Biju Patnaik Institute of It & Management Studies, Bhubaneswar

BIJU PATNAIK INSTITUTE OF IT & MANAGEMENT STUDIES, BHUBANESWAR
Module – I
Operations Strategy (Introduction)
What is Strategy?
1) “A plan of action designed to achieve a long-term or overall aim for example the art of
planning and directing overall military operations and movements in a war or battle”.
2) “Strategy is the direction and scope of an organisation over the long term: ideally, which
matches its resources to its changing environment and in particular its markets, customers or
clients so as to meet stakeholder expectations”.
3) “Strategy is an action that managers take to attain one or more of the organization’s goals”.
4) Strategy can also be defined as “A general direction set for the company and its various
components to achieve a desired state in the future. Strategy results from the detailed strategic
planning process”.
5) “A strategy is all about integrating organizational activities and utilizing and allocating the
scarce resources within the organizational environment so as to meet the present objectives”.
Features of Strategy:
1) Strategy is Significant because it is not possible to foresee the future. Without a perfect
foresight, the firms must be ready to deal with the uncertain events which constitute the
business environment.
2) Strategy deals with long term developments rather than routine operations, i.e. it deals with
probability of innovations or new products, new methods of productions, or new markets to be
developed in future.
3) Strategy is created to take into account the probable behavior of customers and competitors.
Strategies dealing with employees will predict the employee behavior.
4) Strategy is a well-defined roadmap of an organization. It defines the overall mission, vision
and direction of an organization. The objective of a strategy is to maximize an organization’s
strengths and to minimize the strengths of the competitors.
Levels of Strategy:
Levels of Strategy can be seen to exist at 3 main levels of corporate, business and functional:
Corporate level Strategy:
 At the highest or corporate level the strategy provides long-range guidance for the whole
organisation.
 What business should we be in?
Business Level Strategy:
 Here the concern is with the products and services that should be offered in the market defined
at the corporate level.
 How do we compete in this business?
Functional Level Strategy:
 This is where the functions of the business (e.g. operations, marketing, finance) make long-
range plans which support the competitive advantage being pursued by the business strategy
 How does the function contribute to the business strategy?
What is Operations Strategy?
1) 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 reconciliation of market
requirements with operations resources.
2) Operations strategy involves decisions that related to the specifications and design of the product
or service, design of a production process and the infrastructure needed to support the process, the
role of inventory in the process, and locating the process.
3) Operations strategy decision are part of corporate planning process that coordinates the goals of
operations with those of marketing and that of larger organization.
4) Operations strategy is concerned with the reconciliation of market requirements and operations
resources. It does this by:
 Satisfying market requirements (measured by competitive factors) by setting appropriate
performance objectives for operations
 Taking decisions on the deployment of operations resources which effect the performance
objectives for Operations.
5) Using a market-based approach to operations strategy an organisation makes a decision regarding

the markets and the customers within those markets that it intends to target. The organisation’s
market position is one in which its performance enables it to attract customers to its products or
services in a more successful manner than its competitors.
6) A resource-based view of operations strategy works from the inside-out of the firm, rather than
the outside-in perspective of the market-based approach. Here there is an assessment of the
operations decisions regarding:
 Structural decisions - physical arrangement and configuration of resources.
 Infrastructural decisions - activities that take place within the operation’s structure.
Elements of operation strategy
Operations strategy comprises six components:
1) Positioning the production system:- It involves selecting the product design, the production
system and the inventory policy for the finished goods for each product line
i. Product Focused- Generally employed in mass production organizations, where
there are groups of machine, tools and workers arranged according to their
respective tasks in order to put together a product.
ii. Process Focused-It is designed to support production departments that perform a

single task like painting or packing. These system are highly flexible and can
easily be modified to support other product design.
2) Focus of factories and service facilities
3) Product/Service design and development
4) Technology selection and process development: - Thorough analysis and planning of the
production processes and facilities. Every step in the process of production is planned in
detail. The technology to be used in the production process is selected from range of options.
5) Allocation of resources to strategic alternatives- Production companies have to continuously

deal with the problem of scarce resources like capital, machine and materials and so on, their
shortages can influence production performance significantly. Hence the operation manger
have to plan the optimal use of resources, both in terms of minimizing wastage, and in terms
of their allocation to the best strategic use.
6) Facility planning: The location of the production facilities is one of the key decisions an
operation manager has to make since it is critical to the competitiveness of the organization,
which involves massive initial investment. Strategically right options should be carefully
weighed against all available alternatives. These decisions also influence the future decisions
on probable capacity expansions plans. Operation managers also make decisions, i.e.
decision on internal arrangement of workers and department within the facility.
The Role and Purpose of Operations Strategy:
 Operations strategy is only one part of overall business or corporate strategy, but it’s crucial
for competitiveness and success. Without a strong operations strategy, companies fail to keep
up with changing markets and lose out to more strategic competitors. Many companies, big
and small, have struggled with operations strategy, often lacking in comparison with
technologically savvy competitors. For example, Amazon, while constantly advancing
technology such as drones for delivery, has pushed aside myriad brick-and-mortar retailers.
 To be effective and competitive, all parts of a company must work together. All departments
should contribute to the company mission and have strategies underlying the overall
corporate/business strategy. In addition to having an operations strategy, they should also have
functional area strategies in finance, IT, sales, marketing, human resources, and possibly other
departments, depending on the type of business.
 “An operations strategy should guide the structural decisions and the evolution of operational
capabilities needed to achieve the desired competitive position of the company as a whole.
 Based on operation strategy, it could be categorized types of organizations based on a

company’s attitude toward operations:
i. Stage 1, Internally Neutral: The operations function is reactive and viewed as a necessary evil.
ii. Stage 2, Externally Neutral: The operations function adopts best practices and tries to match
the competition.
iii. Stage 3, Internally Supportive: The operations function tries to provide support for the overall
business strategy.
iv. Stage 4, Externally Supportive: The operations function provides competitive advantage for
the company, and sets the industry standard.
Core Operational Strategy Areas:
Different sources use different terms to describe strategy areas. Here’s one way to categorize core
strategies:
1) Corporate: Overall company strategy, driving the company mission and interconnected
departments
2) Customer-Driven: Operational strategies to meet the needs of a targeted customer segment
3) Core Competencies: Strategies to develop the company’s key strengths and resources.
4) Competitive Priorities: Strategies that differentiate the company in the market to better
provide a desired product or service.
5) Product or Service Development: Strategies in product design, value, and innovation
A company’s key success factors (KSFs) pertain to competitiveness, such as a company’s attributes,
resources, capabilities, and competencies. By identifying these, a company can focus on the issues that
matter most and measure them with key performance indicators (KPIs). Another way to frame
strategic areas is by these “distinctive” competencies:
1) Price
2) Quality,( such as performance, features, aesthetics, and durability)
3) Service
4) Flexibility
5) Tradeoffs, or competing on one or two distinctive competencies
6) An order qualifier means a company or product has a characteristic that allows it to be a viable
competitor.
7) An order winner is a characteristic that causes customers to choose it over competitors.
Tips /Tactics for Operations Strategies:
Specific strategies depend on your specific business. Here are strategy tips that apply to many
companies, whether they are producing goods or services.
1) Take a Global View: See how others worldwide are providing better goods and services. Learn
from them, and see how you might compete and innovate in a core competency. Also, improve
your supply chain by looking globally, and employ global talent if remote work is an option.
2) Have a Strong Mission Statement: Focus your efforts with a mission statement that truly
defines your goals and guides your business approach. Tie your overall business strategy and
operations strategy into it.
3) Gain Competitive Advantage with Differentiation: Develop a point of differentiation and a

