Operations Strategy Prepared by :- Suhad Romi Supervisor :- Dr. Yousef Abu Farah

Corporate Strategy Defines the business will pursue, new opportunities, threats in the environment and the objectives that it should be achieved. It serves as the framework for carrying out all the organization functions.

Operation strategy It specifies how operations can help implement the firm’s corporate strategy.

Strategic Choice Management set corporate strategy by making three strategic choices :- 1- Determining the firm’s mission. 2- Monitoring the changes at environment 3- identifying and developing the firm’s core competencies.

Corporate Strategy Market analysis segmentation needs assessment Socioeconomic and business environment Corporate strategy missions goals distinctive competencies MissionGoals Distinctive Competences

How to lead or Formulate the Corporate Strategy ??

 How does operation strategy relate to corporate strategy ??  Corporate Strategy :- The overall scope and direction of a corporation and the way in which its various business operations work together to achieve particular goals.scopecorporationbusiness operationswork achievegoals  Operations strategy is the tool that helps to define the methods of producing goods or a service offered to the customer  Operations Strategy :- is the development of a long-term plan for using the major resources of the firm for a high degree of compatibility between these resources and the firm’s long- term corporate strategy

Mission What business are we in now? Who are our customers ? What are our basic beliefs? What are the key performance objectives (profit, growth, market share,...) by which we measure success ?

Copyright 2005 Prentice HallCh 2 -9 Mission Elements Customers Markets Employees Public Image Self-Concept Philosophy Survival Growth Profit Products Services Technology

Copyright 2005 Prentice Hall Ch “What do we want to become?” Vision Mission Statement “What is our business?”

Comprehensive Mission Statement Clear Business Vision

Two Types - Micro Environment “task environment and operating environment “ Consists of actors in the company’s immediate environment, that affects the performance of the company. ◦ The suppliers - Competitors - Stack holders - Customers - Macro Environment Consists of larger societal forces that affect all the actors in company’s micro environment. the demographic, economic, natural, technological, political and cultural forces EXTERNAL ENVIRONMENT

 By Examine the external environments, this will lead to a set of :-  Opportunities.  Threats.

The Internal Scanning Internal scanning (organizational analysis): is concerned with identifying and developing an organization‘s resources and competencies. 14

Resources an organization’s assets. Capabilities Corporation’s ability to exploit its resources. Competency A cross –functional integration and coordination of capabilities. Core competency Something that the corporation can do well. (Strengths that represent unique skills or resources.) Distinctive competency When Core competencies are superior to those of the competition. or A firm’s strengths that cant be easily matched or imitated by competitors. {Fred R David page 137} 15

16 Core Competency :- Work Force :- Well trained & flexible workforce. Facilities :- Well located facilities “ offices, stores, and plants “ Market & Financial Know how ?? Attract capital form stock sales, market & distributes it’s products, and ability to differentiate it’s product System & technology. Having an Experts in IS, & New Technology

At internal scanning ; we should link the followings to the strategy :- Integrating Strategy & Organizational Structures: ◦ Simple structure - Functional structure ◦ Divisional structure - Strategic business units ◦ Integrating Strategy & Culture values, beliefs, rites, rituals, ceremonies 17

 By Examine the internal environments, this will lead to a set of :-  Strengths.  Weakness.

Global Strategies :- It’s include buying foreign Parts or services, combining with other parts to reduce risks & threats or planning ways to enter market when it’s forbidden. This will be done by strategic alliance. An agreement with another firms.

1- Collaborative Effort :- An agreement between 2 companies, when the first company has core competency that the other company needs and can’t duplicate. Strategic alliance forms :-

2- Joint Ventures Agreement between 2 firms to jointly produce a products & services.

2 - Joint Ventures Advantages ◦ Allows for sharing of risk (both financial and political) ◦ Provides opportunity to learn new environment ◦ Provides opportunity to achieve synergy by combining strengths of partners ◦ May be the only way to enter market given barriers to entry Disadvantages ◦ Requires more investment than a licensing agreement ◦ Must share rewards as well as risks ◦ Requires strong coordination ◦ Potential for conflict among partners ◦ Partner may become a competitor

3- Licensing A contractual agreement whereby one company makes an asset available to another company in exchange fo license fees, or some other form of compensation ◦ Patent ◦ Trade secret ◦ Brand name ◦ Product formulations

Advantages to Licensing Provides additional profitability with little initial investment Provides method of circumventing tariffs, quotas, and other export barriers Attractive ROI Low costs to implement

Disadvantages to Licensing Limited participation Returns may be lost Lack of control Licensee may become competitor Licensee may exploit company resources

Market Analysis

4-27 What is Market segmentation? The breaking down or building up of potential buyers into groups called Market Segments

4- 29 How to determine the market segment :- How to determine the market segment :- 1.Demographic Factors :- age, income, educational level. 2.Psychological Factors :- pleasure, fear. 3.Industry factors :- specific technologies, certain materials, particular industry.

