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Operations Strategy

The document provides an overview of operations strategy. It defines operations strategy and differentiates it from operations management. It discusses key decision areas in operations strategy like capacity, supply chain, process technology and development. It also presents a framework for formulating operations strategy involving defining corporate objectives, determining marketing strategies, assessing product competitiveness, establishing delivery modes, and providing infrastructure support. An example case study of operations strategy of food service organization Akshay Patra is also summarized.

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sulabhagarwal1985
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173 views

Operations Strategy

The document provides an overview of operations strategy. It defines operations strategy and differentiates it from operations management. It discusses key decision areas in operations strategy like capacity, supply chain, process technology and development. It also presents a framework for formulating operations strategy involving defining corporate objectives, determining marketing strategies, assessing product competitiveness, establishing delivery modes, and providing infrastructure support. An example case study of operations strategy of food service organization Akshay Patra is also summarized.

Uploaded by

sulabhagarwal1985
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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OPERATIONS

STRATEGY
MBAO0014
SYLLABUS
SYLLABUS
TEXT/REFERENCE BOOK

Operations Strategy by Nigel Slack,


Michael Lewis and Mohita Gangwar Sharma
(Pearson).
OPERATIONS MANAGEMENT

• The business function responsible for planning, coordinating, and controlling the
resources needed to produce products and services for a company.
• Modern Operations management focuses upon:
• Long term survival
• Customer driven approach
• Core competencies
• Competitive priorities
• Innovation in product development
WHAT IS STRATEGY?

• Derived from a Greek word ‘strategos’ meaning ‘leading an army’.


• Setting broad objectives to direct organizations towards its overall goal.
• Planning the path to achieve these goals
• Stressing on long term objectives
OPERATIONS STRATEGY

Operations strategy is the total pattern of decisions which shape the long-term
capabilities of any type of operation and their contribution to overall
strategy, through the matching of market requirements with operations
resources.

Operations strategy is a process by which key operations decisions are made


that are consistent with the overall strategic objectives of the firm.
EXAMPLES- OPERATIONS STRATEGY

• Amazon: Once known for books, Amazon is now known as the go-to platform for online
shoppers of any product. Its distribution network is widely praised and even includes
experiments with drone delivery.
• Apple Computers: Apple is long recognized in operations circles for its operational
excellence and supply chain management.
• Walmart: This retailing giant managed to undercut many competitors on the price and
variety of a wide range of products.
• FedEx: FedEx made speed of delivery its calling card, achieving it with excellent operations.
NEED OF OPERATIONS STRATEGY

• Due to several factors, the competitive dynamics will change and the expectations of the customer
also change on account of this.
• Organisations need a structural approach to scan the market and distil the changing needs at the
market place. Moreover they also need a mechanism to chalk out a plan for responding to these
changes in the most effective way.
• With the changes in the market place the competitive priorities for an organisation must also change.
Organisation need to tune their operations to match with the competitive priorities.

Therefore it is important for organisation to develop the capability to devise strategies for operations
and revisit the strategy formulation exercise and when there is a need for it.
OPERATIONS MANAGEMENT VS OPERATIONS
STRATEGY
• Scope: Operations strategy is a broad, long-term plan that encompasses the entire organization and its
operations. It is concerned with the overall direction and scope of an organization’s operations, including its
market focus, competitive position, and resource allocation. Operations management, on the other hand,
is focused on the day-to-day planning and control of an organization’s operational processes in order to
achieve efficiency and effectiveness.
• Level of decision-making: Operations strategy is developed at the corporate level by top management,
while operations management is carried out at the operational level by middle and lower level managers.
• Time horizon: Operations strategy has a long-term time horizon, as it is concerned with the overall
direction and scope of an organization’s operations over the long term. Operations management, on the
other hand, has a shorter time horizon, as it is focused on the day-to-day planning and control of
operational processes.
OPERATIONS MANAGEMENT VS OPERATIONS
STRATEGY
• Focus: Operations strategy is concerned with the overall direction and scope of an
organization’s operations, including its market focus, competitive position, and resource
allocation. Operations management is focused on the efficiency and effectiveness of an
organization’s operational processes.
• Link to business strategy: Operations strategy is closely linked to the overall business
strategy of an organization, as it is concerned with aligning the organization’s operations
with its business goals and objectives. Operations management, on the other hand, is
focused on the day-to-day planning and control of operational processes and may not
always be directly linked to the overall business strategy.
FOUR PERSPECTIVES OF OPERATIONS
STRATEGY
CONT’D…