unique value proposition, and consistently innovate and build strategies around them. Don’t
just use best practices. Exceed them, and leapfrog the competition.
4) Gain Insights from a SWOT Analysis: Analyze your company’s strengths, weaknesses,
opportunities, and threats as a catalyst to strategy.
5) Track Progress: Develop strong analytics and KPI dashboards to measure and optimize your
operational efforts.
Operations Strategy Examples:
With the rapidly changing marketplace in recent years, some companies have excelled in part due to
their strong operations strategies. Here a few examples:
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 touted 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.
Case Study of Wal-Mart Operation Strategy
Innovation and Operations Discipline:
Operations Discipline:
 Discipline: A Critical But Challenging Step toward Operational Excellence. It isn’t unusual to
confuse operational excellence with operational discipline. While the two are closely linked --
indeed, the former cannot be realized without the latter -- operational discipline is but one
important component among others along the journey to operational excellence.
 DuPont Sustainable Solutions (DSS) defines operational discipline as “the deeply rooted
dedication and commitment by every member of the organization to carry out each task the
right way every time.”
 Operational discipline means complying with a set of well-thought-out and well-defined

processes, and consistently executing them correctly. Striving to achieve operational
excellence is one of the most important contributors to an organization’s sustainable
performance and growth.
 Simply put, operational discipline means complying with a set of well-thought-out and well-
defined processes, and consistently executing them correctly. It’s an essential ingredient when
trying to achieve operational excellence.
 Operational discipline provides an organized way to accomplish tasks and implement

operational changes through a fundamental set of procedures that are specific to a business’s
unique products or service offerings.
 Regardless of the industry, operational discipline increases reliability and decreases the risk of
a high-consequence incident occurring. DuPont Sustainable Solutions’ Safety Perception
Survey of our clients across the globe, representing sectors from oil and gas to chemicals,
confirms that disciplined processes yield positive results. Survey participants who had strong
incident investigation processes in place and implemented investigation recommendations saw
a correlation with strong safety performance.
 Operational discipline improves the execution and performance of the work practices across an
organization to a point where leaders and employees consistently and continuously address the
day-to-day operational needs of the business in a timely, safe and efficient manner.
 Discipline = Predictability, for some, operational discipline can have a negative connotation.
For example, it is sometimes interpreted as a means to punish behavior and actions that are not
in line with expected norms. Still others may believe that operational discipline imposes rigid,
inflexible command-and-control regimens that stifle free thought and innovation within a
company.
 When companies employ operational discipline as a means of providing more predictability

across their organizations, certain tasks reach higher levels of efficiency, contributing to fewer
mistakes and better quality.
 Effective operational discipline can be seen day in and day out within high-risk industries like
nuclear power or aviation, where the consequences of an accident can be so catastrophic that
the importance of reliability raises itself to a very high level. These high-reliability
organizations nearly always achieve “error-free operations” due to their strong operational
discipline.
Every business, along with its stakeholders surely benefit from raising performance to higher levels of
excellence, few factors are described below;
The Importance of Leadership:
 “Doing it right every time” is great, but operational discipline alone isn’t enough for
organizations to approach operational excellence. High-performing organizations leverage
their error-free operations to focus on and address other critical operational improvements
within the organization that allow it to reach a higher level of operational excellence. One
factor that’s key to reaching these higher levels of operational excellence is the deep
involvement of an organization’s leadership.
 Leadership is essential to establishing the appropriate organizational structure and focused

processes that will improve operational excellence. Leadership articulates and defines the
shared values and common purpose, and prioritizes the things that truly matter to drive the
highest levels of operational excellence. The direction needed to support this is delivered to the
organization through proper tools and training, as well as employee involvement, clear
communication of the rules, open dialogue and alignment.
Culture of Interdependency: A Driver and Indicator of Operational Excellence:
 An organization’s journey to operational excellence can be a complicated one. DuPont

Sustainable Solutions has an effective model, known as the DuPont Bradley Curve, to help
companies measure their progress toward development of an effective operating culture that is
essential to the pursuit of operational excellence.
 DuPont Bradley Curve is a much cited, leading quantitative indicator of organizational culture
and maturity. It is a method for measuring how a company’s goals for organizational
excellence become incorporated within company culture, and how that culture can be
enhanced.
 As mapped out by the DuPont Bradley Curve, people in an organization move from externally
applied discipline (from supervisors, for instance) to self-discipline, to a state of
interdependency in which they help each other perform better.
 Operational discipline accelerates progress along the Bradley Curve. In fact, according to
DuPont Sustainable Solutions’ Safety Perception Survey, operational discipline, in which an
organization’s leaders enable employees to feel empowered to assume responsibility for
safety , was shown to be a key contributor toward reaching interdependency.
 The Bradley Curve is an effective modeling tool that helps organizations assess where they
stand and chart an effective path forward. It helps them identify obstacles and answer key
questions toward implementing effective operational discipline, as a requirement to the
achievement of operational excellence.
Figure: DuPont Bradley Curve

Innovation:
1) Innovation is an idea converts into reality for example a new method, idea, product, etc. and
operating is about discipline.
2) Innovation is defined as the process of making an idea or invention into a good or service that
creates value and/or for which customers will pay.
3) Innovation in its modern meaning is "a new idea, creative thoughts, new imaginations in form
of device or method".
4) Innovation is often also viewed as the application of better solutions that meet new
requirements, unarticulated needs, or existing market needs.
5) Such innovation takes place through the provision of more-effective products, processes,
services, technologies, or business models that are made available to markets, governments and
society. Operations generate today's value, while innovation creates tomorrow's opportunities.
The primary difference between operations discipline and innovation is uncertainty. It eludes planning,
prediction and containment.
Operating Discipline vs. Innovating
Sl.NO. Operating Discipline Innovating

1 Creating today's revenue Creating tomorrow's revenue
2 Managers are in charge Leaders are in change
3 Following rules Breaking rules
4 Steps are mostly linear Steps are mostly non-linear
5 Single route and result Multiple routes and results
6 Driven by functional teams Driven by cross-functional teams
7 Failures are punished Noble failures are permitted

8 Reworking is a part of learning and moving
Reworking is waste
forward
9 Clear, shared goals Unclear, often conflicting goals
10 Clear front end Fuzzy front end
11 Easy to measure Tough to measure
12 Rich historical data Poor historical data
13 Scientific forecasting impossible,
Scientific forecasting possible
simulation games are used instead
14 Short cycle time Long cycle time
15 Many common causes Many special causes
16 Traditional players & roles New players & roles
17 Doing things right Doing right things
Operational Excellence as a Competitive Strategy:
1) An operational excellence strategy aims to accomplish cost leadership. Here the main focus
centres on automating manufacturing processes and work procedures in order to streamline
operations and reduce cost.
2) A strategy of operational excellence is ideal for markets where customers value cost over
choice, which is often the case for mature, commoditized markets where cost leadership
provides a vehicle for continued growth.
3) Leaders in the area of operational excellence are strongly centralized, with strong
organizational discipline and a standardized, rule-based operation.
4) Measuring the performance of key processes and benchmarking costs comprise an integral part
of the operations of these companies who relentlessly seek to streamline their processes in
order to eradicate errors. Disciplines such as TQM, SCM and Six Sigma are cultivated in a
volume-oriented business model.
5) Examples of companies pursuing this competitive strategy include Wal-Mart, IKEA,
Southwest Airlines, McDonald’s and FedEx etc.
Customer Intimacy as a Competitive Strategy:
 The customer intimacy strategy focuses on offering a unique range of customer services that
allows for the personalization of service and the customization of products to meet differing
customer needs. Often companies who pursue this strategy bundle services and products into a
“solution” designed specifically for the individual customer.
 The successful design of solutions requires vendors to possess deep customer knowledge as
well as insights into their customers’ business processes. The solutions offered rarely present
the cheapest option for the customer, nor the most innovative, but are regarded as “good
enough.”
 Customer intimacy focuses on the needs of the individual customer, the true customer intimacy
can only arrive through aligning the product development, manufacturing, administrative
functions and executive focus around the needs of the individual customer.
 Customer-centric companies tend to have a decentralized organization which allows them to

learn and change quickly according to customers’ needs. These types of companies often keep
an entire ecosystem of partners for the actual production and delivery of products and services
to their customers.
 Examples of companies who pursue this type of strategy include IBM, Lexus, Virgin Atlantic
and Amazon.com.
Product Leadership as a Competitive Strategy:
 Product leadership as a competitive strategy aims to build a culture that continuously brings
superior products to market. Here product leaders achieve premium market prices thanks to the
experience they create for their customers. The corporate disciplines they cultivate include:
1) Research portfolio management

