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Operations Strategy in a Global Environment

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Presentation on theme: "Operations Strategy in a Global Environment"— Presentation transcript:

1 Operations Strategy in a Global Environment
Operations Management Chapter 1 – Operations and Productivity11 Chapter 2 Operations Strategy in a Global Environment

2 Outline Global Company Profile: Boeing A Global View of Operations
Cultural and Ethical Issues Developing Missions And Strategies Mission Strategy

3 Outline – Continued Achieving Competitive Advantage Through Operations
Competing On Differentiation Competing On Cost Competing On Response Ten Strategic OM Decisions

4 Outline – Continued Issues In Operations Strategy
Research Preconditions Dynamics Strategy Development And Implementation Identify Critical Success Factors Build and Staff the Organization Integrate OM with Other Activities

5 Outline – Continued Global Operations Strategy Options
International Strategy Multidomestic Strategy Global Strategy Transnational Strategy

6 Global Strategies Boeing – sales and production are worldwide
Benetton – moves inventory to stores around the world faster than its competition by building flexibility into design, production, and distribution Sony – purchases components from suppliers in Thailand, Malaysia, and around the world

7 Global Strategies Volvo – considered a Swedish company but it is controlled by an American company, Ford. The current Volvo S40 is built in Belgium and shares its platform with the Mazda 3 built in Japan and the Ford Focus built in Europe. Haier – A Chinese company, produces compact refrigerators (it has one-third of the US market) and wine cabinets (it has half of the US market) in South Carolina

8 Some Multinational Corporations
% Sales % Assets Outside Outside Home Home Home % Foreign Company Country Country Country Workforce Citicorp USA NA Colgate- USA NA Palmolive Dow USA NA Chemical Gillette USA NA Honda Japan NA IBM USA This slide can be used to further explore the characteristics of multinational companies

9 Some Multinational Corporations
% Sales % Assets Outside Outside Home Home Home % Foreign Company Country Country Country Workforce ICI Britain NA Nestle Switzerland Philips Netherlands Electronics Siemens Germany 51 NA 38 Unilever Britain & Netherlands

10 Boeing Suppliers (787) Firm Country Component
Dassault France Design and PLM software Messier-Bugatti France Landing gear Thales France Electrical power conversion system and integrated standby flight display Diehl Germany Interior lighting FR-HiTemp UK Fuel pumps and valves Smiths Aerospace UK Central computer system

11 Boeing Suppliers (787) Firm Country Component
BAE SYSTEMS UK Electronics Alenia Aeronautics Italy Upper center fuselage & horizontal stabilizer Toray Industries Japan Carbon fiber for wing and tail units Fuji Heavy Japan Center wing box Industries Kawasaki Heavy Japan Forward fuselage, Industries fixed section of wing, landing gear well

12 Boeing Suppliers (787) Firm Country Component
Teijin Seiki Japan Hydraulic actuators Mitsubishi Heavy Japan Wing box Industries Chengdu Aircraft China Rudder Group Hafei Aviation China Parts

13 Reasons to Globalize Reasons to Globalize Tangible Reasons
Reduce costs (labor, taxes, tariffs, etc.) Improve supply chain Provide better goods and services Understand markets Learn to improve operations Attract and retain global talent Tangible Reasons Intangible Reasons

14 Reduce Costs Foreign locations with lower wage rates can lower direct and indirect costs World Trade Organization (WTC) North American Free Trade Agreement (NAFTA) APEC, SEATO, MERCOSUR European Union (EU)

15 Improve the Supply Chain
Locating facilities closer to unique resources Auto design to California Athletic shoe production to China Perfume manufacturing in France

16 Provide Better Goods and Services
Objective and subjective characteristics of goods and services On-time deliveries Cultural variables Improved customer service

17 Understand Markets Interacting with foreign customer and suppliers can lead to new opportunities

18 Learn to Improve Operations
Remain open to the free flow of ideas General Motors partnered with a Japanese auto manufacturer to learn

19 Attract and Retain Global Talent
Offer better employment opportunities Better growth opportunities and insulation against unemployment Relocate unneeded personnel to more prosperous locations Incentives for people who like to travel

20 Cultural and Ethical Issues
Cultures can be quite different Attitudes can be quite different towards Punctuality Lunch breaks Environment Intellectual property Thievery Bribery Child labor

21 Developing Missions and Strategies
Mission statements tell an organization where it is going The Strategy tells the organization how to get there

22 Mission Mission - where are you going?
Organization’s purpose for being Answers ‘What do we provide society?’ Provides boundaries and focus

23 Hard Rock Café Our Mission: To spread the spirit of Rock ‘n’ Roll by delivering an exceptional entertainment and dining experience. We are committed to being an important, contributing member of our community and offering the Hard Rock family a fun, healthy, and nurturing work environment while ensuring our long-term success.

