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Operations Management Chapter 1 – Operations and Productivity11 Chapter 2 Operations Strategy in a Global Environment.

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Presentation on theme: "Operations Management Chapter 1 – Operations and Productivity11 Chapter 2 Operations Strategy in a Global Environment."— Presentation transcript:

1 Operations Management Chapter 1 – Operations and Productivity11 Chapter 2 Operations Strategy in a Global Environment

2 Outline Global Company Profile: Boeing Global Company Profile: Boeing A Global View of Operations A Global View of Operations Cultural and Ethical Issues Cultural and Ethical Issues Developing Missions And Strategies Developing Missions And Strategies Mission Mission Strategy Strategy

3 Outline – Continued Achieving Competitive Advantage Through Operations Achieving Competitive Advantage Through Operations Competing On Differentiation Competing On Differentiation Competing On Cost Competing On Cost Competing On Response Competing On Response Ten Strategic OM Decisions Ten Strategic OM Decisions

4 Outline – Continued Issues In Operations Strategy Issues In Operations Strategy Research Research Preconditions Preconditions Dynamics Dynamics Strategy Development And Implementation Strategy Development And Implementation Identify Critical Success Factors Identify Critical Success Factors Build and Staff the Organization Build and Staff the Organization Integrate OM with Other Activities Integrate OM with Other Activities

5 Outline – Continued Global Operations Strategy Options Global Operations Strategy Options International Strategy International Strategy Multidomestic Strategy Multidomestic Strategy Global Strategy Global Strategy Transnational Strategy Transnational Strategy

6 Global Strategies Boeing – sales and production are worldwide Boeing – sales and production are worldwide Benetton – moves inventory to stores around the world faster than its competition by building flexibility into design, production, and distribution Benetton – moves inventory to stores around the world faster than its competition by building flexibility into design, production, and distribution Sony – purchases components from suppliers in Thailand, Malaysia, and around the world Sony – purchases components from suppliers in Thailand, Malaysia, and around the world

7 Global Strategies Volvo – considered a Swedish company but it is controlled by an American company, Ford. The current Volvo S40 is built in Belgium and shares its platform with the Mazda 3 built in Japan and the Ford Focus built in Europe. Volvo – considered a Swedish company but it is controlled by an American company, Ford. The current Volvo S40 is built in Belgium and shares its platform with the Mazda 3 built in Japan and the Ford Focus built in Europe. Haier – A Chinese company, produces compact refrigerators (it has one-third of the US market) and wine cabinets (it has half of the US market) in South Carolina Haier – A Chinese company, produces compact refrigerators (it has one-third of the US market) and wine cabinets (it has half of the US market) in South Carolina

8 Some Multinational Corporations % Sales% Assets OutsideOutside HomeHomeHome% Foreign CompanyCountryCountryCountryWorkforce CiticorpUSA3446NA Colgate-USA7263NA Palmolive Dow USA6050NA Chemical GilletteUSA6253NA HondaJapan6336NA IBMUSA574751

9 Some Multinational Corporations % Sales% Assets OutsideOutside HomeHomeHome% Foreign CompanyCountryCountryCountryWorkforce ICIBritain7850NA NestleSwitzerland PhilipsNetherlands Electronics SiemensGermany51NA38 UnileverBritain & Netherlands

10 Boeing Suppliers (787) FirmCountryComponent DassaultFranceDesign and PLM software PLM software Messier-BugattiFranceLanding gear ThalesFranceElectrical power conversion system conversion system and integrated and integrated standby flight display standby flight display DiehlGermanyInterior lighting FR-HiTempUKFuel pumps and valves and valves Smiths AerospaceUKCentral computer system system

11 Boeing Suppliers (787) FirmCountryComponent BAE SYSTEMSUKElectronics Alenia AeronauticsItalyUpper center fuselage & fuselage & horizontal stabilizer horizontal stabilizer Toray IndustriesJapanCarbon fiber for wing and tail units wing and tail units Fuji Heavy JapanCenter wing box Industries Industries Kawasaki Heavy JapanForward fuselage, Industries fixed section of wing, Industries fixed section of wing, landing gear well landing gear well

12 Boeing Suppliers (787) FirmCountryComponent Teijin SeikiJapanHydraulic actuators Mitsubishi Heavy JapanWing box Industries Industries Chengdu Aircraft ChinaRudder Group Hafei AviationChinaParts

