Lecture 2 –

Operations
Strategy
EFIM30014 – Operations Management

Dr Aniekan Essien
Lecturer in Business Analytics
G.04 11-13 Tyndall’s Park Road
aniekan.essien@bristol.ac.uk
Summary for last week

1. Operations management as the activity of

managing the resources devoted to the
production & delivery of products and
services.
2. Discussed the characterisation of
processes using the ITO sequence.
3. How the 4Vs can be used to describe or
characterise operations and processes
4Vs Analysis – Examples
Weekly Outline

1. Operations and Strategy (Operations

Strategy)
2. The role of five performance objectives
in operations strategy.
3. The Four Perspectives on Operations
Strategy (top-down, bottom up,
operational resources led, market
requirements led).
Learning Outcomes

1. Discuss the distinction between Operations

Management (OM) and Operations Strategy
(OS).
2. Discuss the role of the performance
objectives in an organisation’s operation
strategy.
3. Discuss the four perspectives and how to
align Market requirements with Operations
resources.
Section 1
Operations and Strategy (Operations
Strategy)
DIRECTING THE DESIGNING THE DELIVERING THE DEVELOPING THE
OPERATION OPERATION OPERATION OPERATION

1: Introduction to 5: Inventory Management 10. Sustainable &

3: Process, Layout
Operations responsible
& Capacity
Management READING WEEK operations

6: Improving Operations
2: Operations
Strategy 7: Supply Chain
Management

8: Quality Management
4: Service
Operations
Management 9: Technologies in
Operations Management
What is Strategy?

“Broad objectives that direct an enterprise towards its

overall goal”
- Slack and Brandon-Jones (2019)

Slack, N. and Brandon-Jones, A., 2021. Operations

management. Pearson Education, Inc.
An Organisation is a System
▪ An open system – subject to ▪ It has hard and soft elements
vagaries of environment. o Well-defined and quantified
objectives.
▪ It is a human activity system –
reliant and involves people with o Loose, uncertain and
belief systems and objectives. qualitative requirements.
▪ It is a socio-technical system – ▪ A system in a steady state remains
social organisation and constant over time, but that
technological systems. constant state requires continual
work (a.k.a. a system in dynamic
equilibrium).
What is Strategy?
Strategic Decisions are: ▪ Setting broad objectives that
▪ Widespread in their effect on direct an enterprise towards its
the organization to which the overall goal.
strategy refers. ▪ Planning the path (in general
▪ Define the position of the rather than specific terms) that
organization relative to its will achieve these goals.
environment ▪ Stressing long-term rather than
▪ Move the organization closer to short-term objectives.
its long-term goals. ▪ Dealing with the total picture
rather than individual activities.
Business Strategy
Customers
▪ Fundamental purpose of a
business. Needs seeking
benefits at
acceptable prices
▪ Every company needs customers.

▪ Defines, relative to competitors,

the set of customer needs that the
firm seeks to satisfy by its products
or services.
▪ Defined based on how the Assets and Assets and
customer prioritizes product cost, Utilisation Cost Differentials Utilisation
delivery time, variety/flexibility and
quality. Company Competitor
Strategic/Competitive Advantage

The goal:

Value Advantage
Superior
Customer value
at less cost

Cost Advantage
The role of Operations in Strategy

Strategy Strategy Strategy

Operations Operations Operations

Operations implements strategy Operations supports strategy Operations drives strategy

Strategic/Competitive Advantage
Customer willing to
pay higher price. The goal:

Value Advantage
Superior
Customer value
at less cost

Customer prefers a
lower price.
Cost Advantage
Two Strategic Positions
Compete on the basis of HIGH
Compete on the basis of LOW PRICE
QUALITY
 Summary for LO1
▪ Ops strategy is the definition of the broad
objectives that direct an enterprise towards
its overall goal.

▪ Ops strategy determines the direction,

while ops management executes the
strategic plan at ground level. Discuss the distinction
▪ Ops Management refers to the
between Operations
transformation of inputs to outputs, while Management (OM) and
business strategy dictates how firms
compete and survive by providing better Operations Strategy
value to customers. (OS).
▪ Firms can either compete on the basis of
low price or on the basis of high-quality,
depending on the market requirements.
Section 2
The Role of five Performance Objectives in
Operations Strategy
Transformed/Transforming Resources
Quality Being RIGHT
The value equation:
▪ What does the customer
Speed Being FAST
value?