24 Factors Affecting Mission
Philosophy and Values Profitability and Growth Environment Customers Public Image Mission Benefit to Society

25 Organization’s Mission
Strategic Process Organization’s Mission Functional Area Missions Marketing Operations Finance/ Accounting

26 Strategy Action plan to achieve mission
Functional areas have strategies Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses

27 Strategies for Competitive Advantage
Differentiation – better, or at least different Cost leadership – cheaper Quick response – more responsive

28 Competing on Differentiation
Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perception of value Safeskin gloves – leading edge products Walt Disney Magic Kingdom – experience differentiation Hard Rock Cafe – theme experience

29 Competing on Cost Provide the maximum value as perceived by customer. Does not imply low quality. Southwest Airlines – secondary airports, no frills service, efficient utilization of equipment Wal-Mart – small overheads, shrinkage, distribution costs Franz Colruyt – no bags, low light, no music, doors on freezers

30 Competing on Response Flexibility is matching market changes in design innovation and volumes Institutionalization at Hewlett-Packard Reliability is meeting schedules German machine industry Timeliness is quickness in design, production, and delivery Johnson Electric, Bennigan’s, Motorola

31 OM’s Contribution to Strategy
Operations Specific Competitive Decisions Examples Strategy Used Advantage Product Quality Process Location Layout Human resource Supply-chain Inventory Scheduling Maintenance FLEXIBILITY Sony’s constant innovation of new products………………………………....Design HP’s ability to follow the printer market………………………………Volume Southwest Airlines No-frills service……..…..LOW COST DELIVERY Pizza Hut’s five-minute guarantee at lunchtime…………………..…..……..Speed Federal Express’s “absolutely, positively on time”………………………..….Dependability QUALITY Motorola’s automotive products ignition systems…………………………......Conformance Motorola’s pagers………………………..….Performance IBM’s after-sale service on mainframe computers……....AFTER-SALE SERVICE Fidelity Security’s broad line of mutual funds………….BROAD PRODUCT LINE Response (Faster) Cost leadership (Cheaper) Differentiation (Better)

32 Strategic Options to Gain a Competitive Advantage
28% - Operations Management 18% - Marketing/distribution 17% - Momentum/name recognition 16% - Quality/service 14% - Good management 4% - Financial resources 3% - Other

33 Elements of Operations Management Strategy
Low-cost product Product-line breadth Technical superiority Product characteristics/differentiation Continuing product innovation Low-price/high-value offerings Efficient, flexible operations adaptable to consumers Engineering research development Location Scheduling

34 Strategy Development Process
Environmental Analysis Identify the strengths, weaknesses, opportunities, and threats. Understand the environment, customers, industry, and competitors. Determine Corporate Mission State the reason for the firm’s existence and identify the value it wishes to create. Form a Strategy Build a competitive advantage, such as low price, design, or volume flexibility, quality, quick delivery, dependability, after-sale service, broad product lines.

35 Four International Operations Strategies
Import/export or license existing product Examples U.S. Steel Harley Davidson International Strategy Cost Reduction Considerations High Low Local Responsiveness Considerations (Quick Response and/or Differentiation)

36 Four International Operations Strategies
Cost Reduction Considerations High Low Local Responsiveness Considerations (Quick Response and/or Differentiation) International Strategy Import/export or license existing product Examples U.S. Steel Harley Davidson

37 Four International Operations Strategies
Standardized product Economies of scale Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator Global Strategy Cost Reduction Considerations High Low Local Responsiveness Considerations (Quick Response and/or Differentiation) International Strategy Import/export or license existing product Examples U.S. Steel Harley Davidson

38 Four International Operations Strategies
Cost Reduction Considerations High Low Local Responsiveness Considerations (Quick Response and/or Differentiation) Standardized product Economies of scale Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator Global Strategy International Strategy Import/export or license existing product U.S. Steel Harley Davidson

39 Four International Operations Strategies
Use existing domestic model globally Franchise, joint ventures, subsidiaries Examples Heinz McDonald’s The Body Shop Hard Rock Cafe Multidomestic Strategy Cost Reduction Considerations High Low Local Responsiveness Considerations (Quick Response and/or Differentiation) Standardized product Economies of scale Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator Global Strategy International Strategy Import/export or license existing product U.S. Steel Harley Davidson

40 Four International Operations Strategies
Cost Reduction Considerations High Low Local Responsiveness Considerations (Quick Response and/or Differentiation) Standardized product Economies of scale Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator Global Strategy International Strategy Import/export or license existing product U.S. Steel Harley Davidson Multidomestic Strategy Use existing domestic model globally Franchise, joint ventures, subsidiaries Heinz The Body Shop McDonald’s Hard Rock Cafe

41 Four International Operations Strategies
Move material, people, ideas across national boundaries Economies of scale Cross-cultural learning Examples Coca-Cola Nestlé Transnational Strategy Cost Reduction Considerations High Low Local Responsiveness Considerations (Quick Response and/or Differentiation) International Strategy Import/export or license existing product Examples U.S. Steel Harley Davidson Multidomestic Strategy Use existing domestic model globally Franchise, joint ventures, subsidiaries Heinz The Body Shop McDonald’s Hard Rock Cafe Standardized product Economies of scale Cross-cultural learning Texas Instruments Caterpillar Otis Elevator Global Strategy

42 Four International Operations Strategies
Cost Reduction Considerations High Low Local Responsiveness Considerations (Quick Response and/or Differentiation) Standardized product Economies of scale Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator Global Strategy Transnational Strategy Move material, people, ideas across national boundaries Coca-Cola Nestlé International Strategy Import/export or license existing product U.S. Steel Harley Davidson Multidomestic Strategy Use existing domestic model globally Franchise, joint ventures, subsidiaries Heinz The Body Shop McDonald’s Hard Rock Cafe

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