2) Teamwork
3) Product management
4) Marketing
5) Talent management
 Product leaders recognize that excellence in creativity, problem solving and teamwork is critical
to their success.
 The consumer electronics, fund management, automotive and pharmaceutical industries include
many companies pursuing a strategy of product leadership. Examples of these include Apple,
Fidelity Investments, BMW and Pfizer.
Operations Performance:
Firm's performance measured against standard or prescribed indicators of effectiveness, efficiency,

and environmental responsibility such as, cycle time, productivity, waste reduction, and regulatory
compliance. Operational performance objectives are the areas of operational performance that a
company tries to improve, in a bid to meet its corporate strategy.
Five Operational Performance Objectives:
The Five Performance Objectives of quality, speed, dependability, flexibility, and cost can be
grouped together to play a pivotal role in business. Interwoven through every aspect of operations
allows management to draw attention to areas within an organisation that is not performing well and
provides opportunities to address them. The characteristics of each objective allow management to
assess operations both internally and externally to benefit the business by gaining and creating the
competitive advantage.
Quality:
Quality is the most visible part of what an operation does and acts as a consistent indicator of
customers’ expectations, in other words, ‘doing things right’, but the things which the operation needs
to do right will vary according to the kind of operation. All operations regard quality as a particularly
important objective. Quality is something that a customer finds relatively easy to judge about the
operation. A customer perception of high-quality products and services means customer satisfaction
and therefore the likelihood that the customer will return. When quality means consistently producing
services and products to specification it not only leads to external customer satisfaction but makes life
easier inside the operation as well.
Quality reduces costs: The fewer mistakes made by each process in the operation, the less time will be
needed to correct the mistakes and the less confusion and irritation will be spread.
Operation principle: Quality can give the potential for better services and products and save costs.
Speed:
Speed means the elapsed time between customers requesting products or services and them receiving
them. The main benefit to the operation’s (external) customers of speedy delivery of goods and
services is that the faster they can have the product or service, the more likely they are to buy it, or the
more they will pay for it, or the greater the benefit they receive. Fast response to external customers is
greatly helped by speedy decision making and speedy movement of materials and information inside
the operation.
Speed reduces inventories: The material’s journey time is far longer than the time needed to make and
fit the product. It actually spends most of its time waiting as stocks (inventories) of parts and products.
The longer items take to move through a process, the more time they will be waiting, and the higher
inventory will be.
Operation principle: Operations principle is that speed can give the potential for faster delivery of
services and products and save costs.
Dependability:
Dependability means doing things in time for customers to receive their goods or services exactly
when they are needed, or at least when they were promised. Customers might only judge the
dependability of an operation after the product or service has been delivered. For example no matter
how cheap or fast a car mechanic garage is, if it always later than promised to finish or the same parts
continue to fail, the customer will go elsewhere.
Dependability saves time: Managers and workers spending time firefighting chaos, simply waste
time! If they had machinery and services that they could depend on, much valuable time would be
saved to concentrate on other aspects of the business.
Dependability saves money: Ineffective use of time will translate into extra costs.
Dependability gives stability: The disruption caused to operations by a lack of dependability goes
beyond time and cost. It affects the ‘quality’ of the operation’s time.
Operations principle: Dependability can give the potential for more reliable delivery of services and
products and save costs.
Flexibility:
Flexibility means being able to change the operation in some way. This may mean changing what the
operation does, how it is doing it, or when it is doing it. Specifically, customers will need the
operation to change so that it can provide four types of requirement:
1) Product/service flexibility: the operation’s ability to introduce new or modified products and
services.
2) Mix flexibility: the operation’s ability to produce a wide range or mix of products and services.
3) Volume flexibility: the operation’s ability to change its level of output or activity to produce
different quantities or volumes of products and services over time.
4) Delivery flexibility: the operation’s ability to change the timing of the delivery of its services
or products.
Holding the flexibility to change and adapt quickly to market conditions provides the business with a
competitive edge, as larger centralized companies that do not have that flexibility will at times take
weeks and months to adapt, meanwhile the more flexibility can capitalize.
Operations principle: Flexibility can give the potential to create new services and products, in a wider
variety and with different volumes and with different delivery dates, as well as save costs.
Cost:
 To the companies which compete directly on price, the cost will clearly be their major
operations objective. The lower the cost of producing their goods and services, the lower can
be the price to their customers. Even those companies which do not compete on price will be
interested in keeping costs low. Every rupees removed from an operation’s cost base is a
further pound added to its profits. Therefore, low cost is a universally attractive objective.
 All operations have an interest in keeping their costs as low as is compatible with the levels of
quality, speed, dependability, and flexibility that their customers require. The measure that is
most frequently used to indicate how successful an operation is at doing this is productivity.
Productivity is the ratio of what is produced by an operation to what is required to produce it.
 Both the reduction of cost through internal effectiveness is as important as the focus on making
improvements to all the other operational objectives.
Cost operation principle : Cost is always an important objective for operations management, even if
the organisation does not compete directly on price.
Figure: The Operation Performance objectives and their effects.

What is Operational Performance Management (OPM)?
 Operational performance management (OPM) is the alignment of all business units within an
organization to ensure that they are working together to achieve core business goals.
 In manufacturing, OPM software integrates and analyzes data from a variety of plant sources
and translates raw data feeds into actionable information. The data is packaged as exception
reports and key performance indicator (KPI) dashboards, so that the information can be viewed
in context.
 OPM software allows manufacturers to establish links between operations KPIs and critical
business metrics. As a result, they gain insight into everything from asset utilization to
machine uptime and plant-floor productivity while also monitoring energy usage, uncovering
the cause of quality problems, and ensuring consistent production across multiple lines.
Operations performance management plays a vital role to run any project successfully. Its benefits
include:
 Operation management involves similar management for every industry or business

irrespective of their nature of the operation. Planning, organizing, staffing, monitoring
controlling, directing and motivating are its significant elements. With its help, an organization
is able to make good use of its resources like labor, raw material, money and other resources.
 To improve the overall productivity. The ratio of input to output is termed as productivity. It
gives a measure of the efficiency of the manager as well as the employees.
 Operation management is the heart of an organization as it controls the entire operation, if the
products are made catering to the needs of the customers then, they’ll be sold at a rapid rate.
 The optimum utilization of resources leading to enormous profits of the organization. The
efforts of the employees and the various raw materials are efficiently utilized and converted
into the services and goods required by the organization.
 It plays a crucial role in an organization as it handles issues like design, operations, and
maintenance of the system used for the production of goods.
The following are 10 tips for using network technology to help your business increase operational
performance efficiency, reduce costs, improve customer satisfaction, and stay ahead of the
competition.
 Provide employees with secure, consistent access to information: A secure, reliable, self-
defending network based on intelligent routers and switches provides your business with
maximum agility by providing reliable, secure access to business intelligence.
 Deliver anytime, anywhere access to mobile employees: Technologies enabling ubiquitous

access include virtual private networks (VPNs), which securely connect remote workers to the
company network, and pervasive wireless networks, which enable workers to stay connected to
the network while roaming about an office building or campus.
 Create effective business processes with partners: Some large enterprises make efficient,
secure business processes a prerequisite for doing business with them. To develop efficient
business processes that meet the requirements of your partners, your business needs a secure,
reliable network infrastructure.
 Make it easy to collaborate: Effective, interactive collaboration between employees, partners,

suppliers, and customers is a sure-fire way to boost efficiency while also reducing costs.
 Enable employees to take their phone systems wherever they go: Missed calls create any
number of business challenges, including operational inefficiencies (from trying to reach
absent colleagues), project delays, missed opportunities and lost revenues. Workers can access
their entire communications system wherever they go and can check e-mail, voice mail, fax
and pages all in one inbox, among other benefits.
 Streamline communications with customers: Interacting with customers efficiently and