Dependability Being ON TIME

Flexibility Being ABLE TO CHANGE

Cost Being PRODUCTIVE

Adapted from Slack and Brandon-Jones (2019)

Performance Objectives – Ocado
Competitive Factors: Performance Objectives:
If the customer values these… Then the operation will need to excel at these…

Low Price Cost

High quality Quality
Fast delivery Speed
Reliable delivery Dependability
Innovative products and services Flexibility (Product/Service)
Wide range of products/services Flexibility (Mix)
The ability to change timing or quantity of
products and services Flexibility (Volume and/or Delivery)
Activity
For these two companies:
▪ What do they have to be
good at to compete in their
markets?
▪ How do their operations help
them to achieve this?
 RyanAir

Operations strategic decisions Market Requirements

▪ Stripped down service

▪ Low Price
▪ One technology
▪ Cheap airport locations ▪ Reliability
▪ Fast turnround
▪ Basic Service
 Summary for LO2
▪ Ops performance objectives refer to the
set of criteria against which to evaluate
the performance of operations.

▪ Five objectives are cost, quality, speed,

dependability and flexibility. Discuss the role of
▪ Excelling at one or more of these
the performance
operations’ performance objectives can objectives in an
enable an organisation to pursue a
business strategy based on a organisation’s
corresponding competitive factor.
operation strategy.
▪ Matching operations excellence to
customer requirements lies at the heart
of any operations-based strategy.
Section 3
The Four Perspectives on Operations
Strategy
The four perspectives of Ops Strategy
Top-Down
▪ What the whole group or business
wants
Outside-In
▪ What the market position requires
operations to do
Bottom-Up
▪ What day-to-day experience suggests
operations should do
Inside-Out
▪ What operations resources can do

Adapted from Slack and Brandon-Jones (2019)

Top-down: Ops Strategy with Business
▪ Top-Down: Identifies three related levels of
strategy

o Corporate: positions the firm in its

global, economic and political
environment.

o Business: each business unit in the

corporate group must have its own
business strategy.

o Operations: the operations function

must consider how best to organize itself
to support the business objectives.

Adapted from Slack, Brandon-Jones & Johnston (2019)

 Outside in – The market perspective
▪ Operations strategy should reflect the
intended market position (i.e., you Customer
must serve your market or fail!).
Needs
▪ Operations should respond by
providing the ability to perform in a
way that enables the firm to compete Performance Market
(e.g., Tesco). Positioning
Objectives
▪ By ensuring operations achieve the
right priority between 5 performance
objectives (e.g., if customer needs Competitors’
fast delivery, speed should be Actions
important to the operation).
Required Understanding
performance markets
 Bottom Up – Strategy & Experience
Challenges with top-down
▪ Rarely applicable in real-world.

▪ When corporates are creating strategy,

they consider the market conditions,
experiences and ops capabilities.

▪ This is bottom-up perspective.

▪ Both perspectives can work together –

the top-down sets the overall
direction and the bottom-up uses
experience to build capabilities.

Adapted from Slack, Brandon-Jones & Johnston (2019)

In Summary…
Operations Resources Strategic Reconciliation Market Requirements

Operations Market
Resources Segmentation

Operations Performance
Operations Strategy Market
Objectives Positioning
Competences Decisions

Operations Competitor
Processes Activity

Understanding Strategic Required Understanding

Resources and Decisions Performance Markets
Processes
• Capacity • Quality
• Supply networks • Speed
• Process technology • Dependability
• Development and • Flexibility
organisation • Cost

Adapted from Slack and Brandon-Jones (2019)

 Summary for LO3
▪ Four perspectives of ops strategy -
Market-based, resource-based, top-
down, and bottom-up.
▪ Top-down – requirements of the
business,
Discuss the four
▪ Outside-in (market-based) – what the
market requires the operations to do. perspectives and how to
▪ Bottom-up – what the day-to-day align Market
experiences suggests operations to requirements with
do.
Operations resources.
▪ Inside-out (resource-based) –
capabilities of the operations
resources.
Summary for Today
1. Ops Strategy is the pattern of strategic
decisions & actions which set the role
objectives and activities of the operations.
2. Performance objectives strongly relate
to customer value.
3. There are four perspectives of
operations strategy - Market-based,
resource-based, top-down, bottom-up.
Reflective Questions
1. What is operations strategy?
2. What are the differences between operations
management and operations strategy?
3. What is the difference between a ‘top-down’ and
a ‘bottom-up’ view of operations strategy?
4. What is the difference between the market
requirements and an operations resource view
of operations strategy?
5. How are the four perspectives of operations
strategy reconciled?