Operations Management Jones & Robinson Operations Management Chapter 12 Operations Strategy

Learning Objectives Recognize the relationship between corporate, business, and operations strategy Explain the relationship between operations, marketing, human resource and financial strategies Compare and contrast the market-driven and resource-based view of operations strategy Outline the concept of ‘business models’ Differentiate between a range of contemporary operations strategies and how these may be used to deliver order winners

Strategy In many organizations there are three levels of strategic planning and implementation: Corporate strategy Business strategy A strategy set for each functional area, such as Marketing, Operations and Human Resources

Hierarchy of Strategies

Operations Strategy An Operations Strategy is a plan for managing operations over the long term to achieve business goals, and thereby achieve competitive advantage Competitive advantage is the superiority of an organization relative to other competing organizations demonstrated by its performance in the marketplace

Different roles for Operations in delivering Competitive Advantage

Alternative Perspectives on Strategic Operations Two alternative ways of thinking about operations strategy: Market-driven view – idea put forward by Michael Porter (1980) that strategy was mainly driven externally by rivalry between firms, power of customers and suppliers, threat of new entrants to the market and threat of new products. Resource-based view – strategy is determined from within using resources and knowledge which are difficult to imitate – termed core competencies by Prahalad and Hamel (1990)

Business Models A business model is a system designed for competing effectively in a specific marketplace. Most business models are planned whereas strategies are emergent. Examples of planned business models are South-West Airlines, Federal Express and Amazon.com

Business Models Spring and Mason (2010) suggest that there are three main elements of a business model: Network architecture Market offering Technology Each of these has separate sub-elements

Business Models

Network Architecture Markets refer to the specific customers that are to be served by the new enterprise. The two main types of market are B2B and B2C. Transactions describe the way in which the organisation will engage with its customers and enable them to purchase the offer. Capabilities are those things the organisation needs to have in order to conduct its business. Customer relationships - how these are designed and maintained

Market Offering Artefacts are what we generally know as products. Activity refers to services that are performed on or to the customer (e.g. medical care) or on behalf of the customer (e.g. parcel delivery). Access also tends to refer to services, but in this case services that enable customers to use facilities or things offered by the organisation (e.g. hotel rooms or car hire). Value refers to an offer which is none of the above

Technology Infrastructure relates to the physical environment needed to host the organization, such as buildings. Core technology refers to the specific plant or machinery an organization might need in order to create a transaction. Process technology is how the infrastructure and core technology is deployed. Product technology refers to the specific characteristics of the technology used by the organization.

Contemporary Operations Strategies Lean Production - enables quality, cost and dependability to be combined Agile Manufacturing – enables speed, cost and dependability to be combined Mass Customization – enables flexibility, cost and dependability to be combined Low-cost Competition – strategy based entirely on lowest cost within a given market

Contemporary Operations Strategies Servitization – manufacturing firms becoming service providers with added value services for customers Ubiquitization – mainly adopted by service firms who physically distribute their services ‘everywhere’ e-Business – the use of the internet has made firms think of different business models to exploit this marketing channel