knowledgeably helps keep them satisfied—and few things are as important to your bottom line
as satisfied customers. Linking an IP communications system to a customer relationship
management (CRM) solution is one way to enhance customer communications.
 Reduce unproductive travel time: Any time spent traveling, particularly by airplane, can
dramatically reduce operational efficiency. An IP communications solution that offers rich-
media conferencing, such as videoconferencing, helps reduce the need to travel to offsite
meetings and training sessions. The time saved from traveling can be better spent on more
productive pursuits. Also, reducing travel saves money.
 Outsource IT tasks: Is it the best use of an employee's time to manage your network security
or IP communications system? Often, a more efficient option is to outsource such tasks to a
managed service provider. A service provider has the expertise that your business needs but
may lack, without the need to spend time or money developing that expertise in house.
 Improve employee retention and satisfaction: When your business has inefficient processes,
such as antiquated phone systems or a sluggish network, employees can get frustrated, because
they can't get their jobs done with the tools provided. Customers may perceive that frustration
and lose confidence in your business. Even worse, valued employees can become burned out
and decide to move on. Not only have you lost a productive worker, you must spend time and
money hiring a replacement. To help ensure employees are productive and satisfied, your
business needs, at a minimum, a secure, reliable, always-available network.
 Develop a long-term technology plan: Whenever you replace hardware that has become
obsolete or ineffective, it's disruptive to workers and that results in low productivity. It can
minimize or eliminate such disruptions by carefully determining short- and long-term business
objectives and the carefully mapping technology solutions to those objectives.
Operations Strategy Framework:
Operations strategy provides the ability to improve products, services, and processes. To develop the
strategy, consider the business/corporate strategy and a market/needs analysis. Then, consider the
competing priorities of cost, quality, time, and flexibility and how it will handle them. To exist in the
market, you need to have acceptable quality, price, reputation/years in business, and reliability. To
actually win more orders in the market, the factors change a bit. You need winning quality, price,
speed of delivery, consistency of delivery, and reliability.
Figure: Schematic views of Operation Strategy Framework

These factors combine like this to provide an operations strategy framework, as outlined below;
 It start with the business/corporate strategy, laying out objectives, such as return on investment
(ROI), profit, and growth.
 Next it move to marketing strategy, where it consider factors such as customer segments,
standardization vs. customization, innovation level, and leader-vs.-follower alternatives.
 Next comes order-winning criteria such as quality, price, delivery speed, design, and after-sales
support.
 Last comes operations/manufacturing strategy, which includes choices of structure (such as
facilities and process) and infrastructure (such as planning/control systems and work
organization). Feeding into that strategy are the elements of product/process design, inventory,
quality management, human resources and job design, and maintenance.
In a similar vein, the other outlined five performance objectives in, Operations Management:
1) Cost: Ability to compete on low price

2) Quality: Ability to compete on high quality
3) Speed: Ability to compete on fast delivery
4) Dependability: Ability to compete on reliable delivery
5) Flexibility: Ability to compete with new products or services, wide selection, and timing
Organizations start with an intended strategy, but only some of that is realized through deliberate
strategy. Some intentions are left unrealized, such as those that didn’t adequately consider operational
feasibility. Meanwhile, emergent strategies develop as patterns of actions taken in the organization
most often by the operations department. The deliberate strategies and emergent strategies feed into
the realized strategies. This process shows the importance of operations details in the big picture.
Developing an Operations Strategy:
Once a business strategy has been developed, an operations strategy must be formulated. This will
provide a plan for the design and management of the operations function in ways that support the
business strategy. The operations strategy relates the business strategy to the operations function. The
operations strategy focuses on specific capabilities of the operation that give the company a
competitive edge. These capabilities are called competitive priorities. By excelling in one of these
capabilities, a company can become a winner in its market.
These competitive priorities and their relationship to the design of the operations function are shown
in Figure. Each part of this figure is discussed next. Competitive priorities Capabilities that the
operations function can develop in order to give a company a competitive advantage in its market.
Figure: Operations strategy and the design of the operations function
Competitive Priorities:
Operations managers must work closely with marketing in order to understand the competitive
situation in the company’s market before they can determine which competitive priorities are
important. There are four broad categories of competitive priorities:
1. Cost : Competing based on cost means offering a product at a low price relative to the prices of
competing products. The need for this type of competition emerges from the business strategy. The
role of the operations strategy is to develop a plan for the use of resources to support this type of
competition. Note that a low-cost strategy can result in a higher profit margin, even at a competitive
price. Also, low cost does not imply low quality.
To develop this competitive priority, the operations function must focus primarily on cutting costs
in the system, such as costs of labor, materials, and facilities. Companies that compete based on cost
study their operations system carefully to eliminate all waste. They might offer extra training to
employees to maximize their productivity and minimize scrap.
Case Study: A company that successfully competes on cost is Southwest Airlines. Southwest’s entire
operations function is designed to support this strategy. Facilities are streamlined: only one type of
aircraft is used, and flight routes are generally short. This serves to minimize costs of scheduling crew
changes, maintenance, inventories of parts, and many administrative costs. Unnecessary costs are
completely eliminated: there are no meals, printed boarding passes, or seat assignments. Employees
are trained to perform many functions and use a team approach to maximize customer service.
Because of this strategy, Southwest has been a model for the airline industry for a number of years.
Southwest Airlines
2. Quality: Many companies claim that quality is their top priority, and many customers say that they
look for quality in the products they buy. Yet quality has a subjective meaning; it depends on who is
defining it. For example, to one person quality could mean that the product lasts a long time, such as
with a Volvo, a car known for its longevity. To another person quality might mean high performance,
such as a BMW. When companies focus on quality as a competitive priority, they are focusing on the
dimensions of quality that are considered important by their customers. Quality as a competitive
priority has two dimensions.
The first is high-performance design. This means that the operations function will be designed to
focus on aspects of quality such as superior features, close tolerances, high durability, and excellent
customer service. The second dimension is goods and services consistency, which measures how often
the goods or services meet the exact design specifications. One of the first aspects that needs to be
addressed is product design quality, which involves making sure the product meets the requirements of
the customer. A second aspect is process quality, which deals with designing a process to produce
error-free products. This includes focusing on equipment, workers, materials, and every other aspect
of the operation to make sure it works the way it is supposed to. Companies that compete based on
quality have to address both of these issues: the product must be designed to meet customer needs, and
the process must produce the product exactly as it is designed.
3. Time: Time or speed is one of the most important competitive priorities today. Companies in all
industries are competing to deliver high-quality products in as short a time as possible. Companies like
FedEx, Lens Crafters, United Parcel Service (UPS), and Dell compete based on time. Today’s
customers don’t want to wait, and companies that can meet their need for fast service are becoming
leaders in their industries. Making time a competitive priority means competing based on all time-
related issues, such as rapid delivery and on-time delivery.
Rapid delivery refers to how quickly an order is received; on-time delivery refers to how often
deliveries are made on time. Another time-competitive priority is development speed, which is the
time needed to take an idea to the marketplace. When time is a competitive priority, the job of the
operations function is to critically analyze the system and combine or eliminate processes in order to
save time. Often companies use technology to speed up processes, rely on a flexible workforce to meet
peak demand periods, and eliminate unnecessary steps in the production process.
Case Study: FedEx is an example of a company that competes based on time. The company’s claim is
to “absolutely, positively” deliver packages on time. To support this strategy, the operation function
had to be designed to promote speed. Barcode technology is used to speed up processing and handling,
and the company uses its own fleet of airplanes. FedEx relies on a very flexible part-time workforce,
such as college students who are willing to work a few hours at night. FedEx can call on this part-time
workforce at a moment’s notice, providing the company with a great deal of flexibility. This allows
FedEx to cover workforce requirements during peak periods without having to schedule full-time
workers.
Figure: FedEx Express

