MD 021 - Management and Operations Operations Strategy

Definitions of strategy and operations strategy Levels of strategy: corporate, business, functions Evaluating an operations strategy E ample: McDonald!s

Definition of Strategy "trategy is a deliberate searc# for a plan of action t#at $ill develop a business!s distinctive competence and compound it%

Definition of Operations Strategy &n operations strategy consists of a se'uence of decisions t#at, over time, enables a business unit to ac#ieve a desired operations structure, infrastructure, and set of specific capabilities in support of t#e competitive priorities%

Order-Qualifiers and Order-Winners

Order-'ualifiers are t#ose criteria t#at a company must meet for a customer to even consider it as a possible supplier% (ompanies need only be as good as competitors% Order-$inners are t#ose criteria t#at $in t#e order% (ompanies need to be better t#an t#eir competitors%

Levels of Strategy
What business are we in?

Corporate

Divisional %&usiness'

How do we $o(pete?

Fin

!"t

#rod Dev

Ops

ole of ea$h fun$tion?

Co(ponents of the Operations Strategy "tructural decision categories: .nfrastructural decision categories: (apabilities: (ompetitive priorities: (apacity +acilities ,ertical integration -ec#nology /or0force Organi1ation .nformation2control systems 3ni'ue to eac# firm (ost 4uality 5ig#-performance design (onsistent 'uality -ime +ast delivery time On-time delivery Development speed +le ibility (ustomi1ation ,olume fle ibility

Criteria for )valuating an Operations Strategy Consistency (internal and external) 7et$een t#e operations strategy and t#e overall business strategy 7et$een t#e operations strategy and t#e ot#er functional strategies $it#in t#e business &mong t#e decision categories t#at ma0e up t#e operations strategy 7et$een t#e operations strategy and t#e business environment 8resources available, competitive be#avior, governmental restraints, etc%9 Contribution (to competitive advantage) Ma0ing trade-offs e plicit, enabling operations to set priorities t#at en#ance t#e competitive advantage Directing attention to opportunities t#at complement t#e business strategy :romoting clarity regarding t#e operations strategy t#roug#out t#e business unit so its potential can be fully reali1ed :roviding t#e operations capabilities t#at $ill be re'uired by t#e business in t#e future

Statement of McDonalds Operations Strategy To provide unmatched consistency in operations in support of high product quality. This must be accomplished with adequate speed, low cost, and process innovation to accommodate changes in consumer tastes. +rom t#e statement of McDonald<s operations strategy, it is clear t#at bot# consistent and #ig#performance 'uality are considered order $inners, $#ile speed, cost, and innovation are considered order 'ualifiers%

McDonalds Operations Strategy

Dimension (apacity +acilities :rocess -ec#nology ,ertical .ntegration /or0force "trategy >ro$t# as needed t#roug# additional stores - but capacity added carefully /ell-utili1ed - franc#isee!s $ell-being depends on it being used #eavily Distributed facilities, eac# facility being very similar to t#e ne t, all focused around t#e same menu - alt#oug# t#e uniformity is beginning to c#ange 5ig# degree of process understanding, emp#asis on ?fool-proof? processes & leader in t#e tec#nology of fast-food delivery :artners#ip arrangement Long-term relations#ip $it# suppliers to promote innovation and 'uality improvement +ranc#isees: $ell-trained, carefully selected, entrepreneurs Operators: #ig#-turnover, c#eap >uidelines provided by corporation, but franc#isees pus# to locally optimi1e (entrali1ed buying 7ul0 contracts ?:us#? system for basic supplies, ?pull? system day-today in t#e restaurants

Organi1ation (ontrol "ystems

Evaluation of t#e operations strategy:

.nternal and e ternal consistency - Loo0ing at t#e operations

strategy along t#e seven dimensions, t#ey all support t#e operations mission and t#e business strategy from t#e previous page%
(ontribution to competitive advantage - "ystemic strategy

creates unmatc#ed consistency in operations t#at #as been difficult to imitate%

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