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1 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning OPERATIONS STRATEGY CHAPTER 4 DAVID A. COLLIER AND JAMES R. EVANS OM.

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Presentation on theme: "1 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning OPERATIONS STRATEGY CHAPTER 4 DAVID A. COLLIER AND JAMES R. EVANS OM."— Presentation transcript:

1 1 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning OPERATIONS STRATEGY CHAPTER 4 DAVID A. COLLIER AND JAMES R. EVANS OM

2 22 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Competitive Priorities Competitive advantage denotes a firms ability to achieve market and financial superiority over its competitors. Competitive priorities represent the strategic emphasis that a firm places on certain performance measures and operational capabilities within a value chain. Chapter 4 Operations Strategy

3 33 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Understanding Customer Requirements A Japanese professor, Noriaki Kano, suggested three classes of customer requirements: Dissatisfiers: requirements that are expected in a good or service. If these features are not present, the customer is dissatisfied, sometimes very dissatisfied. Satisfiers: requirements that customers say they want. Exciters/delighters: new or innovative good or service features that customers do not expect. Examples? Chapter 4 Operations Strategy

4 44 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Understanding Customer Requirements Basic customer expectationsdissatisfiers and satisfiersare generally considered the minimum performance level required to stay in business and are often called order qualifiers. Order winners are goods and service features and performance characteristics that differentiate one customer benefit package from another, and win the customer's business. Chapter 4 Operations Strategy

5 55 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Understanding Customer Requirements Search attributes are those that a customer can determine prior to purchasing the goods and/or services. These attributes include things like color, price, freshness, style, fit, feel, hardness, and smell. Goods such as supermarket food, furniture, clothing, automobiles, and houses are high in search attributes. Chapter 4 Operations Strategy

6 66 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Understanding Customer Requirements Experience attributes are those that can be discerned only after purchase or during consumption or use. Examples of these attributes are friendliness, taste, wearability, safety, fun, and customer satisfaction. Chapter 4 Operations Strategy

7 77 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Understanding Customer Requirements Credence attributes are any aspects of a good or service that the customer must believe in, but cannot personally evaluate even after purchase and consumption. Examples would include the expertise of a surgeon or mechanic, the knowledge of a tax advisor, or the accuracy of tax preparation software. Chapter 4 Operations Strategy

8 88 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Cost Quality Time Flexibility Innovation Competitive Priorities Chapter 4 Operations Strategy

9 99 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Competitive Priority – Cost Almost every industry has a low price market segment. Low-cost strategy firms: Honda Motor Co., Marriott's Fairfield Inns, Merck-Medco On-line Pharmacy, Southwest Airlines, and Wal-Mart's Sam's Club. Southwest Airlines is one of the few airlines that have been profitable during the period. A low cost strategy can reshape industry structure such as in the airline industry. Chapter 4 Operations Strategy

10 10 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Competitive Priority – Quality Businesses offering premium quality goods usually have large market shares and were early entrants into their markets. Quality is positively and significantly related to a higher return on investment for almost all kinds of market situations. A strategy of quality improvement usually leads to increased market share, but at a cost in terms of reduced short-run profitability. High goods quality producers can usually charge premium prices. Chapter 4 Operations Strategy

11 11 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Competitive Priority – Time Time is perhaps the most important source of competitive advantage. Customers demand quick response, short waiting times, and consistency in performance. Many firms use time as a competitive weapon to create and deliver superior goods and services, such as Charles Schwab, Clarke American Checks, CNN, Dell, FedEx, and Wal-Mart. Chapter 4 Operations Strategy

12 12 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Competitive Priority – Time Reductions in flow time serve two purposes: First, they speed up work processes so that customer response is improved. Deliveries can be made faster, and more often on-time. Second, reductions in flow time can be accomplished only by streamlining and simplifying processes and value chains to eliminate non-value-added steps such as rework and waiting time. Chapter 4 Operations Strategy

13 13 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Competitive Priority – Flexibility Mass customization is being able to make whatever goods and services the customer wants, at any volume, at any time for anybody, and for a global organization, from any place in the world. High-levels of flexibility might require special strategies such as modular designs, interchangeable components, and postponement strategies. Chapter 4 Operations Strategy

14 14 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Competitive Priority – Flexibility Flexible operations require sharing manufacturing lines and specialized training for employees. Flexible operations may also require attention to outsourcing decisions, agreements with key suppliers, and innovative partnering arrangements, because delayed shipments and a complex supply chain can hinder flexibility. Chapter 4 Operations Strategy

15 15 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Competitive Priority – Innovation Innovation is the discovery and practical application or commercialization of a device, method, or idea that differs from existing norms. Innovations in all forms encapsulate human knowledge. Chapter 4 Operations Strategy

16 16 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Competitive Priority – Innovation Innovations take many forms: Physical goods such as telephones, automobiles, refrigerators, computers, optical fiber, satellites, and cell phones. Services such as self-service, all-suite hotels, health maintenance organizations, and Internet banking. Chapter 4 Operations Strategy

17 17 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Competitive Priority – Innovation Innovations take many forms: Manufacturing such as computer-aided design, robotic automation, and smart tags. Management practices such as customer satisfaction surveys, quantitative decision models, and Six Sigma. Chapter 4 Operations Strategy

18 18 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Strategic Planning Strategy is a pattern or plan that integrates an organizations major goals, policies, and action sequences into a cohesive whole. Effective strategies develop around a few key competitive priorities, such as low cost or fast service time, which provide a focus for the entire organization and exploit an organizations core competencies (the strengths unique to that organization). Chapter 4 Operations Strategy

19 19 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Strategic Planning Strategic planning is the process of determining long-term goals, policies, and plans for an organization. The businesses in which the firm will participate are often called strategic business units (SBUs), and are usually defined as families of goods or services having similar characteristics or methods of creation. Strategy is the result of a series of hierarchical decisions about goals, directions, and resources. Chapter 4 Operations Strategy

20 20 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Strategic Planning Most large organizations have three levels of strategy: Corporate strategy is necessary to define the businesses in which the corporation will participate and develop plans for the acquisition and allocation of resources among those businesses. Chapter 4 Operations Strategy

21 21 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Strategic Planning Most large organizations have three levels of strategy: A business strategy defines the focus for SBUs. The major decisions involve which markets to pursue and how best to compete in those markets; that is, what competitive priorities the firm should pursue. Chapter 4 Operations Strategy

22 22 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Strategic Planning Most large organizations have three levels of strategy: A functional strategy is the set of decisions that each functional areamarketing, finance, operations, research and development, engineering, and so ondevelops to support its particular business strategy. Chapter 4 Operations Strategy

23 23 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Strategic Planning The operations strategy defines how an organization will execute its chosen business strategies. It is how an organizations processes are designed and organized to produce the type of goods and services to support the corporate and business strategies. Chapter 4 Operations Strategy

24 24 OM, Ch. 4 Operations Strategy ©2009 South-Western, a part of Cengage Learning Strategic Planning Managers recognize that the value (supply) chain can be leveraged to provide a distinct competitive advantage, and that operations is a core competency for the organization. Whoever has superior operational capability over the long term is the odds-on-favorite to win the industry shakeout. Chapter 4 Operations Strategy


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