4- 30 Benefits of Market Segmentation Benefits of Market Segmentation 1.Identifies opportunities for new product development 2.Helps design marketing programs most effective for reaching homogenous groups of buyers 3.Improves allocation of marketing resources

Need Assessment The second step in market analysis, which identifies the needs of each segment, and assessing how well competitors addressing those needs.

Need Assessment Each Market segment has market needs, by which they can grouped into :- 1- Product – Service needs. “ product attributes “ prices, quality “ 2- Delivery System Need. “ process for delivering the products “ safety, delivery speed “ 3- Volume needs. Attributes of the demand “ availability, prediction “ 4 – Other needs. Attributes related to the operations, such as reputation, after sales services.

2- 33 Competitive Priorities Cost1.Low cost Quality2.High-performance design 3.Consistent quality Time4.Fast delivery 5.On-time delivery 6.Development speed Flexibility7.Customization 8.Volume flexibility

2- 34 Competitive Priorities Cost Quality Flexibility Speed

35 Competitive Priorities- Four Important Operations Questions: Will you compete on – Cost? Quality? Time? Flexibility? All of the above? Some? Tradeoffs?

© Wiley Competing on Cost? Offering products/services at a low price relative to competitors. ◦ Typically high volume products ◦ Often limit product range & offer little customization ◦ Can use lower skill labor ◦ Low cost should not mean low quality

© Wiley Competing on Quality? Quality may be defined differently by customers versus employees Quality dimensions: 1- High performance design:  Superior features, high durability, & excellent customer service 2- Product & service consistency:  Meets design specifications  Error free delivery Quality issues to address: ◦ Product design quality – products/services must meet requirements ◦ Process quality will produce error-free products/services

Competing on Time? Time is one of the most important competitive priorities Being first-to-deliver often wins the race Time –related issues: ◦ Fast delivery:  Focused on shorter time between order placement and delivery ◦ On-time delivery:  Deliver product exactly when needed every time ◦ Rapid development speed  Using concurrent processes to shorten product development time

Competing on Flexibility? The company’s environment often changes rapidly Flexibility is needed to accommodate these changes ◦ Product flexibility:  Easily switch production from one item to another  Easily customize product/service to meet specific requirements of a customer ◦ Volume flexibility:  Ability to ramp production up and down to match market demands

© Wiley Are There Priority Tradeoffs? Are There Priority Tradeoffs? Emphasize priorities that support the business strategy, which may require “trade-offs” Focus on “order qualifiers” and “order winners” ◦ Which priorities are “Order Qualifiers”? e.g. Must have excellent quality since everyone expects it ◦ Which priorities are “Order Winners”? e.g. Dell competes on all four priorities Southwest Airlines competes on cost McDonald’s competes on consistency FedEx competes on speed Custom tailors compete on flexibility ◦ Can you have both high quality and low cost? e.g. Yes, Coke and Pepsi are good examples ◦ Can you offer design flexibility and short delivery? e.g. Yes, modular housing manufacturers do it

Flow Strategy Flow strategies deal with how the operations of a firm are structured to develop a product or provide a service In the software industry, they are often called “Process Strategies” There are two extreme in flow strategies: ◦ Flexible flow strategy ◦ Line flow strategy

Flow Strategy Flexible flow: The customers, materials, or information move in diverse ways, with the path of one customer or job often crisscrossing the path that the next one will take. Line Flow: The customers, materials or information move linearly from one operation to the next, according to a fixed sequence.

Flexible flow Example Health Centre Physical exam Broken arm Flu D T RP B D:Doctor (examination rooms) R:Radiology (X-ray) T:Triage (assess severity of illness) B:Blood (lab test) P:Pharmacy (fill prescriptions) Broken arm Flu Physical exam

Flexible flow Example AAP - Compact 4 cylinder A:Front-end body-to- chassis assembly H:Hood attachment F:Fluid filling S:Start-up testing Mid-sized 6 cylinder Compact 4 cylinder ASHF Mid-sized 6 cylinder Compact 4 cylinder

Capabilities The Role of Flow Strategy Operations strategy Process decisions Quality decisions Capacity, location, and layout decisions Operating decisions Flow strategy Flexible flows Intermediate flows Line flows Future directions Competitive priorities Corporate strategy

Typical Flow Strategies Make-to-Stock Strategy Standardized Services Strategy Assemble-to-Order Strategy Make-to-Order Strategy Customized Services Strategy

 Make to stock strategy :- The firms hold items in stock for immediate delivery to customers.  Mass Production :- large volumes of a standard product for a mass market  Standardization Services Strategy :- Strategies based On Flows :-

 Make-to-Order ◦ products and services are made to customer specifications after an order has been received  Make-to-Stock ◦ products and services are made in anticipation of demand  Assemble-to-Order ◦ products and services add options according to customer specifications

Linking Flow Strategy with Competitive Priorities Flexible FlowsLine Flows Tendency for customized products Tendency for standardized products and services, with low volumesand services, with high volumes High-performance design quality Consistent quality More emphasis on customization More emphasis on low cost and volume flexibility Long delivery times Short delivery times Flow Strategy