• Top down perspective: operations strategy should reflect what whole business want to do. Eg: what type of
business to be in?, In which countries company should do business? etc.
• Bottom up approach: Operations strategy is build by learning from day to day operational activities and
improvements. (Continuous and incremental improvements). Eg: daily inspection/quality check can help in
building operations strategy for quality.
• Market requirements: translating market requirements into operations decisions. Identifying what is needed
from the operations point of view to compete in a market. Eg: controlling the cost of production to lower the
price, upgrading the technology of the product etc.
• Operations resources: exploiting the capabilities of operations resources in chosen market. Eg: exploiting
the capabilities of employees, distribution/production centres locations
Performance Dimensions

Quality Time(speed and Flexibility Cost


• Performance dependability) • Mix • Labor
• Speed
• Conformance • Changeover • Material
• Reliability
• Reliability • Volume • Engineering
• Delivery
window • Quality
Decision areas
 Capacity strategy
 What should be the overall level of capacity?
 How this capacity be distributed among different units/plants?
 When should be the changes be made to overall capacity levels?
 How much capacity change to be made?
 Supply network strategy (including purchasing and logistics)
 How operations relate to the interconnected network of other operations?
 All operations need to consider their position in supply network (customer, distributor, supplier
etc)
 How to manage the network and related operations in the network?
 How many suppliers we should have?
 Long term partnerships or market based relationships?
Cont’d…
 Process technology strategy
 Choice and development of systems, machines and processes that directly or indirectly
transforms goods/services.
 How to choose/evaluate a alternate process technologies?
 How assess the consequences of choosing a particular process technology?
 Development and organization
 Set of broad and long term decisions regarding how to run operations on continuous
basis.
 How to improve processes of an operation over time?
 How to integrate resources together within the business?
 How to organise for new product and service development?
The operations strategy matrix
Cont’d…
 The operations strategy matrix is a tool used by strategy
professionals to assess major factors that affect company operations.
The concept will assist organisations in making better strategic
operational decisions and reducing risks.

 The left side of this matrix is “Performance objectives” which leads to


“market competitiveness” on the right side. The bottom axis is
operational “Decision areas” leading to “Resource usage” at the top of
the matrix. The boxes in the matrix are used to layout the main elements
of the operations strategy or operating model.
Case study: Akshay Patra
Framework for operations strategy in manufacturing and services

 Hill framework for Operations Strategy Formulation


 Hill (2005) provides an iterative framework
 It links together:
 The corporate objectives: which provide the organisational direction,
 The marketing strategy: which defines how the organisation will compete in its
chosen markets,
 The operations strategy: which provides capability to compete in those markets
Cont’d…
 The Hill’s framework consists of five steps:
 Define corporate objectives:
 Determine marketing strategies to meet these objectives
 Assess how different products win orders against competitors
 Establish the most appropriate mode to deliver these sets of products
 Provide the infrastructure required to support operations
Define corporate objectives
 Involves establishing corporate objectives that provide a direction for the
organisation and performance indicators that allow progress in achieving those
objectives to be measured.
 The objectives will be dependent on the needs of external and internal
stakeholders and so will include financial measures such as profit and growth
rates as well as employee practices such as skills development and appropriate
environmental policies.
 Eg: Switzerland based Rolex watch companies are facing a threat from smart
watches so switz watch companies are offering around 85 % of price value to
clear unsold watches, Increase sales volume, low profitability, to keep at par
with smart watches. Analog watch incorporates digital version along with
added value features compete with smart watches
Determine marketing strategies to meet these objectives

 This involves identifying target markets and how to compete in these


markets
 Eg: Adidas covers the market for youngsters sport persons as the
target market so their strategy involves a product range pricing that is
value for money and comfort, which attracts the target segment. Their
advertisement and promotional strategies includes the use of sport
personalities to attract the target age group.
Assess how different products win orders against competitors

 crucial stage in Hill’s methodology where any mismatches between


the requirements of the organization’s strategy and the operations’
capability are revealed.
 This step provides the link between corporate marketing proposals
and the operations processes and infrastructure necessary to support
them.
 A match between key performance dimensions and decision areas is
made.
Establish the most appropriate mode to deliver these sets of products (structural decisions)

 Processes are designed to manufacture the products/ services


 Decision is taken regarding the type of process required
 Volume
 Variety
Provide the infrastructure required to support operations

 reconciling market requirements (demand) with the operation’s


resources (supply).
 Includes distribution, materials management i.e., all planning and
control activities.

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