1-1 Business Strategy Context for Operations Strategy Chapter 1 McGraw-Hill/Irwin Operations Strategy Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved.

1-2 What is strategy?  Strategic thinking has its roots in military strategy  “The branch of military science dealing with military command and the planning and conduct of a war.”  And has evolved to focus on business  “An elaborate and systematic plan of action.”

1-3 Competitive Strategy: The Positioning View

1-4 Competitive Strategy: The Positioning View  Options for firm positioning:  Cost leadership  Differentiation  Focus  And, within each of the three:  Variety-based  Needs-based  Access-based

1-5 Competitive Strategy: The Positioning View  SWOT Analysis  Strengths  Weaknesses  Opportunities  Threats

1-6 Concerns with the Positioning View  Too narrowly focused on industry and product economics rather than customer economics  Allows too few options for positioning. Looking at conflicts among positions might lead to new options.  Relies too much on analytical tools  Does not acknowledge the need for learning and adaptation over time

1-7 Competitive Strategy: The Resource- Based View  Competitive advantage is derived from the firm’s development of unique bundles of resources and capabilities that are:  Inimitable: are difficult or costly to imitate or replicate  Valuable: allow the firm to improve its market position relative to competitors  Rare: in relatively short supply

1-8 Competitive Strategy: The Resource- Based View  Resource: an observable, but not necessarily tangible, asset that can be valued and traded  e.g., brand, patent, parcel of land, license  Asset or input to production than an organization owns, controls or has access to on a semi-permanent basis  Capability: not observable, and hence necessarily intangible, cannot be valued and changes hands only as part of an entire unit  Processes, activities or functions performed within a system  Utilize the organization's resources

1-9 Competitive Strategy: The Resource- Based View  Types of capabilities  Process-based  e.g., McDonald’s  Systems- or coordination-based  e.g., Ritz-Carlton  e.g., Southwest Airlines  Organization-based  e.g., Nucor Steel  Network-based  e.g., Zara  e.g., Dell

1-10 Competitive Strategy: Integrating the Positioning and Resource-Based Views

1-11 How Strategy Is Made

1-12 Levels of Strategy-Making

1-13 Business Strategy: Views the Firm Might Take

1-14 Business Strategy: Focus on the Customer  Types of customer needs  Must haves  Linear satisfiers  Delighters  Neutral

1-15 Business Strategy: Dimensions along which Customers Assess Performance  Cost  Quality  Availability  Features/Innovativeness  Environmental performance

1-16 Business Strategy: Dimensions along which Customers Assess Performance

1-17 Business Strategy: Making Tradeoffs in Positioning

1-18 Strategy-Making in Context

1-19 Strategy-Making: Cross-Functional Participation

1-20 Operations Strategy: Goals  Cost  Quality  Availability  Features/Innovativeness  Environmental Performance

1-21 Operations Strategy: Connecting Operations Goals to Customer Concerns

1-22 Operations Strategy: Decision Categories  Structural decisions  Vertical integration  Process technology  Capacity  Facilities  Infrastructural decisions  Sourcing  Information technology  Supply chain coordination  Business processes and policies  Capabilities development  Lean operation  Quality  Flexibility

1-23 Strategy-Making: Step 1  Understand what position the firm wants to or can take in the marketplace by learning about:  Competitors  Suppliers  Complementary product or service offerings and firms offering them  Spaces outside the industry into which the firm might expand  Customer needs in terms of:  Cost  Quality  Availability  Features/innovativeness  Environmental performance

1-24 Strategy-Making: Step 2  Understand what capabilities the firm has to offer, can or should develop both within and across the key functional areas of the firm:  Operations  Marketing  Research and development  Human resources  Finance and accounting  As well as outside the firm with supply chain partners

1-25 Strategy-Making: Step 3  Integrate or synthesize the activities and capabilities of the functions to achieve:  Coherent strategic fit in support of a desired strategic direction  Development of a set of capabilities to pursue a new strategic direction

1-26 Integrated Strategy-Making Framework