1. Corporate Strategy and its Connection to Operations

2. Corporate Mission The mission of the organization
defines its purpose, i.e., what it contributes to society
states the rationale for its existence
provides boundaries and focus
defines the concept(s) around which the company can rally
Functional areas and business processes define their missions such that they support the overall corporate mission in a cooperative and synergistic manner.

3. Corporate Mission Examples
Merck: The mission of Merck is to provide society with superior products and services-innovations and solutions that improve the quality of life and satisfy customer needs-to provide employees with meaningful work and advancement opportunities and investors with a superior rate of return.
FedEx: FedEx is committed to our People-Service-Profit philosophy. We will produce outstanding financial returns by providing totally reliable, competitively superior, global air-ground transportation of high-priority goods and documents that require rapid, time-certain delivery. Equally important, positive control of each package will be maintained utilizing real time electronic tracking and tracing systems. A complete record of each shipment and delivery will be presented with our request for payment. We will be helpful, courteous, and professional for each other, and the public. We will strive to have a completely satisfied customer at the end of each transaction.

4. Corporate Strategy
The organization’s action plan to achieve its mission
The corporate strategy translates into more detailed strategies for each functional area (i.e., Operatios, Finance, Marketing)
Generally speaking, these strategies seek to exploit (external) opportunities and (internal) strengths, neutralize (external) threats, and address (internal) weaknesses

5. Defining the Corporate Strategy
Responsiveness (Reliability; Quickness; Flexibility;
e.g., Dell, Overnight Delivery Services)
Competitive Advantage through which
the company market share is attracted
Cost Leadership (Price;
e.g., Wal-Mart, Southwest
Airlines, Generic Drugs)
Differentiation (Quality; Uniqueness;
e.g., Luxury cars, Fashion Industry,
Brand Name Drugs)

6. OM’s contribution to Corporate Strategy
Differentiation
Cost Leadership
Responsiveness
Quality
Low Cost
Design & Volume Flexibility
After-Sale Service
Fast & Dependable Delivery
Broad Product Line
Product Process Quality Location Layout Human Resources
Supply Chain Inventories Scheduling Maintenance

7. Critical Success factors and Activity Maps
Critical Success Factors (CSF): Those activities or factors that are key to achieving and maintaining competitive advantage.
Activity Map: A graphical representation of the links among the competitive advantage, CSF’s, and the company supporting activities.
Example: Figure 2.7-Activity Mapping of Southwest Airlines’ Low Cost Corporate Strategy

8. Environmental Analysis Determine Corporate Mission
Strategy Development Process (J. Heizer & B. Render, “Operations Management”, Prentice Hall)
Environmental Analysis
Understand the environment, customers, industry, and competitors
Identify your strengths, weaknesses, opportunities and threats.
Determine Corporate Mission
State the reason for the firm’s existence and
identify the value it wishes to create
Form a Strategy
Build and maintain a competitive advantage, such as low price,
quick delivery or quality, by identifying and developing
the critical success factors

9. The operations frontier, trade-offs, and the operational effectiveness
Responsiveness
Cost Leadership
Differentiation

10. Expanding the operations frontier: Dell’s “revolution” in the PC market
Dell’s competitive advantage: Provide customized PC configurations, with short delivery times and affordable prices.
Dell’s success in PC market:

11. The CSF’s underlying Dell’s competitive advantage
Very high product (configurable) variety – mass customization!
Direct fulfillment - no intermediaries
No production launch until customer order booked (pure pull!)
Very low finished goods inventory (costs) – high inventory turns (raw material inventory influenced by “recommended configurations”)
High velocity material flows & fulfillment

12. Typical PC Supply Chain
PC SUPPLY CHAINS
Virtual Integration
Typical PC Supply Chain
(Compaq, HP, IBM, etc.)
Customer
Distribution
Channels
Manufacturer
Suppliers
PUSH
PULL
Customer
Dell
Suppliers
Dell Supply Chain
PUSH
PULL

13. Supporting Dell’s competitive advantage through a new operational model
Focused on strategic partnerships: suppliers down from 200 to 47
Suppliers maintain nearby ship points; delivery time 15 minutes to 1 hour
Suppliers own inventory until used in production
Demand pull throughout value chain – “information for inventory” substitution
Demand forecasting is critical – changes are shared immediately within Dell and with supply base
Customers frequently steered to “recommended configurations” with high availability to balance supply and demand
External logistics supplier used to manage inbound supply chain

14. Dell performance

15. Emerging factors and trends enabling Dell’s strategy
The commoditization of the PC industry
Standardized and interchangeable components
Emergence of reliable manufacturing service providers
Recent advances in Supply Chain Management
Information Technology (IT) platforms that allow the effective and efficient information exchange and coordination across the entire supply chain
3rd party logistics service providers
Emerging emphasis on virtual rather than vertical company integration

16. Factors affecting Corporate Strategy
External
Emerging strengths and weaknesses of competitors => new threats and opportunities, respectively
New industry entrants
Development of substitute products
Development of new technologies
Legal developments (e.g., environmental concerns and regulations)
Economic and political developments (e.g., new international agreements, political crises)
Internal
Company politics and restructuring
Modified relationships with customers and suppliers
Product Life Cycle

17. Strategy and Issues during a Product’s Life (J. Heizer & B
Strategy and Issues during a Product’s Life (J. Heizer & B. Render, “Operations Management”, Prentice Hall)
Introduction
Growth
Maturity
Decline
Poor time to change image, price or quality
Competitive costs become critical
Defend market position
Cost control critical
Practical to change price or quality image
Strengthen niche
Best period to increase market share
R&D engineering critical
Sales
Time
Frequent product and process changes
Short production runs
High production costs
Limited models
Attention to quality
Forecasting critical
Products and process reliability
Increase capacity
Shift towards product focus
Enhance distribution
Little product differentiation
Overcapacity in the industry
Reduce capacity and eventually prune line to eliminate items not returning good margin
Standardization - minor product changes
Optimum capacity
Process stability
Long production runs

18. The opportunities and challenges of globalization

19. Some basic definitions
International business: A firm that engages in cross-border transactions.
Multinational corporation (MNC): A firm that has extensive involvement in international business, owing or controlling facilities in more than one country.

20. Building competitive advantage through globalization
Cost reductions: labor, transportation, taxation (free trade zones), tarrifs, etc.
Easier access to local markets; ability to understand and adjust better to the local markets and cultures;
Ability to create new markets and expand the life cycle of existing products
Ability to tap to the local expertise or unique resources
Ability to interact with and learn from the local industry

21. The challenges underlying the deployment and support of global operations
The provided products and services need to appeal to the local markets => need for broader product lines and customization
Need to coordinate the production activity across a geographically dispersed network
Need to understand and systematically assess the pros and cons offered by the various geographical locations
Technological infrastructure
Labor skills and education
Political stability and legal issues (prod. Liability laws, export restrictions)
Economic factors (tax and interest rates, availability of raw materials, etc.)
Social and cultural aspects (language, work ethic, etc.)
Need to align the provided products and services, as well as the deployed production and business functions to the local culture and ethics

22. Global Operations Strategies
International
Multi-domestic
Global
Transnational
c.f. Figure 3.2 of page 67