Lecture 4 – Operations for Business Competitiveness Principles of Business Operations

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Learning Objectives for this Unit

On completion of this unit, students will be able to:

• Understand how customer wants and needs drive

strategy and operations

Principles of Business Operations

Topic 4:
Operations for Business Competitiveness © NCC Education Limited

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Introduction Introduction - Continued

• Organisations have to decide where to focus their • Competitive advantage is an organisation’s ability
efforts to outperform its competitors …

• This determines their strategy … and the • Determined by competitive priorities that an
operations required to support that strategy organisation places on key performance measures
and operational capabilities in the value chain …
more on this later

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Customer Wants and Needs 1 Customer Wants and Needs 2

• Customers’ needs vary – consequently organisations
segment customers into target groups
• Identifying what customers need and want requires
“being close to the customer”
• Identifying customer needs is not always easy …
customers don’t always know what they want until it’s
been created
• Creating “breakthrough” goods and services
sometimes require companies to take risks
• Dis-satisfiers – these are requirements that are
expected in a good or service (e.g. a “clean” hotel
room)
• If these requirements are not present then
customers become dissatisfied
• Satisfiers – these are things that customers say
they want (e.g. a restaurant in the hotel)
• Providing these goods or services provides
customer satisfaction

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Lecture 4 – Operations for Business Competitiveness Principles of Business Operations

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Customer Wants and Needs 3 Class Activity

• Exciters and Delighters – these are new or • Work in groups of about 5

innovative features that customers do not expect
but that add value (e.g. free wi-fi in the hotel) • Develop a set of dissatisfiers, satisfiers and
exciter/delighters for your favourite fast food
• Providing these goods or services provides
restaurant.
customers with “extra” satisfaction and can lead to
competitive advantage • 10 minutes
• Note – over time these become accepted “norms”
and can be reclassified as satisfiers (or even • Feedback to the class
dissatisfiers), e.g. cameras on mobile phones • 5 minutes

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Customer Wants and Needs 4 Customer Wants and Needs 5

• Customers use 3 criteria for assessing the quality Search attributes

of goods and services they receive:
• These can be determined prior to purchasing the
– Search
good or service
– Experience
– Credence
• For example, the colour, style, fit, etc. for a new
item of clothing

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Customer Wants and Needs 6 Customer Wants and Needs 9

Experience attributes Credence attributes

• These can only be determined after purchase and • Aspects that the customer must believe in, but
during consumption or use cannot personally evaluate even after the purchase
• For example, durability of the clothing item, ease of • For example, a patient has “faith” that a surgeon
washing, etc. has performed the operation properly

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Lecture 4 – Operations for Business Competitiveness Principles of Business Operations

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Goods-Services Continuum Competitive Priorities 1

High Goods High Service
Content Content

• Organisations use five competitive priorities (cost,

Easy to Evaluate Difficult to Evaluate

quality, time, flexibility and innovation) to determine

Clothing Restaurant
Meal
Legal
Services
their strategy and operations
Jewellery
Haircut Medical
Diagnosis
Furniture Child Care
Car Repairs • All organisations use all of these – it’s which one(s)
High Search High Experience High Credence they focus on, and to what extent, that differs from
Attributes Attributes
Attributes
one organisation to another
Based On: Evans & Collier (2007) “Operations Management: An Integrated Goods & Services Approach”, Thomson, p. 122.

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Competitive Priorities 2 Competitive Priorities 3

Cost Quality

• Many firms gain competitive advantage by leading • This can be assessed in several ways
on cost, i.e. through low prices • A “quality” good or service is one that meets (or
exceeds) customer expectations
• The value of a good or service in the marketplace
• Generally this is achieved through handling high is influenced by the quality of its design
volumes of goods and services
• High quality producers can usually charge higher
prices

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Competitive Priorities 4 Competitive Priorities 5

Time Flexibility

• Customers demand quick response, short waiting • This requires a close relationship with customers to
times and consistency in performance understand their wants and needs.
• Flexible organisations can respond quickly to
• Organisations can excel in this to create a changes in the market place
competitive advantage and deliver superior goods
and services • Mass customisation is the ability to make whatever
the customer wants, in the volume they require, for
a global organisation from any place in the world

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Lecture 4 – Operations for Business Competitiveness Principles of Business Operations

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Competitive Priorities 6 Class Activity

Innovation • Work in groups of about 5

• Think of any “innovation” over the last few years.

• Is the ability to apply a new discovery to practical What is the innovation & how has it improved the
goods and services quality of life for its customers?
• Innovative organisations are able to meet better the • 10 minutes
needs and wants of their customers
• Over time innovations have improved the quality of • Feedback to the class
life for all of us • 5 minutes

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Strategic Planning Hierarchy of Strategies

• Determining long-term goals and plans for the

Corporate
Strategy

organisation
• Objective is to build a position of strength so that Business
the organisation can achieve its goals despite any Strategy

unforeseen external forces that may arise

• Core competencies are the strengths unique to the Marketing Operations Human Resource

organisation Strategy Strategy Strategy

• Strategic implementation is the set of actions

necessary to achieve the strategy

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Corporate Strategy Operations Strategy

• Establishes organisational direction • A plan for managing operations over the long term
to achieve business goals
• Defines the basis upon which the organisation
will compete • Involves translating competitive priorities into
operational capabilities
• Key to execution is the business plan:
• Operations design choices determine the process
o Financial and performance goals
best suited to produce goods or create services
o Markets and customers
o Product portfolio – what products will be offered and • Infrastructure decisions focus on non-process
how quickly will they be updated features and capabilities, e.g. employees, quality
control, organisational structure, etc.

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Lecture 4 – Operations for Business Competitiveness Principles of Business Operations

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Operations Design and Infrastructure Operations Design and Infrastructure

Decisions 1 Decisions 2

• Selecting and designing the key value creation • Supply chain integration and outsourcing – the role
processes that suppliers will play in the value chain
• Need to appropriately match processes to the type • Technology – choices made influence cost,
of good or service being produced to support flexibility, quality and speed
competitive priorities • Capacity and facilities – amount and type of
• Several key areas need consideration … capacity, location of facilities
• Inventory – where (and how much) inventory will be
positioned within the supply chain

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Operations Design and Infrastructure

Conclusions
Decisions 3
• Infrastructure decisions include the “behind the scenes” • Organisations must understand their customers
decisions. They include decisions relating to: wants and needs
– Workforce
– Operating plans and control systems
– Quality control • They use competitive priorities to build their unique
– Organisational structure strategy to attempt to gain competitive advantage
– Compensation systems
– Learning and innovation systems
– Support services
• This requires organisational and operational
strategies and decisions regarding infrastructure

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References

• Evans & Collier (2007) “Operations Management:

An Integrated Goods & Services Approach”, Topic 4 – Operations for Business
Thomson Competitiveness

Any Questions?

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