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Alex Hill and Terry Hill

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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? DIRECTION WHAT to do IMPLEMENTATION HOW to do it

7

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 Levels of strategy CORPORATE BUSINESS UNIT FUNCTIONAL

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

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

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

15 Levels of strategy Functional

16 Levels of strategy Functional

17

18

19 Developing a strategy

20 Developing a strategy

21 Developing a strategy

22 Developing a strategy

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
Get and keep a service or product on a customer’s SHORTLIST ORDER-WINNERS 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 MARKET POSITIONING OF BOTTLED WATER
CASE 2.1 MARKET POSITIONING OF BOTTLED WATER 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?

29 MARKET POSITIONING OF BOTTLED WATER CASE 2.1 Question Answer
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 Order-winners and qualifiers (e.g. price, delivery speed) that WIN and RETAIN customers Need to ATTRACT, WIN and RETAIN customers

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

31 CUSTOMER SEGMENTATION IN THE ELECTRICITY INDUSTRY Question Answer
CASE 2.2 CUSTOMER SEGMENTATION IN THE ELECTRICITY INDUSTRY Question Answer 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 Developing a strategy Dinner Rush Le Mans Modern Times (1971) (2000)
Understanding customer requirements Dinner Rush (2000) Le Mans (1971) Modern Times (1936) At this point you could illustrate strategy development using clips from three classic films Le Mans (1971) directed by Lee H. Katzin, starring Steve McQueen - stratgey developed in a pitstop Modern Times (1936) directed by and starring Charlie Chaplin - strategy used in factory Dinner rush (2000) directed by Bob Giraldi, starring Danny Aiello - strategy in a restaurant setting Pit stop Factory Restaurant

34 Developing a strategy Alternative approaches Film clip Pit 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 Pull out points above through discussion… Make MONEY Produce GOOD FOOD

35 Developing a strategy Alternative approaches Film clip Factory 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 clip Restaurant 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

37 A recap of the operations process is valuable at this point

38 Developing a strategy Operations process Operations process Pit stop
Factory Restaurant TRANSFORMED resources Materials Information Customers TRANSFORMING resources Facilities Staff OUTPUTS Goods Services This table can be used to frame a discussion, or printed for students to fill in during the clips

39 Key market requirements
Developing a strategy Understanding customer requirements Key market requirements Pit stop Factory Restaurant ORDER-WINNERS QUALIFIERS This table can be used to frame a discussion, or printed for students to fill in during the clips

40 Developing a strategy What is the OPERATIONS process?
What are the key MARKET requirements? [play the clips from Le Mans, Modern Times and Dinner Rush] While students are watching the clips, ask them to think about the questions shown above

41 Developing a strategy Operations process Operations process Pit stop
Factory Restaurant TRANSFORMED resources Materials Information Customers TRANSFORMING resources Facilities Staff OUTPUTS Goods Services

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

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

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? DIRECTION WHAT to do IMPLEMENTATION HOW to do it

48

49

50 INTEGRATING MARKETING AND OPERATIONS AT ALDI
CASE 2.3 INTEGRATING MARKETING AND OPERATIONS AT ALDI What is Aldi’s MARKETING strategy? What is Aldi’s OPERATIONS strategy? How has it INTEGRATED these two strategies?

51 INTEGRATING MARKETING AND OPERATIONS AT ALDI Question Answer
CASE 2.3 INTEGRATING MARKETING AND OPERATIONS AT ALDI Question Answer What is Aldi’s MARKETING strategy? Product RANGE Limited range Mainly own-label products What is Aldi’s 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

52 Developing a strategy The process of strategy development

53

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

60 OPERATIONS DEVELOPMENTS AT BENETTON
CASE 2.4 OPERATIONS DEVELOPMENTS AT BENETTON Market OW and Q OPERATIONS 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 Product RANGE PRICE TIME to market Delivery SPEED

61 Alternative APPROACHES
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 CORPORATE BUSINESS UNIT
FUNCTIONAL

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

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

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

66 Developing a strategy The Great Escape Big Night (1996) (1963)
Alternative approaches The Great Escape (1963) Big Night (1996) At this point you could use clips from two films to demonstrate approaches to developing a strategy in two different settings: The Great Escape (1963) directed by John Sturges, starring Steve Mcqueen Big Night (1996) directed by Campbell Scott and Stanley Tucci, starring Tony Shalhoub and Stanley Tucci Prison Camp Restaurant

67 Developing a strategy Alternative approaches Film clip Prison Camp
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 clip Restaurant 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 don’t 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 Aspect Prison Camp
Restaurant Strategic OBJECTIVES STRATEGY for meeting these objectives PROCESS of developing and implementing strategy This table can be used as the framework for class discussion and/or printed as a handout for students to fill in while watching the clips

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? Ask students to think about the three points above while watching the clip from each film

71 Developing a strategy Alternative approaches Aspect Prison Camp
Restaurant Strategic OBJECTIVES STRATEGY for meeting these objectives PROCESS of developing and implementing strategy

72 Developing a strategy Alternative approaches Aspect Prison Camp
Restaurant 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

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? LEVELS of strategy Strategy DEVELOPMENT
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 1 Strategy embodies the aspect(s) of: a)
Direction (what to do) b) Implementation (how to do it) c) Both a) and b) Pull out points above through discussion… Make MONEY Produce GOOD FOOD

78 Revision questions 1 Strategy embodies the aspect(s) of: a)
Direction (what to do) b) Implementation (how to do it) c) Both a) and b) Pull out points above through discussion… Make MONEY Produce GOOD FOOD

79 Revision questions 2 The 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) Pull out points above through discussion… Make MONEY Produce GOOD FOOD

80 Revision questions 2 The 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) Pull out points above through discussion… Make MONEY Produce GOOD FOOD

81 Revision questions 3 A 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 Pull out points above through discussion… Make MONEY Produce GOOD FOOD

82 Revision questions 3 A 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 Pull out points above through discussion… Make MONEY Produce GOOD FOOD

83 Revision questions 4 Discussion 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 Pull out points above through discussion… Make MONEY Produce GOOD FOOD

84 Revision questions 4 Discussion 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 Pull out points above through discussion… Make MONEY Produce GOOD FOOD

85 Revision questions 5 Market order-winners and qualifiers are: a)
Time specific b) Market specific c) Both a) and b) Pull out points above through discussion… Make MONEY Produce GOOD FOOD

86 Revision questions 5 Market order-winners and qualifiers are: a)
Time specific b) Market specific c) Both a) and b) Pull out points above through discussion… Make MONEY Produce GOOD FOOD

87 Revision questions 6 A 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 Pull out points above through discussion… Make MONEY Produce GOOD FOOD

88 Revision questions 6 A 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 Pull out points above through discussion… Make MONEY Produce GOOD FOOD

89 CASE FOR TUTORIAL APPLE


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