Production & Operations

Management

Chapter 2
Strategic Operations Management
 Strategic Operations Management
Nature of Strategic Management

™The ultimate purpose of strategic management is

to help organization increase performance through

1) Improved effectiveness.
2) Efficiency.
3) Flexibility.

™A strategy is a way of doing something.It usually

includes ,formulation & setting up of goals and set
action plans for accomplishing the goals
Strategic Operations Management
Strategic Operations Management
Strategic Operations Management
 Strategic Operations Management

™In the past companies could succeed by focusing

all Management efforts on running their day to day
affairs as efficiently as possible.

™The Strategic management highlights the

significance of devoting more attention to
analyzing environments and formulating
strategies that relate direct to environmental
changes.
Strategic Management Process

Strategic Management process involves four steps

1.Environmental Scanning:
Environment of an organization comprises both external
and internal factors. In Strategic management, process
begins with the scanning of external and internal
environments and ends with monitoring the Activities of
the organization.
2. Strategy formulation
Strategies are formulated at three levels
Corporate level
Business Unit level
Functional level
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Strategic Management Process

Corporate level:
™This is formulated by top management to oversee the
interest and operations of an organization made up of more
than one line business.
™In formulating Corporate strategy, the company should
decide where it want to be in 10 to 15 years, in at least
eight areas: Market standing, Innovation, Productivity,
Physical and financial resources, profitability, managerial
performance and development, worker performance and
attitude, social responsibility.

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Strategic Management Process

™Typical Corporate level Strategies:

1.Growth Strategies.
Internal growth
Horizontal Integration
Vertical Integration
Mergers
Strategic alliance
2. Stability Strategies
3.Retrenchment Strategies
Turnaround
Divestment
Liquidation
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Strategic Management Process

Business Unit level Strategies:

™The appropriate question at business level is “How
should we compete in the chosen industry or business”
™ A business unit is organizational subsystem that has a
market ,a set of competitors and a goal distinct from other
subsystems in group
™The concept of Strategic Business Unit (SBU) was
pioneered by GEC at there 200 business units
™A single unit that operate within one industry is also
considered a business unit

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Strategic Management Process

Functional level Strategies:

™Each business unit will consists several departments such
as Manufacturing, Quality Control , H.R, Finance etc
™Functional Strategies identify the basic course of action
that each of department pursue in order to help business
unit to attain its goals
™In formulating functional strategies managers must be
aware that different functions are interrelated

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Strategic Management Process

3 Strategic Implementation
™Strategies Formulated need to be implemented.
Implementation of Strategies is more difficult than their
formation , they two differ in the following ways.
™Strategy Formulation is positioning forces before action
™Strategy Implementation is managing forces during the
action
™Strategy Formulation focus on effectiveness
™Strategy Implementation focus on Efficiency
™Strategy Formulation is primarily Intellectual process
™Strategies Implementation is primarily operational
process
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Strategic Management Process

™Strategy Formulation requires good intuitions and

operating skills
™Strategy Implementation requires motivation &
leadership skills.
™Strategy Formulation requires co ordination among few
individuals.
™Strategy Implementation requires co ordination among
many persons.
™Strategies Formulation and tools do not differ vastly for
small , large or non profit organization.
™Strategy Implementation varies among different type&
size of industries
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Strategic Management Process

4.Evaluation & control

Basic Activities involved are:
™Establishing performance targets , Standards , and
tolerance limits for the objectives
™Measuring the performance in relation to the target at a
given time , if outcomes are outside the limits, inform
managers to take action
™Analyze deviation from accepted limits.
™Execute modifications where necessary

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Importance of Strategic Management

Strategic Management offers both financial & non

financial benefit to an organization as listed below
1.It allows identification, Prioritization,& exploitation of
opportunities.
2.Provides objective view of management problems.
3.Framework for Improved co-ordination
4.It minimizes the effect of adverse conditions
5.It allows major decisions to better support established
objectives
6.It allows more efficient allocation of time

Cont….
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Importance of Strategic Management

7. It allows fewer resources and less time to be devoted

8. It creates a framework for internal communication
9. It helps to integrate the behavior of individuals
10.It provides basis for the clarification of individual
responsibilities.
11.It encourages to forward thinking
12.It provides a co-operative ,integrated approach to
tackling problems
13.It encourages a favorable attitude
14.It gives a degree of discipline

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 Role of Operations Management in
Strategic Management

The role of operations management in formulating &

implementing business strategies is crucial
™ The traditional role of production or operations was to
design the product /services based on the marketing
information provided by marketing department and to
convert the design into products within financial
constraints ,stipulated by finance department.
™ Marketing & finance functions could exert more
influence on top management in formulation of
business strategies.

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 Elements of Operations Strategy

Operations strategy comprises six components

™ Positioning the production System
™ Focus on factories and service facilities
™ Product /Service design and development
™ Technology Selection & Process development
™ Allocation of resources to strategic alternatives
™ Facility planning

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 Production &
Operations Management

End Of

Chapter 2