1 1 Slide Chapter 2 Operations Strategy in a Global Environment Professor Ahmadi

2 2 Slide Learning Objectives n DEVELOPING MISSIONS AND STRATEGIES Mission Mission Strategy Strategy n DEFINING GLOBAL OPERATIONS International business International business Multinational corporation Multinational corporation Global company Global company Transnational company Transnational company n REASONS FOR GLOBALIZATION Pros Pros Cons Cons

3 3 Slide Learning Objectives - Continued n ACHIEVING COMPETITIVE ADVANTAGE THROUGH OPERATIONS Competing on Differentiation Competing on Differentiation Competing on Cost Competing on Cost Competing on Response Competing on Response n TEN STRATEGIC OM DECISIONS n STAGES OF PRODUCT LIFE CYCLE Introduction Introduction Growth Growth Maturity Maturity Decline Decline

4 4 Slide Corporate Mission n A corporate mission is a set of long-range goals and including statements about: the kind of business the company wants to be inthe kind of business the company wants to be in who its customers arewho its customers are its basic beliefs about businessits basic beliefs about business its goals of survival, growth, and profitabilityits goals of survival, growth, and profitability n Mission - where you are going

5 5 Slide Business Strategy n Business strategy is a long-range game plan of an organization and provides a road map of how to achieve the corporate mission. n Inputs to the business strategy are Assessment of global business conditions - social, economic, political, technological, competitiveAssessment of global business conditions - social, economic, political, technological, competitive Distinctive competencies or weaknesses - workers, sales force, R&D, technology, managementDistinctive competencies or weaknesses - workers, sales force, R&D, technology, management n Strategy - how you are going to get there; an action plan

6 6 Slide Factors Affecting Mission Mission Philosophy & Values Profitability & Growth Environment CustomersPublic Image Benefit to Society

7 7 Slide Strategy Process Marketing Decisions Operations Decisions Fin./Acct. Decisions Company Mission Business Strategy Functional Area Strategies

8 8 Slide Defining Global Operations n International business - engages in cross-border transactions n Multinational Corporation - has extensive involvement in international business, owning or controlling facilities in more than one country n Global company - integrates operations from different countries, and views world as a single marketplace n Transnational company - seeks to combine the benefits of global-scale efficiencies with the benefits of local responsiveness

9 9 Slide Reasons to Globalize Operations n Reduce costs (labor, taxes, tariffs, etc.) n Improve the supply chain n Provide better goods and services n Attract new markets n Learn to improve operations n Attract and retain global talent TangibleIntangible

10 Slide Pros and Cons of Globalization n Pros (Pluses) Productivity grows more quickly (living standards can go up faster)Productivity grows more quickly (living standards can go up faster) Global competition and cheap imports keep a lid on prices (inflation less likely to derail economic growth)Global competition and cheap imports keep a lid on prices (inflation less likely to derail economic growth) Open economy spurs innovation (with fresh ideas from abroad)Open economy spurs innovation (with fresh ideas from abroad) Export jobs often pay more than other jobsExport jobs often pay more than other jobs US has more access to foreign investment (keeps interest rates low)US has more access to foreign investment (keeps interest rates low)

11 Slide Pros and Cons of Globalization n Cons (Minuses) Millions of Americans have lost jobs due to imports or production shifts abroadMillions of Americans have lost jobs due to imports or production shifts abroad Most displaced workers find new jobs that pay lessMost displaced workers find new jobs that pay less Workers face pay-cuts demands from employersWorkers face pay-cuts demands from employers Service and white-collar jobs are increasingly vulnerableService and white-collar jobs are increasingly vulnerable US employees lose their comparative advantage when companies build advanced factories abroadUS employees lose their comparative advantage when companies build advanced factories abroad

12 Slide Costs reduction through globalization n Maquiladoras n World Trade Organization (WTC) n North American Free Trade Agreement (NAFTA) n European Union (EU)

13 Slide Operational Effectiveness and Competitive Advantage n Operational effectiveness is the ability to perform similar operations activities better than competitors. n It is very difficult for a company to compete successfully in the long run based just on operational effectiveness. n A firm must also determine how operational effectiveness can be used to achieve a sustainable competitive advantage. n An effective competitive strategy is critical.

14 Slide Strategies for Competitive Advantage n Differentiation n Cost leadership n Quick response

15 Slide 10 Strategic OM Decisions n Goods & service design n Quality n Process & capacity design n Location selection n Layout design n Human resource and job design n Supply-chain management n Inventory n Scheduling n Maintenance

16 Slide Stages in a Product’s Life Cycle n Introduction- Sales begin, production and marketing are developing, profits are negative. n Growth - sales grow dramatically, marketing efforts intensify, capacity is expanded, profits begin. n Maturity - production focuses on high-volume, efficiency, low costs; marketing focuses on competitive sales promotion; profits are at peak. n Decline - declining sales and profit; product might be dropped or replaced.

17 Slide Stages in the Product Life Cycle Introduction Growth Maturity Decline Growth rate