4. Flexibility: As a company’s environment changes rapidly, including customer needs and
expectations, the ability to readily accommodate these changes can be a winning strategy. This is
flexibility. There are two dimensions of flexibility. One is the ability to offer a wide variety of goods
or services and customize them to the unique needs of clients. This is called product flexibility. A
flexible system can quickly add new products that may be important to customers or easily drop a
product that is not doing well. Another aspect of flexibility is the ability to rapidly increase or decrease
the amount produced in order to accommodate changes in the demand. This is called volume
flexibility. The meaning of flexibility when you compare ordering a suit from a custom tailor to
buying it off the rack at a retailer. Another example would be going to a fine restaurant and asking to
have a meal made just for you, versus going to a fast-food restaurant and being limited to items on the
menu. The custom tailor and the fine restaurant are examples of companies that are flexible and will
accommodate customer wishes.
Case Study: Another example of flexibility is Empire West Inc., a company that makes a variety of
products out of plastics, depending on what customers want. Empire West makes everything from
plastic trays to body guards for cars. Companies that compete based on flexibility often cannot
compete based on speed because it generally requires more time to produce a customized product.
Also, flexible companies typically do not compete based on cost because it may take more resources
to customize the product. However, flexible companies often offer greater customer service and can
meet unique customer requirements. To carry out this strategy, flexible companies tend to have more
general-purpose equipment that can be used to make many different kinds of products. Also, workers
in flexible companies tend to have higher skill levels and can often perform many different tasks in
order to meet customer needs.
5. The Need for Trade-Offs: The operations function must place emphasis on those priorities that
directly support the business strategy. Therefore, it needs to make trade-offs between the different
priorities. For example, consider a company that competes on using the highest quality component
parts in its products. Due to the high quality of parts, the company may not be able to offer the final
product at the lowest price. In this case, the company has made a trade-off between quality and price.
Similarly, a company that competes on making each product individually based on customer
specifications will likely not be able to compete on speed. Here, the trade-off has been made between
flexibility and speed.
For example, even though a company is not competing on low price, it still cannot offer its
products at such a high price that customers would not want to pay for them. Similarly, even though a
company is not competing on time, it still has to produce its product within a reasonable amount of
time; otherwise, customers will not be willing to wait for it. One way that large facilities with multiple
products can address the issue of tradeoffs is using the concept of plant-within-a-plant (PWP),
introduced by well-known Harvard professor Wickham Skinner.
The PWP concept suggests that different areas of a facility be dedicated to different products with
different competitive priorities. These areas should be physically separated from one another and
should even have their own separate workforce. As the term suggests, there are multiple plants within
one plant, allowing a company to produce different products that compete on different priorities. For
example, hospitals use PWP to achieve specialization or focus in a particular area, such as the cardiac
unit, oncology, radiology, surgery, or pharmacy. Similarly, department stores use PWP to isolate
departments, such as the Sears auto service department versus its optometry center.
6. Order Winners and Qualifiers: To help a company decide which competitive priorities to focus
on, it is important to distinguish between order winners and order qualifiers, which are concepts
developed by Terry Hill, a professor at Oxford University. Order qualifiers are those competitive
priorities that a company has to meet if it wants to do business in a particular market. Order winners,
on the other hand, are the competitive priorities that help a company win orders in the market.
Consider an example of simple restaurant that makes and delivers pizzas. Order qualifiers might be
low price (say, less than Rs.10.00) and quick delivery (say, under 15 minutes) because this is a
standard that has been set by competing pizza restaurants. The order winners may be “fresh
ingredients” and “home-made taste.” These characteristics may differentiate the restaurant from all the
other pizza restaurants. However, regardless of how good the pizza, the restaurant will not succeed if it
does not meet the minimum standard for order qualifiers. Knowing the order winners and order
qualifiers in a particular market is critical to focusing on the right competitive priorities.
It is important to understand that order winners and order qualifiers change over time. Often when one
company in a market is successfully competing using a particular order winner, other companies
follow suit over time. The result is that the order winner becomes an industry standard, or an order
qualifier. To compete successfully, companies then have to change their order winners to differentiate
themselves. An excellent example of this occurred in the auto industry.
Prior to the 1970s, the order-winning criterion in the American auto industry was price. Then the
Japanese automobile manufacturers entered the market competing on quality at a reasonable price. The
result was that quality became the new order winner and price became an order qualifier, or an
expectation. Then by the 1980s American manufacturers were able to raise their level of quality to be
competitive with the Japanese. Quality then became an order qualifier, as everyone had the same
quality standard.
Translating Competitive Priorities into Production Requirements:
Operations strategy makes the needs of the business strategy specific to the operations function by
focusing on the right competitive priorities. Once the competitive priorities have been identified, a
plan is developed to support those priorities. The operations strategy will specify the design and use of
the organization’s resources; that is, it will set forth specific operations requirements. These can be
broken down into two categories.
 Structure: Operations decisions related to the design of the production process, such as
characteristics of facilities used, selection of appropriate technology, and flow of goods
and services through the facility.
 Infrastructure: Operations decisions related to the planning and control systems of the
operation, such as organization of the operations function, skills and pay of workers,
and quality control approaches.
Together, the structure and infrastructure of the production process determine the nature of the
company’s operations function. The structure and infrastructure of the production process must be
aligned to enable the company to pursue its long-term plan.
Case study of Dell Computer Corporation: Earlier we explained how Dell used its mission,
environmental scanning, and core competencies to develop its business strategy. But to make this
business plan a reality, the company needed to develop an operations strategy to create its structure
and infrastructure. The focus was on customer service, cost, and speed. Dell set up a system in which
customers could order computers directly from the company, without going through an intermediary,
such as a retailer. An operations system was designed so that ordering of components and assembly of
computers did not occur until an order was actually placed. This kept costs low because Dell did not
have computers sitting in inventory. A warehousing system was designed so that when components
were needed, suppliers would deliver them to the plant within 15 minutes; in contrast, competitors like
IBM and Compaq must wait hours or even days to receive needed components. To further increase
speed, Dell set up a shipping arrangement with United Parcel Service (UPS). With this structure and
infrastructure, Dell was able to implement its business plan.
Figure: Dell set up a shipping arrangement with United Parcel Service (UPS)
Strategic Role of Technology:
Technology has enabled companies to share real-time information across the globe, to improve the
speed and quality of their processes, and to design products in innovative ways. Companies can use
technology to help them gain an advantage over their competitors. For this reason technology has
become a critical factor for companies in achieving a competitive advantage. The companies that
invest in new technologies tend to improve their financial position over those that do not. However,
the technologies a company acquires should not be decided on randomly, such as following the latest
fad or industry trend.
Types of Technologies:
There are three primary types of technologies. They are differentiated based on their application, but
all three areas of technology are important to operations managers.
The first type is product technology, which is any new technology developed by a firm. An example
of this would include Teflon®, the material used in no-stick fry pans. Teflon became an emerging
technology in the 1970s and is currently used in numerous applications. Other examples include CDs
and flat-screened monitors. Product technology is important as companies must regularly update their
processes to produce the latest types of products.
A second type of technology is process technology. It is the technology used to improve the process of
creating goods and services. Examples of this would include computer aided design (CAD) and
computer-aided manufacturing (CAM). These are technologies that use computers to assist engineers
in the way they design and manufacture products. Process technologies are important to companies, as
they enable tasks to be accomplished more efficiently.
The last type of technology is information technology, which enables communication, processing, and
storage of information. Information technology has grown rapidly over recent years and has had a
profound impact on business. Just consider the changes that have occurred due to the Internet. The
Internet has enabled electronic commerce and the creation of the virtual marketplace and has linked
customers and buyers. Another example of information technology is enterprise resource planning
(ERP), which functions via large software programs used for planning and coordinating all resources
throughout the entire enterprise. ERP systems have enabled companies to reduce costs and improve
responsiveness but are highly expensive to purchase and implement. Consequently, as with any
technology, investment in ERP needs to be a strategic decision.
Technology as a Tool for Competitive Advantage:
 Technology can be acquired to improve processes and maintain up-to-date standards.