13 Reasons to Globalize Reduce costs (labor, taxes, tariffs, etc.) Reduce costs (labor, taxes, tariffs, etc.) Improve supply chain Improve supply chain Provide better goods and services Provide better goods and services Understand markets Understand markets Learn to improve operations Learn to improve operations Attract and retain global talent Attract and retain global talent Tangible Reasons Intangible Reasons

14 Reduce Costs Foreign locations with lower wage rates can lower direct and indirect costs Foreign locations with lower wage rates can lower direct and indirect costs World Trade Organization (WTC) World Trade Organization (WTC) North American Free Trade Agreement (NAFTA) North American Free Trade Agreement (NAFTA) APEC, SEATO, MERCOSUR APEC, SEATO, MERCOSUR European Union (EU) European Union (EU)

15 Improve the Supply Chain Locating facilities closer to unique resources Locating facilities closer to unique resources Auto design to California Auto design to California Athletic shoe production to China Athletic shoe production to China Perfume manufacturing in France Perfume manufacturing in France

16 Provide Better Goods and Services Objective and subjective characteristics of goods and services Objective and subjective characteristics of goods and services On-time deliveries On-time deliveries Cultural variables Cultural variables Improved customer service Improved customer service

17 Understand Markets Interacting with foreign customer and suppliers can lead to new opportunities Interacting with foreign customer and suppliers can lead to new opportunities

18 Learn to Improve Operations Remain open to the free flow of ideas Remain open to the free flow of ideas General Motors partnered with a Japanese auto manufacturer to learn General Motors partnered with a Japanese auto manufacturer to learn

19 Attract and Retain Global Talent Offer better employment opportunities Offer better employment opportunities Better growth opportunities and insulation against unemployment Better growth opportunities and insulation against unemployment Relocate unneeded personnel to more prosperous locations Relocate unneeded personnel to more prosperous locations Incentives for people who like to travel Incentives for people who like to travel

20 Cultural and Ethical Issues Cultures can be quite different Cultures can be quite different Attitudes can be quite different towards Attitudes can be quite different towards Punctuality Punctuality Lunch breaks Lunch breaks Environment Environment Intellectual property Intellectual property Thievery Thievery Bribery Bribery Child labor Child labor

21 Developing Missions and Strategies Mission statements tell an organization where it is going The Strategy tells the organization how to get there

22 Mission Mission - where are you going? Mission - where are you going? Organization s purpose for being Organization s purpose for being Answers What do we provide society? Answers What do we provide society? Provides boundaries and focus Provides boundaries and focus

23 Hard Rock Caf é Our Mission: To spread the spirit of Rock n Roll by delivering an exceptional entertainment and dining experience. We are committed to being an important, contributing member of our community and offering the Hard Rock family a fun, healthy, and nurturing work environment while ensuring our long-term success.

24 Benefit to Society Mission Factors Affecting Mission Philosophy and Values Profitability and Growth Environment CustomersPublic Image

25 Strategic Process MarketingOperations Finance/ Accounting Functional Area Missions Organization s Mission

26 Strategy Action plan to achieve mission Action plan to achieve mission Functional areas have strategies Functional areas have strategies Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses

27 Strategies for Competitive Advantage Differentiation – better, or at least different Differentiation – better, or at least different Cost leadership – cheaper Cost leadership – cheaper Quick response – more responsive Quick response – more responsive

28 Competing on Differentiation Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer s perception of value Safeskin gloves – leading edge products Safeskin gloves – leading edge products Walt Disney Magic Kingdom – experience differentiation Walt Disney Magic Kingdom – experience differentiation Hard Rock Cafe – theme experience Hard Rock Cafe – theme experience

29 Competing on Cost Provide the maximum value as perceived by customer. Does not imply low quality. Southwest Airlines – secondary airports, no frills service, efficient utilization of equipment Southwest Airlines – secondary airports, no frills service, efficient utilization of equipment Wal-Mart – small overheads, shrinkage, distribution costs Wal-Mart – small overheads, shrinkage, distribution costs Franz Colruyt – no bags, low light, no music, doors on freezers Franz Colruyt – no bags, low light, no music, doors on freezers

30 Competing on Response Flexibility is matching market changes in design innovation and volumes Flexibility is matching market changes in design innovation and volumes Institutionalization at Hewlett-Packard Institutionalization at Hewlett-Packard Reliability is meeting schedules Reliability is meeting schedules German machine industry German machine industry Timeliness is quickness in design, production, and delivery Timeliness is quickness in design, production, and delivery Johnson Electric, Bennigan s, Motorola Johnson Electric, Bennigan s, Motorola

31 OM s Contribution to Strategy Product Quality Process Location Layout Human resource Supply-chain Inventory Scheduling Maintenance FLEXIBILITY Sony s constant innovation of new products ………………………………....Design HP s ability to follow the printer market ……………………………… Volume Southwest Airlines No-frills service …….. …..LOW COST DELIVERY Pizza Hut s five-minute guarantee at lunchtime ………………….. ….. ……..Speed Federal Express s absolutely, positively on time ……………………….. ….Dependability QUALITY Motorola s automotive products ignition systems …………………………......Conformance Motorola s pagers ……………………….. ….Performance IBM s after-sale service on mainframe computers ……....AFTER-SALE SERVICE Fidelity Security s broad line of mutual funds ………….BROAD PRODUCT LINE OperationsSpecificCompetitive DecisionsExamplesStrategy UsedAdvantage Response (Faster) Cost leadership (Cheaper) Differentiation (Better)

32 Strategic Options to Gain a Competitive Advantage 28% - Operations Management 18% - Marketing/distribution 17% - Momentum/name recognition 16% - Quality/service 14% - Good management 4% - Financial resources 4% - Financial resources 3% - Other 3% - Other

33 Elements of Operations Management Strategy Low-cost product Low-cost product Product-line breadth Product-line breadth Technical superiority Technical superiority Product characteristics/differentiation Product characteristics/differentiation Continuing product innovation Continuing product innovation Low-price/high-value offerings Low-price/high-value offerings Efficient, flexible operations adaptable to consumers Efficient, flexible operations adaptable to consumers Engineering research development Engineering research development Location Location Scheduling Scheduling

34 Strategy Development Process Determine Corporate Mission State the reason for the firm s existence and 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 service, broad product lines. Environmental Analysis Identify the strengths, weaknesses, opportunities, and threats. Understand the environment, customers, industry, and competitors.

35 Four International Operations Strategies Cost Reduction Considerations HighLow HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation) Import/export or license existing product Examples U.S. Steel Harley Davidson International Strategy

36 Four International Operations Strategies Cost Reduction Considerations HighLow HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation) International Strategy Import/export or license existing product Examples U.S. Steel Harley Davidson

37 International Strategy Import/export or license existing product Examples U.S. Steel Harley Davidson Four International Operations Strategies Cost Reduction Considerations HighLow HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation) Standardized product Economies of scale Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator Global Strategy

38 Four International Operations Strategies Cost Reduction Considerations HighLow HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation) Standardized product Economies of scale Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator Global Strategy International Strategy Import/export or license existing product Examples U.S. Steel Harley Davidson

39 Standardized product Economies of scale Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator Global Strategy International Strategy Import/export or license existing product Examples U.S. Steel Harley Davidson Four International Operations Strategies Cost Reduction Considerations HighLow HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation) Use existing domestic model globally Franchise, joint ventures, subsidiaries Examples Heinz McDonald s The Body Shop Hard Rock Cafe Multidomestic Strategy

40 Four International Operations Strategies Cost Reduction Considerations HighLow HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation) Standardized product Economies of scale Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator Global Strategy International Strategy Import/export or license existing product Examples U.S. Steel Harley Davidson Multidomestic Strategy Use existing domestic model globally Franchise, joint ventures, subsidiaries Examples HeinzThe Body Shop McDonald sHard Rock Cafe

41 International Strategy Import/export or license existing product Examples U.S. Steel Harley Davidson Multidomestic Strategy Use existing domestic model globally Franchise, joint ventures, subsidiaries Examples HeinzThe Body Shop McDonald sHard Rock Cafe Standardized product Economies of scale Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator Global Strategy Four International Operations Strategies Cost Reduction Considerations HighLow HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation) Move material, people, ideas across national boundaries Economies of scale Cross-cultural learning Examples Coca-Cola Nestl é Transnational Strategy

42 Four International Operations Strategies Cost Reduction Considerations HighLow HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation) Standardized product Economies of scale Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator Global StrategyTransnational Strategy Move material, people, ideas across national boundaries Economies of scale Cross-cultural learning Examples Coca-Cola Nestl é International Strategy Import/export or license existing product Examples U.S. Steel Harley Davidson Multidomestic Strategy Use existing domestic model globally Franchise, joint ventures, subsidiaries Examples HeinzThe Body Shop McDonald sHard Rock Cafe


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