

16 Levels of strategy Functional

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19 Developing a strategy

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23 >KEY IDEA Understanding MARKETS is the FIRST step in strategy development

24 Developing a strategy Understanding customer requirements

25 >KEY IDEA Customer PURCHASES are not only based on the service or product specification, but also a wide RANGE of CRITERIA such as price, delivery speed and quality conformance

26 Developing a strategy Understanding customer requirements QUALIFIERS ORDER-WINNERS Get and keep a service or product on a customers SHORTLIST WIN you the order once you are on the shortlist

27 >KEY IDEA Understanding CUSTOMER requirements: AVOID general descriptions IDENTIFY and WEIGHT order-winners and qualifiers

28 CASE 2.1 MARKET POSITIONING OF BOTTLED WATER 1.Why would MARKETING place this in a beverage segment? 2.How would OPERATIONS view the market? 3.How would you use BOTH perspectives to develop a strategy?

29 CASE 2.1 MARKET POSITIONING OF BOTTLED WATER QuestionAnswer Why would MARKETING place this in a beverage segment? How would OPERATIONS view the market? How would you use BOTH perspectives to develop a strategy? Because that is how the product is CONSUMED Easy to gather CONSUMER data Easy to gather COMPETITOR data Need to ATTRACT, WIN and RETAIN customers Order-winners and qualifiers (e.g. price, delivery speed) that WIN and RETAIN customers

30 CASE 2.2 CUSTOMER SEGMENTATION IN THE ELECTRICITY INDUSTRY 1.List the MARKET dimensions used by marketing and operations 2.How would you use BOTH perspectives to develop an operations strategy?

31 CASE 2.2 CUSTOMER SEGMENTATION IN THE ELECTRICITY INDUSTRY QuestionAnswer List the MARKET dimensions used by marketing and operations How would you use BOTH perspectives to develop an operations strategy? MARKETING - size of SALES revenue –Large business - SME - Residential OPERATIONS - PROFIT margin –SME - Residential - Large business SALES REVENUE and PROFIT are both important Therefore need to focus on all THREE segments

32 >KEY IDEA All functions must be involved in the discussion on HOW to GAIN, RETAIN and GROW CUSTOMERS and MARKETS

33 FactoryRestaurantPit stop Le Mans (1971) Modern Times (1936) Dinner Rush (2000) Developing a strategy Understanding customer requirements

34 Developing a strategy Alternative approaches Film clipPit Stop Film Title Director (year) Le Mans Lee H. Katzin (1971) Clip Start Finish 00:47:40 00:50:43 What clip shows The pit crew decide to bring in the racing cars to put on new tyres that will drive better in the rain Key learning objective How an operation transforms inputs into outputs The order-winners and qualifiers for a racing pit crew

35 Developing a strategy Alternative approaches Film clipFactory Film Title Director (year) Modern Times Charles Chaplin (1936) Clip Start Finish 00:01:53 00:06:03 What clip shows Charlie Chaplin working on a production line within a factory Key learning objective How an operation transforms inputs into outputs The order-winners and qualifiers for a high volume factory producing a narrow range of standard products

36 Developing a strategy Alternative approaches Film clipRestaurant Film Title Director (year) Dinner Rush Bob Giraldi (2000) Clip Start Finish 00:58:58 01:02:44 What clip shows The chef producing a special one-off dish for a restaurant critic who is having dinner in the restaurant Key learning objective How an operation transforms inputs into outputs (and the difference between services and manufacturing) The order-winners and qualifiers for a low volume, design-led restaurant offering high levels of service

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38 Operations processPit stopFactoryRestaurant TRANSFORMED resources Materials Information Customers TRANSFORMING resources Facilities Staff OUTPUTS Goods Services Developing a strategy Operations process

39 Developing a strategy Understanding customer requirements Key market requirements Pit stopFactoryRestaurant ORDER- WINNERS QUALIFIERS

40 Developing a strategy What is the OPERATIONS process? What are the key MARKET requirements?

41 Operations processPit stopFactoryRestaurant TRANSFORMED resources Materials Information Customers TRANSFORMING resources Facilities Staff OUTPUTS Goods Services Developing a strategy Operations process

42 Pit stopFactoryRestaurant TRANSFORMED resources Materials Information Customers TRANSFORMING resources Facilities Staff OUTPUTS Goods Services Car Rain tyres Raw material Pit stop Mechanics Spanners Car with rain tyres Factory Production line Operator Spanner Widget Raw material Order details Customer Restaurant Kitchen Equipment Chef Waiter Food Drink Service Developing a strategy Operations process

43 Developing a strategy Understanding customer requirements Key market requirements Pit stopFactoryRestaurant ORDER- WINNERS Delivery speed Price Product design Service design QUALIFIERS Delivery reliability Quality conformance Price Quality conformance Delivery reliability Price

44 Developing a strategy Understanding customer requirements

45 >KEY IDEA Understanding CUSTOMER requirements: AVOID general descriptions IDENTIFY and WEIGHT order-winners and qualifiers

46 What is strategy? DIRECTION WHAT to do

47 What is strategy? HOW to do it IMPLEMENTATION DIRECTION WHAT to do

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50 CASE 2.3 INTEGRATING MARKETING AND OPERATIONS AT ALDI 1.What is Aldis MARKETING strategy? 2.What is Aldis OPERATIONS strategy? 3.How has it INTEGRATED these two strategies?

51 CASE 2.3 QuestionAnswer What is Aldis MARKETING strategy? Product RANGE Limited range Mainly own-label products What is Aldis OPERATIONS strategy? LAYOUT Inexpensive lighting and basing units Use manufacturers own packaging How has it INTEGRATED these two strategies? Both strategies FOCUS on: Increasing volume Reducing costs INTEGRATING MARKETING AND OPERATIONS AT ALDI

52 Developing a strategy The process of strategy development

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54 Developing a strategy The process of strategy development

55 Developing a strategy The process of strategy development

56 >KEY IDEA Understanding MARKETS is DIFFICULT Identifying SOLUTIONS is EASY Making it HAPPEN is DIFFICULT

57 Developing a strategy The process of strategy development

58 Developing a strategy The process of strategy development

59 CASE 2.4 OPERATIONS DEVELOPMENTS AT BENETTON 1.What are Benettons market ORDER- WINNERS and QUALIFIERS? 2.How has it developed its OPERATIONS to support the market? Benetton Group - Photo: Glenn Dearing

60 CASE 2.4 Market OW and QOPERATIONS support Use of MATERIALS Matching TRENDS CONTINUOUS product development 5 COLLECTIONS per year OUTSOURCING to low-cost countries Process INVESTMENT – robotised logistics Fast ADAPTATION to changing market trends Integrating SUPPLY CHAIN Integrated SUPPLY CHAIN – mainly in-house Directly operated STORES Product DESIGN OPERATIONS DEVELOPMENTS AT BENETTON Product RANGE PRICE TIME to market Delivery SPEED

61 Developing a strategy The process of strategy development Alternative APPROACHES TOP-DOWN vs BOTTOM-UP MARKET-DRIVEN vs MARKET- DRIVING

62 Developing a strategy Top-down approach FUNCTIONAL CORPORATE BUSINESS UNIT

63 Day-to-day EXPERIENCES and LEARNING Consolidated into formal STRATEGY Developing a strategy Bottom-up approach EMERGING sense of what strategy should be

64 Developing a strategy Market-led orientation MARKET MARKET DRIVES OPERATIONS OPERATIONS

65 Developing a strategy Market-driving orientation MARKET OPERATIONS DRIVES MARKET OPERATIONS

66 Developing a strategy Alternative approaches Restaurant Prison Camp The Great Escape (1963) Big Night (1996)

67 Developing a strategy Alternative approaches Film clipPrison Camp Film Title Director (year) The Great Escape John Sturges (1963) Clip Start Finish 00:32:05 00:35:12 What clip shows The British general (Richard Attenborough) arriving at the prison camp and explaining to his men that they wish to escape and letting each of them know the role they will play in impementing this strategy Key learning objective How to develop and implement strategy using a planned and directive approach

68 Developing a strategy Alternative approaches Film clipRestaurant Film Title Director (year) Big Night Campbell Scott and Stanley Tucci (1996) Clip Start Finish 00:12:12 00:14:20 What clip shows The two brothers who own the restaurant debating if they should keep risotto on the restaurant menu as it is expensive to make and customers dont seem to like it Key learning objective How to develop and implement strategy using an emergent approach The difference between market-led and market- driving strategies

69 Developing a strategy Alternative approaches AspectPrison CampRestaurant Strategic OBJECTIVES STRATEGY for meeting these objectives PROCESS of developing and implementing strategy

70 Developing a strategy Alternative approaches What are their strategic OBJECTIVES? What is their STRATEGY to achieve these objectives? What APPROACH has been used to develop and implement this strategy?

71 Developing a strategy Alternative approaches AspectPrison CampRestaurant Strategic OBJECTIVES STRATEGY for meeting these objectives PROCESS of developing and implementing strategy

72 AspectPrison CampRestaurant Strategic OBJECTIVES ESCAPE from the camp Get 250 men out Make MONEY Produce GOOD FOOD STRATEGY for meeting these objectives Create SMOKE SCREEN DIG 3 TUNNELS PRIMO Market-driving Resource-based CRISTIANO Market-driven Market-led PROCESS of developing and implementing strategy TOP-DOWN PLANNED BOTTOM UP EMERGENT Developing a strategy Alternative approaches

73 Critical reflections Operations helps gain FIRST sale whilst also securing the SECOND sale MARKET or marketing-led? Moving to a BUSINESS-LEVEL strategic debate

74 Critical reflections

75 >KEY IDEA Operations help GAIN first sale Whilst SECURING second sale

76 Summary What is STRATEGY? –Direction and Implementation LEVELS of strategy –Corporate - Business - Functional Strategy DEVELOPMENT –Understand market –Develop capability to support or drive market Market REQUIREMENTS –Order-winners and Qualifiers APPROACH to developing strategy –Top down vs Bottom up –Market-led vs Resource-based

77 Revision questions 1Strategy embodies the aspect(s) of: a)Direction (what to do) b)Implementation (how to do it) c)Both a) and b)

78 Revision questions 1Strategy embodies the aspect(s) of: a)Direction (what to do) b)Implementation (how to do it) c)Both a) and b)

79 Revision questions 2The strategic role of executives concerns: a)Managing and controlling the range of activities that fall within their area of responsibility b)How to support the competitive criteria in agreed markets and determining development and investment priorities c)Both a) and b)

80 Revision questions 2The strategic role of executives concerns: a)Managing and controlling the range of activities that fall within their area of responsibility b)How to support the competitive criteria in agreed markets and determining development and investment priorities c)Both a) and b)

81 Revision questions 3A market-driven strategy is based on: a)Exploiting the potential of existing resources and capabilities within the business b)Identifying where advantage can be gained by outperforming current market norms on one or more competitive driver c)Understanding current and future markets and their competitive drivers

82 Revision questions 3A market-driven strategy is based on: a)Exploiting the potential of existing resources and capabilities within the business b)Identifying where advantage can be gained by outperforming current market norms on one or more competitive driver c)Understanding current and future markets and their competitive drivers

83 Revision questions 4Discussion and agreement about current and future markets: a)Is the sole responsibility of the marketing function in a business b)Is the responsibility of all functions within a business c)Is a corporate, not a functional responsibility

84 Revision questions 4Discussion and agreement about current and future markets: a)Is the sole responsibility of the marketing function in a business b)Is the responsibility of all functions within a business c)Is a corporate, not a functional responsibility

85 Revision questions 5Market order-winners and qualifiers are: a)Time specific b)Market specific c)Both a) and b)

86 Revision questions 5Market order-winners and qualifiers are: a)Time specific b)Market specific c)Both a) and b)

87 Revision questions 6A typical area of improvement if delivery speed is a market order-winner is: a)Reducing costs in all areas particularly materials and overheads b)Reviewing the elements of the operations process c)Reviewing current scheduling methods

88 Revision questions 6A typical area of improvement if delivery speed is a market order-winner is: a)Reducing costs in all areas particularly materials and overheads b)Reviewing the elements of the operations process c)Reviewing current scheduling methods

89 CASE FOR TUTORIAL APPLE


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