 Technology can also be used to gain a competitive advantage.
 It provide an advantage over the competition and help gain market share.
 However, investing in technology can be costly and entails risks, such as overestimating the
benefits of the technology or incurring the risk of obsolescence due to rapid new inventions.
 Technology should be acquired to support the company’s chosen competitive priorities, not
just to follow the latest market fad.
 Technology may require the company to rethink its strategy. For example, when the Internet
became available, it was generally assumed that it would replace traditional ways of doing
business.
 Physical activities such as shipping, warehousing, transportation, and even physical contact
must still be performed through the proper technology.
 However, successful use of a technology such as the Internet requires companies to develop
strategies that integrate the technology.
 As you can see, acquiring technology is an important strategic decision for companies.
Operations managers must consider many factors when making a purchase decision.
Value Chain Dynamics and Operations Decisions:
Value Chain:
The process or activities by which a company adds value to an article, including production,
marketing, and the provision of after-sales service.
A value chain is a business model that describes the full range of activities needed to create a product
or service. For companies that produce goods, a value chain comprises the steps that involve bringing
a product from conception to distribution and everything in between such as procuring raw materials,
manufacturing functions, and marketing activities.
A company conducts a value-chain analysis by evaluating the detailed procedures involved in each
step of its business. The purpose of value-chain analyses is to increase production efficiency so that a
company may deliver maximum value for the least possible cost.
Components of a Value Chain:
In his concept of a value chain, Porter splits a business's activities into two categories, "primary" and
"support," whose sample activities we list below. Specific activities in each category will vary
according to the industry.
Primary activities consist of five components, and all are essential for adding value and creating a
competitive advantage:
1) Inbound logistics: Functions like receiving, warehousing, and managing inventory.
2) Operations: Procedures for converting raw materials into finished product.
3) Outbound logistics: Activities to distribute a final product to a consumer.
4) Marketing and sales: Strategies to enhance visibility and target appropriate customers such as
advertising, promotion, and pricing.
5) Service: Programs to maintain products and enhance consumer experience customer service,
maintenance, repair, refund, and exchange.
The role of Secondary activities is to help make the primary activities more efficient. When you
increase the efficiency of any of the four support activities, it benefits at least one of the five primary
activities. These support activities are generally denoted as overhead costs on a company's income
statement:
1) Procurement: How a company obtains raw materials.
2) Technological development: Used at a firm's research and development (R&D) stage
designing and developing manufacturing techniques; and automating processes.
3) Human resources (HR) management: Hiring and retaining employees who will fulfill
business strategy; and help design, market, and sell the product.
4) Infrastructure: Company systems; and composition of its management team planning,
accounting, finance, and quality control.
Value chain dynamics and operations decisions
The strong bargaining power of major retailers and the higher requirements for speed, service
excellence and customization have significantly contributed to transform the Supply Chain
Management. These increasing challenges call for an integrated and dynamic Supply Chain
Management and for a better integration and alignment with key customers, in order to reduce the
firm's time-to-market and build competitive advantage. Supply Chain Dynamics framework to help the
partner to establish new service level strategies, strongly oriented to the strategic importance of its
products and customers, and to map the key system-wide drivers that impact the overall number of
inventory turns, service level and total costs.
Recently, Supply Chain Management has faced a strong transformation, led mainly by
the following key drivers:
1) Plummeting costs of transportation and communication (the inter-organizational co-ordination

costs are getting similar to the intra-organizational costs)
2) Even-more demanding customers and globalization of demand (customers are less forgiving
and more demanding of customized products and services, at a larger variety)
3) Higher requirements for service aggregation and customization
4) Globalization of supply and intense competition (competition has forced new offerings tailored
to customers' needs and has increased the pressure on cost reduction
5) Willingness to increase inventory turns and reduce working capital needs)
6) Higher levels of product customization (trend of commoditization has reduced time-to-market)
7) Increase in technology and knowledge specialization
8) Shortening product life cycles (requirements for lower lead-times)
Manufacturing Architecture and operations strategy in sales, service:
Reducing costs and improving sales is the goal of every business. Business operations constitute many
processes, including material acquisition, manufacturing costs and product delivery. Business
strategies revolving around operations include the size and location of facilities, product
diversification and expansion. It isn't uncommon that several operations strategies may exist within a
company simultaneously.
Market Penetration Strategy:

Market penetration refers to capturing a larger piece of the target market. An insurance company
might define market penetration success by the number of new automobile policies gained.
Developing an operations strategy for market penetration has several potential focus areas.
A business can decide to attract customers away from competitors. It can attract nonusers that have no
experience with your business or with a competitor. Another strategy might employ one or more
geographic locations, centered around a target demographic. Businesses can also try to add more value
to existing clients, thereby enticing increased spending on product or service upgrades.
Operations Strategy for Services:
Goods and services differ from each other in many ways. As a result the strategy for services should
be formed keeping in mind the following strategic aspects:
a. Fewer barriers: as services are often not patentable and the capital investment is low,
competitors can easily join the market
b. Less proprietary technology involved: it is more people –based than technology-based
c. Costs difficult to measure: pricing is hard to compare among competitors as there is a
lot of customer involvement
d. Acquisition is risky: the acquisition is mostly of people who can leave any time they
desire unlike that of machineries.
e. Location is important: a good location is a key strategic move for a service-firm
Product Development Strategy:

As an operations strategy, product development goes well beyond rolling out new products. Think
about software companies that may have a new product coming out but that also provides free patches
and low-cost upgrades for existing product improvement; this is part of the product development
strategy. Initially, when a product is rolled out, it is compared to other products on the market. Being
the best is a good strategy, but it also means that competitors will immediately work to exceed your
product specifications.
For example, a rental car company that eliminates long lines at the airport improves an existing system
for both new and repeat clients. The better this service process is, the higher satisfaction ratings the
company receives. This builds loyalty and referral business.
Operation Strategy to Improve the Supply Chain:

The supply chain refers to the process of creating a product via its delivery. One operations strategy
might look to improve costs in the creation of the product. Another operations approach is to make the
delivery of goods more efficient. An example of improving the creation can include reducing costs of
materials with bulk purchases or automating parts of the production line.
Making the delivery component of operations more efficient could involve anything from improving
warehouse layout to reduce time and labor in fulfilling orders to obtain delivery contracts that reduce
delivery contracts.
For example, a home improvement warehouse might reorganize the warehouse layout, bringing more
frequently bought items closer to the front and within proximity, based on size to the loading docks.
This means that consumers or warehouse employees spend less time walking through a warehouse to
get to the products, thereby expediting the process and saving on labor.
Operation Strategy Model for Service and Product:

Integration of New Product / Service Process

Operational Strategy & Performance Objectives (Case Study)

Operational Strategy Formulation:
Hill framework for Operations Strategy Formulation:
Hill (2005) provides an iterative framework that links together the corporate objectives; which provide
the organizational direction, the marketing strategy; which defines how the organisation will compete
in its chosen markets, and the operations strategy; which provides capability to compete in those
markets.
The framework consists of five steps:

1) Define corporate objectives
2) Determine marketing strategies to meet these objectives
3) Assess how different products win orders against competitors
4) Establish the most appropriate mode to deliver these sets of products
5) Provide the infrastructure required to support operations.
Step 1 Corporate Objectives
Step 1 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.
Step 2 Marketing Strategy
This involves identifying target markets and how to compete in these markets.
Step 3 How Do Products Win Orders in the Market Place?
This is the crucial stage in Hill’s methodology where any mismatches between the requirements of the
organisation’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. This is achieved by translating the marketing strategy into a range of competitive factors (e.g.
price, quality, delivery speed) on which the product or service wins orders. These external competitive
factors provide the most important indicator as to the relative importance of the internal operations
performance objectives. The five basic internal operation’s performance objectives allow the
organisation to measure its operation’s performance in achieving its strategic goals. The performance
objectives are Quality, Speed, Dependability, Flexibility and Cost.
At this stage it is necessary to clarify the nature of the markets that operations will serve by identifying
the relative importance of the range of competitive factors on which the product or service wins
orders. Hill distinguishes between the following types of competitive factors which relate to securing
customer orders in the marketplace.
 Order-winning factors – They are key reasons for customers purchasing the goods or
services and raising the performance of the order-winning factor may secure more business
 Qualifying factors – Performance of qualifying factors must be at a certain level to gain
business from customers, but performance above this level will not necessarily gain further
competitive advantage.
From the descriptions above it can be seen that it is therefore essential to meet both qualifying and
order-winning criteria in order to be considered and then win customer orders.
Step 4 Delivery System Choice (Structural Decisions) and Step 5 Infrastructure choice
(Infrastructural Decisions)
Steps 4 and 5 of Hill’s methodology involves putting the processes and resources in place which
provide the required performance as defined by the performance objectives. Hill categorizes
operations decision areas into delivery system choice, (structural decisions) and infrastructure choice
(infrastructural decisions). Delivery system choice concerns aspects of the organisation’s physical
resources such as service delivery systems and capacity provision. Operations Infrastructural decisions
describe the systems, policies and practices that determine how the structural elements covered in step
4 are managed.
Operation strategy evaluation and control :
There are a number of different criteria for evaluating operation strategic. It would be very difficult to
use all these criteria to get a satisfactory result simultaneously.
It can be classified into three groups;

