CH II - Operation Strategy in Global Environment

Operation Strategy in Global Environment
Some Multinational Corporations
 % Sales %
Assets

 Home Foreign
Company Country Country
Nestle Switzerland 98 95
Philips Netherlands 94 85
Electronics
Microsoft USA 74 58
Reasons to Globalize
 Reduced cost
 Lower wage rates, latest technology of production
 Less stringent government regulations
 Shifting low skilled jobs to other countries
 Improved Supply Chain
 By locating facilities in the countries where resources are
available. Such as facilitating chips, circuit board production to
China by Intel, Microsoft etc.
 Provide better goods and services
 Knowledge about culture and ways in which business is handled
globally in different countries.
 It helps in the customization of products and services to meet customer’s changing products and services.
Mc Donald, Google India.
 Reduce response time to meet customer’s changing habits for products and services. e. g : Honda Motors.
 Understand Market
 Europe lead market – with cell phone innovation
 Japanese lead with the latest cell phone fashion.
 Attract and retain global talent

 Relocate unneeded personals to more prosperous locations.
 Learn to improve operations

 Remain open to the free flow of ideas
Developing Mission Vision and Strategy
 Mission
 It is the purpose or rational for the existance of organisation.
As Aditya Birla Group : mission is to deliver superior services
to the customers, shareholders, employees and society.
 Vision
 An aspiration description of what an organization would like to
achieve or accomplish in the mid-term or long-term future. It is
intended to serves as a clear guide for choosing current and future
courses of action.
 Strategy
 It is a unified, comprehensive and integrated plan that is designed to
ensure that basic objectives of the enterprise are achieved through
proper implementation process. i.e. how to get there.
Strategies for Competitive Advantage
 Differentiation
 better, or at least different from competitors (USP)
 Cost leadership
 cheaper
 Response Time
 rapid response to changing customer needs and prefernces
OM’s Contribution to Strategy
Operations Specific Competitive
Decisions Examples Strategy Used Advantage
Product
FLEXIBILITY:
Quality Samsung's constant innovation
of new products………………………………....Design
HP’s ability to lead
Process the printer market………………………………Volume
Location Jet Airlines economy service……..…..LOW COST
Layout DELIVERY: Differentiation

Pizza Hut’s 5-minute guarantee (Better)
at lunchtime…………………..…..………………….Speed
Human Federal Express’s “absolutely,
resource positively on time”………………………..….Dependability
Response
Supply chain QUALITY: (Faster)
Intel Processors ………………………..….Performance
Cost
Inventory leadership
Toyota ‘s after-sale service
on vehicles…………….... After-sale Service (Cheaper)
Scheduling
Maruti ‘s broad product
Maintenance line of cars………… .Broad Product Line
10 Strategic OM Decisions
1. Goods and service 6. Human resources and

design job design
2. Quality 7. Supply chain
3. Process and capacity management
design
8. Inventory
4. Location selection
9. Scheduling
5. Layout design
10. Maintenance
Operations Strategies for Two Drug
Companies
Brand Name Drugs, Inc. Generic Drug Corp.
Competitive
Product Differentiation Low Cost
Advantage
Human Hire the best; Very experienced top
Resources nationwide searches executives; other
personnel paid below
industry average
Supply Chain Long-term supplier Tends to purchase

relationships competitively to find
bargains
Table 2.2
Elements of Operations Management
Strategy
 Low-cost product
 Technical superiority
 Product characteristics/differentiation
 Continuing product innovation
 Low-price/high-value offerings
 Efficient, flexible operations adaptable to consumers
 Engineering research development
 Location
Product Life Cycle
Introduction Growth Maturity Decline

Best period to increase Practical to change Poor time to change Cost control
market share price or quality image image, price, or quality critical
Company Strategy/Issues
R&D engineering is Strengthen niche Competitive costs

critical become critical
Defend market position
CD-ROMs
Internet search engines
Analog TVs
Drive-through
LCD & plasma TVs restaurants
Sales iPods
3 1/2”
Smart Floppy
Phones disks
Figure 2.5
Strategic issues in Product Life Cycle
Introduction Growth Maturity Decline

Product design and Forecasting critical Standardization Little product
development critical Product and process Less rapid product differentiation
Frequent product reliability changes – more Cost minimization
and process design Competitive product minor changes Overcapacity in
changes
OM Strategy/Issues
improvements and Optimum capacity the industry

Short production options Increasing stability Prune line to
runs Increase capacity of process eliminate items not
High production Shift toward product Long production returning good
costs focus runs margin
Limited models Enhance distribution Product Reduce capacity
Attention to quality improvement and
cost cutting
Figure 2.5
Strategy Options in Global Environment
 Strategy Options
1. International Strategy
2. Multi domestic Strategy
3. Global strategy
 The plans developed by an organization to target growth on
a global level for sales of products or services.
4. Transnational strategy
Four International Operations Strategies
International
High
Strategy
 Import/export or
Cost Reduction Considerations
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low High
Local Responsiveness Considerations
(Quick Response and/or Differentiation)
High
International Strategy
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low High
Global
High Strategy
 Standardized product
 Economies of scale
 Cross-cultural learning
Examples
Chevrolet
Caterpillar
Otis Elevator
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low High
High
Global Strategy
Examples
Texas Instruments
Caterpillar
Otis Elevator
license existing
product
Examples
U.S. Steel
Harley Davidson
Low
Low High
Multidomestic
Strategy
High
 Use existing domestic
Global Strategy
 Standardized model
product globally
 Franchise, joint
Examples
ventures, subsidiaries
Texas Instruments
Caterpillar
Otis Elevator
Examples
Heinz
 Import/exportMcDonald’s
or
product The Body Shop

license existing
Examples
U.S. Steel
Hard Rock Cafe
Harley Davidson
Low
Low High
High
Global Strategy
Examples
Texas Instruments
Caterpillar
Otis Elevator
International Strategy Multidomestic Strategy

 Use existing
 Import/export or domestic model globally
license existing  Franchise, joint ventures,
product subsidiaries
Examples Examples
U.S. Steel Heinz The Body Shop
Harley Davidson McDonald’s Hard Rock Cafe
Low
Low High
Transnational
High Strategy
 Move material, people,
Global Strategy
ideas across national
Examples boundaries
Texas Instruments
Caterpillar
Otis Elevator
Examples
Multidomestic Strategy
 Use existing
product
Coca-Cola
license existing
domestic model globally
 Franchise, joint ventures,
subsidiaries
Examples Nestlé Examples
Low
Low High
High
Global Strategy Transnational Strategy
 Standardized product  Move material, people, ideas across
 Economies of scale national boundaries
 Cross-cultural learning  Economies of scale

Examples
Texas Instruments Examples
Caterpillar Coca-Cola
Otis Elevator Nestlé
International Strategy Multidomestic Strategy

 Use existing
 Import/export or domestic model globally
license existing  Franchise, joint ventures,
product subsidiaries
Examples Examples
Low
Low High

CH II - Operation Strategy in Global Environment

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Operation Strategy in Global Environment

Some Multinational Corporations

Company Country Country

 Attract and retain global talent

 Learn to improve operations

Location Jet Airlines economy service……..…..LOW COST

Layout DELIVERY: Differentiation

1. Goods and service 6. Human resources and

Supply Chain Long-term supplier Tends to purchase

Introduction Growth Maturity Decline

R&D engineering is Strengthen niche Competitive costs

Introduction Growth Maturity Decline

improvements and Optimum capacity the industry

product The Body Shop

International Strategy Multidomestic Strategy

 Cross-cultural learning  Economies of scale

International Strategy Multidomestic Strategy

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