1) Criteria of Suitability,
2) Criteria of Feasibility
3) Criteria of Acceptability.
Criteria of Suitability:
These criteria attempt to measure the extent to which the proposed strategies fit the situation identified
in the strategic analysis.
The situation should indicate the list of the important opportunities and the threats that the firm faces
and the particular strengths and weaknesses of the firm.
The strategy to be selected should meet the following criteria:
a) To what extent, the strategy can overcome the difficulties identified in the strategic analysis?
For example, can the strategy increase the market share of the company?
b) To what extent the strategy can exploit the environmental opportunities by using the
company’s strengths? For example, can the strategy provide the status of leader in introducing
the new product, under the stable market conditions?
c) Does the strategy fit in with the company’s objectives and values? For example, would the
strategy fit in the recently signed agreement with the members of the Chamber of Commerce
and Industry in the country?
Criteria of Feasibility:
These criteria assess the practical implementation and working of the strategy. For example, will the
strategy of price-cut result in hike in profits under the competitive environment?
The following questions need to be assessed at the evaluation stage:
1) Can the company provide enough financial resources to implement the strategy?
2) Is the company capable of performing to the required level?
3) Can the necessary market position be achieved?
4) Will the necessary marketing skills be available?
5) Can competitive reactions be coped with?
6) How will the company ensure that the required managerial and operative skills be available?
7) Will the technology be available to compete effectively?
8) Can the necessary materials and services be procured?
Criteria of Acceptability:
The firm should assess the strategy to decide whether the consequences of proceeding with a strategy
are acceptable.
The strategy should be acceptable to the strategy decision maker in the company.
Therefore, acceptability involves not only the consequences of the strategy, but also the personal
considerations like values of the strategy decision maker.
1) What will be the financial performance of the firm in terms of profitability?
2) How will the financial problems (like liquidity) be solved?
3) What will be the effect on capital structure?
4) Will any proposed changes be acceptable to the general cultural expectations within the
organisation?
5) Will the function of any department, group or individual change significantly?
6) Will the company’s relationship with outside stakeholders (like suppliers, bankers, customers)
need to change?
7) Will the strategy be acceptable to the company’s environment (like local community)?
8) Will the proposed strategy fit existing systems or will it require major changes?
Framework for Evaluating Operation Strategic:

Operation Strategic Control:
Operation Strategic control focuses on monitoring and evaluating the strategic management process to
ensure that it functions in the right direction.
The operation strategic control aims at achieving the results planned at the time of strategy
formulation.
Operation Strategic control is a special type of organisational control.
Purposes of Strategic Control:
The basic purpose of strategic control is to help top management to achieve strategic goals as planned.
Strategic control provides feedback about various steps of strategic management to know, whether the
strategic management processes are appropriate, compatible and functioning in the desirable direction.
To be specific, the purposes of strategic control are to answer the questions such as:
a) Are our internal strengths still holding good?

b) Have we added other internal strengths?
c) Are our internal weaknesses still holding good?
d) Do we have other weaknesses?
e) Are our opportunities still opportunities?
f) Are there new opportunities?
g) Are our threats still existing?
h) Are there new threats?
i) Are the decisions being made consistent with policy?
j) Are there sufficient resources to achieve the objectives?
k) Are events in the environment occurring as anticipated?
l) Are goals and targets being met?
m) Should we proceed with plans as we have formulated?
n) Are the organisational vision, mission and objectives appropriate to the changing environment
factors?
Process of Strategic Control:
The strategic control process consists of six steps. Top management, initially must decide what
elements of the environment and the organisation need to be monitored, evaluated and controlled.
Step 1: Key Areas to be Monitored

Step 2: Establishing Standards
Step 3: Measuring Performance
Step 4: Compare Performance with Standards
Step 5: Take No Action if Performance is in Harmony with Standards
Step 6: Take Corrective Action, if necessary
How to Make Strategic Control Creative?
(i) Use strategic control teams drawn together from various parts of the organisation. Composition of
the strategic control team should change regularly to assure fresh ideas and avoid stagnation.
(ii) Top management must be involved in the interpretation of key success factors and how they are
monitored.
(iii) Strategic control must focus on bottlenecks in the critical success factors and on changes in the
success factors.
(iv) Flexibility must be obtained within the strategic control process so that budgets, formats, agendas,
and other organisational procedures can meet the demands of the particular control context.
Implementing Strategic Control
Role of the Strategy Planning Staff
Normally, the role of strategy planning, formulation, implementation and control go hand-in-hand.
But, in some companies the roles of planning and control of strategy are separated.
This practice is unfortunate as performing these two functions separately by two managers is too often
inflexible and bureaucratic. Planning without control eliminates feed forward and control without
planning eliminates feedback.
The best results of strategic control are achieved when the planning and control staff works as a team.
The team serves as a sounding board for the ideas of individual managers. Involvement in
implementation and control gives other members a better comprehension of the problems associated
with the new strategy.
Role of Top Management:
Top level managers are primarily responsible for strategy formulation, analysis and implementation.
Therefore, they should understand strategic control and take actions implies in the control process.
Top managers should have a vision about the possible changes in the environment and their possible
affect on the current strategy and feed this information forward to the staff at the ground.
Top managers are in leadership position and as such they should influence the organisational members
in strategic control process.
Operation Strategy Competitiveness:
Understanding competitiveness and its importance in operations strategies Competition and market
conditions in the industry guide the general thrust of the operations process, which provide the basis
for determining the organization’s strategy. A careful analysis of market segments and the ability of
the competitors to meet the needs of these segments will determine the best direction for focusing an
organization’s efforts. In doing so, competitive priorities should be established in the various areas of
an organization. These will help the managers identify their abilities or competencies, which will arm
the organization with the competitive edge.
Distinctive Competencies
One way to compare manufacturing among industrial centers is to examine the varying competitive
priorities, such as, quality, performance, price, adaptation, after sales service, etc. Competitiveness or
competitive advantage denotes a firm’s ability to achieve market superiority over its competitors. In
the long run, a sustainable competitive advantage provides above-average performance. A strong
competitive advantage is derived from an organization’s competitive priorities, or rather distinctive
competencies. A distinctive competency should have six (6) characteristics:
1) It is driven by customer wants and needs.

2) It makes a significant contribution to the success of the business.
3) It matches the organization’s unique resources with the opportunities in the environment.
4) It is durable and lasting and difficult for competitors to copy.
5) It provides a basis for further development.
6) It provides direction and motivation to the entire organization.
Hence, we can conclude that distinctive competencies can be defined as those special attributes or
abilities possessed by an organization that give it a competitive edge. In effect, distinctive
competencies relate to the way that organizations compete. The most effective organizations seem to
use an approach that develops distinctive competencies based on customer needs as well as on what
the competition is doing. Merely matching a competitor is not sufficient, it is necessary to exceed the
quality level of the competitor.
Depending on these distinctive competencies any company can achieve competitive advantage
through acts of innovation and new ways of doing things, such as new product designs, production
technologies, training programs, quality control techniques, or new way to manage supplier
relationships. It is also to be noted that mere competence does not constitute a competitive advantage.
The best performing company will be the one that can generate greatest customer value and sustain it
over time. For example Virgin cola was marketed in a premium price of Tk.15 per can, which is still
the cheapest drink in canned form, whereas the other contemporary drinks cost at least Tk.20 per can.
Actually, virgin succeeded to fulfill the customer need not only through its price but also through its
form which makes the customer feel distinctive from others. However, the differentiation in the form
gave virgin brand distinctive competencies and market superiority over other brands in the market.
Four Distinctive Competencies /Competitive Priorities:
The four distinctive competitive priorities can be characterized as follows (Table):
1) Cost Efficiency (Low product price): A company that emphasizes cost efficiency will
see that it’s capital, labor and other operating costs are kept low, relative to other
similar companies.
2) Quality (Product performance): A company that emphasizes quality will consistently
strive to provide a level of quality that is significantly superior to that of its
competitors, even if it has to pay extra to do so.
3) Dependability (reliability, timely delivery): A company that stresses dependability can
be relied upon to have its goods available for customers, or to deliver its goods or
services on schedule, if it is at all possible.
4) Flexibility (new products or change in output volume): A company that develops
flexibility can quickly respond to competitors’ changes in product design, product mix,
or production volume by changing their own.
Time as a Distinctive Competency:

Apart from the four factors (Cost efficiency, quality, dependency and flexibility), time is emerging as
a critical dimension of competition in both manufacturing and service industries. In any industry the
firm with the fastest response to customer demand has the potential to achieve overwhelming market
advantage. In an era of time-based competition, a firm’s competitive advantage is defined not by cost
but by the total time required to produce a product or service. Firms able to respond quickly have
reported growth rates over three times the industry average and double the profitability. Thus the
payoff for quick response is market dominance. These basic strategic choices, then, set the tone for the
shape and content of the operations function and what it accomplishes. A conversion process designed
for one type of focus is often ill suited for success in another, alternative focus.
Traditional View of Competitiveness

The traditional literature on competitiveness suggests that a firm can possess two basic types of
competitive advantages:
i. Cost leadership
ii. Product differentiation
i. Cost Leadership
Many firms gain competitiveness by establishing themselves as low-cost leaders in the market. These
firms produce high volumes of mature products and achieve their competitive advantage through low
prices. Such firms often enter markets that were established by other firms. They emphasize achieving
economies of scale and finding cost advantages from all sources. Low cost can result from high
productivity and high capacity utilization. More importantly, improvements in quality lead to
improvements in productivity, which in turn lead to lower costs. Thus a strategy of continuous
improvement is essential to achieve a low-cost competitive advantage.
For example in the 1980’s GQ group in Bangladesh introduced Econo ballpoint pen to the market at a
cost of Tk. 3 per unit. This introduction brought a prompt change in consumers’ satisfaction and
consumption level. The reason behind this is their quality product in low cost which shook the market
of the other existing ball point pens, even Red Leaf and Staedtler, the two product leaders. Thus
Econo’s low cost resulted in high productivity and the greatest market share.
ii. Product Differentiation

Product differentiation refers to any special features (e.g. design, cost, quality, ease of use, convenient
location, warranty, etc.) that cause a product to be perceived by the buyer as more suitable than a
competitor’s product or service. To achieve differentiation, a firm therefore must be unique in its
industry along some dimensions that are widely valued by customers. It selects one or more attributes
that customers perceive as important and positions itself uniquely to meet those needs. As a result, it
can command premium prices and achieve higher profits. However, a firm that uses differentiation
cannot ignore costs. It must achieve a cost position at par with its competitors and reduce costs in all
areas that do not affect differentiation.
Modern View of Competitiveness

More recently, the modern view towards competitive advantage has been focused on adopting more
Quality-based and Time-based competitiveness. However at the same time keeping in mind cost-
efficiency and product differentiation.
Quality: This focuses on satisfying the customer by integrating quality into all phases of the
organization. This includes not only the final product or service that is provided to the customer, but
also the related processes such as production, design, and after-sales service.
Time: It focuses on reducing the time required to accomplish various activities. By doing so,
organizations seek to improve services to the customer, and to gain a competitive advantage over
rivals who take more time to accomplish the same tasks.
Importance of Competitiveness in Operations Strategy

As we have defined earlier, the competitiveness of a firm is its ability to achieve market superiority
over other competitors. Operations strategy, on the other hand, is a collective pattern of coordinated
decisions for the formulation, reformulation, and deployment of the organization’s resources. These
decisions provide a competitive advantage in support of the overall strategic initiative of the firm or
strategic business units. Operations strategy is a pattern of decisions made over time. These decisions
focus on resource configuration and deployment. For example, how many work shifts, which type of
machinery, what kind of reporting structure, and which type of information to use are all decisions
about how to use resources. The resulting configurations of the firm’s resources must provide or
support the firm’s strategic advantage in the market place. So for the survival of the firms,
considerations of competitive advantage in operation strategy are very important.
Summary
Competitiveness or competitive advantage of a firm denotes its ability to achieve market superiority
over its competitors. In other words how effectively an organization meets the needs of customers
relative to other organizations of the same specialization represents its competitive advantage.
Characteristics of competitive priorities are product performance, low product price, dependability and
flexibility. The management effort towards improvements in quality lead to improvements in
productivity, which in turn lead to lower costs. Cost is a vital factor for surviving in the market.
Therefore many firms gain competitiveness by establishing themselves as low cost leaders in the
market.
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Biju Patnaik Institute of It & Management Studies, Bhubaneswar

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BIJU PATNAIK INSTITUTE OF IT & MANAGEMENT STUDIES, BHUBANESWAR

BIJU PATNAIK INSTITUTE OF IT & MANAGEMENT STUDIES, BHUBANESWAR

What is Operations Strategy?

5) Using a market-based approach to operations strategy an organisation makes a decision regarding

Elements of operation strategy

Operations strategy comprises six components:

ii. Process Focused-It is designed to support production departments that perform a

2) Focus of factories and service facilities

3) Product/Service design and development

5) Allocation of resources to strategic alternatives- Production companies have to continuously

decision on internal arrangement of workers and department within the facility.

The Role and Purpose of Operations Strategy:

 Based on operation strategy, it could be categorized types of organizations based on a

Core Operational Strategy Areas:

2) Customer-Driven: Operational strategies to meet the needs of a targeted customer segment

5) Product or Service Development: Strategies in product design, value, and innovation

Tips /Tactics for Operations Strategies:

3) Gain Competitive Advantage with Differentiation: Develop a point of differentiation and a

opportunities, and threats as a catalyst to strategy.

Operations Strategy Examples:

Case Study of Wal-Mart Operation Strategy

Innovation and Operations Discipline:

 Operational discipline means complying with a set of well-thought-out and well-defined

 Operational discipline provides an organized way to accomplish tasks and implement

 When companies employ operational discipline as a means of providing more predictability

The Importance of Leadership:

 Leadership is essential to establishing the appropriate organizational structure and focused

Culture of Interdependency: A Driver and Indicator of Operational Excellence:

 An organization’s journey to operational excellence can be a complicated one. DuPont

Figure: DuPont Bradley Curve

Operating Discipline vs. Innovating

Sl.NO. Operating Discipline Innovating

7 Failures are punished Noble failures are permitted

Operational Excellence as a Competitive Strategy:

Customer Intimacy as a Competitive Strategy:

 Customer-centric companies tend to have a decentralized organization which allows them to

Product Leadership as a Competitive Strategy:

1) Research portfolio management

Firm's performance measured against standard or prescribed indicators of effectiveness, efficiency,

Five Operational Performance Objectives:

Figure: The Operation Performance objectives and their effects.

What is Operational Performance Management (OPM)?

 Operation management involves similar management for every industry or business

 Deliver anytime, anywhere access to mobile employees: Technologies enabling ubiquitous

 Make it easy to collaborate: Effective, interactive collaboration between employees, partners,

 Streamline communications with customers: Interacting with customers efficiently and

Operations Strategy Framework:

Figure: Schematic views of Operation Strategy Framework

1) Cost: Ability to compete on low price

Developing an Operations Strategy:

Figure: Operations strategy and the design of the operations function

Figure: FedEx Express

Translating Competitive Priorities into Production Requirements:

Strategic Role of Technology:

Technology as a Tool for Competitive Advantage:

 Technology can be acquired to improve processes and maintain up-to-date standards.

Value Chain Dynamics and Operations Decisions:

Components of a Value Chain:

Value chain dynamics and operations decisions

1) Plummeting costs of transportation and communication (the inter-organizational co-ordination

Manufacturing Architecture and operations strategy in sales, service:

Market Penetration Strategy:

Operations Strategy for Services: