Professional Documents
Culture Documents
Chapter 2 - Revised
Chapter 2 - Revised
INTRODUCTION
Operational effectiveness is the ability to perform
similar operations activities better than competitors. It is very difficult for a company to compete successfully in the long run based just on operational effectiveness. A firm must also determine how operational effectiveness can be used to achieve a sustainable competitive advantage. An effective competitive strategy is critical.
International companies
Strategic alliances and production sharing Fluctuation of international financial conditions
$15 trillion, the largest in the world. Companies all over the globe are aggressively exporting their products/services to the US Many US companies are targeting foreign markets to shore up profits. The global economy that interconnects the economies of all nations has been termed the global village. One of the most important new markets is China.
INTERNATIONAL COMPANIES
International companies are those whose
scope of operations spans the globe as they buy, produce, and sell. International firms search out opportunities for profits relatively unencumbered by national boundaries. Operations managers must coordinate geopraphically dispersed operations.
INTERNATIONAL COMPANIES
Worlds Largest Corporations (2010 data)
1. Wal-Mart 2. Royal Dutch Shell 3. Exxon Mobil 4. BP 5. Toyota 6. Japan Post Holdings 7. Sinopec 8. State Grid 9. AXA 10. China National Petroleum
STRATEGIC ALLIANCES
Strategic alliances are joint ventures among
international companies to exploit global business opportunities. Alliances are often motivated by
Product or production technology
Market access
Production capability Pooling of capital
STRATEGIC ALLIANCES
General Motors (US) & Kia Motor Corp. (S.K.) Renault (France) & City of Moscow Sino Aerospace Investment Corp. (Taiwan) & Swearingen Aircraft (US) Kia might help sell and market GM cars in South Korea Manufacture 100,000 vehicles annually near Moscow Forming Texas-based Sino Swearingen Aircraft Co.
STRATEGIC ALLIANCES
Japanese companies have long
cross-holding of shares, sales and purchases within the group, and consultation. A production keiretsu is a web of interlocking relationships between a big manufacturer (Toyota) and its suppliers.
PRODUCTION SHARING
Production sharing means that a product might
be designed and financed in one country, its materials produced in other countries, assembled in another country, and sold in yet other countries. The country that is the highest-quality, lowestcost producer for a particular activity would perform that portion of the production of the product.
can go up faster) Global competition and cheap imports keep a lid on prices (inflation less likely to derail economic growth) Open economy spurs innovation (with fresh ideas from abroad) Export jobs often pay more than other jobs US has more access to foreign investment (keeps interest rates low)
or production shifts abroad Most displaced workers find new jobs that pay less Workers face pay-cuts demands from employers Service and white-collar jobs are increasingly vulnerable US employees lose their comparative advantage when companies build advanced factories abroad
INTERNATIONAL FINANCIAL CONDITIONS Due, in part, to the fall in the value of the dollar between 1975 and 1995, the following occurred:
Prices of US products/services abroad fell and
demand increased Japan and other countries built factories in US Japanese manufacturers moved upscale toward higher priced products
to shift strategies as world financial conditions change. Opportunities are usually available to reduce risk
Building smaller, more flexible factories Using foreign suppliers for materials, parts, or products Carefully planning and forecasting so that changing
the objective of perfect product and service quality. The entire corporate culture must be redirected and committed to the ideal of perfect quality. All employees must be empowered to act. A commitment to continuous improvement has to be organization-wide.
products and respond quickly to customers needs. Organizational structures must be made more horizontal to quickly accommodate change. Multidisciplined teams must have decision-making authority, responding better to the marketplace. Large, unwieldy companies are spinning off whole business units making them autonomous businesses that can compete with small, aggressive competitors.
producing and selling) and overhead costs. It cost the US automakers $1,500 more per auto for labor in 1980 than it cost the Japanese auto-makers. By the 1990s the difference was almost zero. Giant retailers (like Wal-Mart) squeezed weaker competitors out of the market, giving the retailers the leverage to force their suppliers to streamline operations and reduce costs/prices.
ADVANCED TECHNOLOGIES
The use of automation is one of the most far-reaching
developments to affect manufacturing and services in the past century. The initial cost of these assets is high. The benefits go far beyond a reduction in labor costs.
Increased product/service quality Reduced scrap and material costs Faster responses to customer needs Faster introduction of new products and services
ADVANCED TECHNOLOGIES
US companies cannot use automated
production technology as a long-term competitive advantage. Automation systems are available to any company in the world today, although the price is prohibitive for some companies. Not investing, or delaying investing in this technology could be disastrous for a company.
turing sector. There is much opportunity for quality improvement in US service firms. Many operations managers are being employed in services. Planning, analyzing, and controlling approaches from manufacturing are being adapted to service systems. The US service sector, like the manufacturing sector, must streamline and improve operations if it is to survive.
natural gas, water, and petroleum products are periodically unavailable or in short supply. A shortage of any necessary input to a conversion subsystem, including skilled personnel, can be a challenge for an operations manager. An important issue in the formation of business strategy is how to allocate scarce resources among business opportunities.
SOCIAL-RESPONSIBILITY ISSUES
Corporate attitudes are evolving from doing
what companies have a legal right to do, to doing what is right. Factors influencing this evolution include:
Consumer attitude -- Consumers are expressing their
likes/dislikes by such means as stockholder meetings, liability suits, and buying preferences. Regulation The EPA, OSHA, Clean Air Act, and Family Leave Act place constraints on businesses. Self-interests -- Companies realize that profits will be greater if they act responsibly.
SOCIAL-RESPONSIBILITY ISSUES
Environmental Impact
Product-Safety Impact
Employee Impact
SOCIAL-RESPONSIBILITY ISSUES
Environmental Impact
SOCIAL-RESPONSIBILITY ISSUES
Environmental Impact
There is a need for standardizing government
regulations of the environment. Otherwise, companies will gravitate to the lessregulated countries. The International Organization for Standardization has developed a set of environmental guidelines called ISO 14000.
SOCIAL-RESPONSIBILITY ISSUES
Product-Safety Impact
Harm to people or animals that results from poor product design can:
Damage a companys reputation Require a large expense to remedy Cause governments to impose more regulations
SOCIAL-RESPONSIBILITY ISSUES
Employee Impact
Family leave
Health care Retirement benefits Educational assistance and more
SOCIAL-RESPONSIBILITY ISSUES
Employee Impact
Employee benefits and policies impact longterm profitability due to their effect on:
Employee morale and productivity
CORPORATE MISSION
A corporate mission is a set of long-
COCA-COLA COMPANY
Mission Everything we do is inspired by our enduring mission: To Refresh the World... in body, mind, and spirit. To Inspire Moments of Optimism... through our brands and our actions. To Create Value and Make a Difference... everywhere we engage.
COCA-COLA COMPANY
Vision To achieve sustainable growth, we have established a vision with clear goals. Profit: Maximizing return to shareowners while being mindful of our overall responsibilities. People: Being a great place to work where people are inspired to be the best they can be. Portfolio: Bringing to the world a portfolio of beverage brands that anticipate and satisfy peoples desires and needs. Partners: Nurturing a winning network of partners and building mutual loyalty. Planet: Being a responsible global citizen that makes a difference.
BUSINESS STRATEGY
Business strategy is a long-range game
plan of an organization and provides a road map of how to achieve the corporate mission. Inputs to the business strategy are
Assessment of global business conditions - social,
economic, political, technological, competitive Distinctive competencies or weaknesses - workers, sales force, R&D, technology, management
COMPETITIVE PRIORITIES
Low Production Costs
Definition
Unit cost (labor, material, and overhead) of each product/service Some Ways of Creating
Redesign of product/service
New technology Increase in production rates Reduction of scrap/waste Reduction of inventory
COMPETITIVE PRIORITIES
Delivery Performance
Definition
a) Fast delivery b) On-time delivery Some Ways of Creating a) larger finished-goods inventory a) faster production rates a) quicker shipping methods b) more-realistic promises b) better control of production of orders b) better information systems
COMPETITIVE PRIORITIES
High-Quality Products/Services
Definition
COMPETITIVE PRIORITIES
Customer Service and Flexibility
Definition
Ability to quickly change production to other products/services. Customer responsiveness. Some Ways of Creating
Change in type of processes used Use of advanced technologies Reduction in WIP through lean manufacturing Increase in capacity
OPERATIONS STRATEGY
Operations strategy is a long-range
game plan for the production of a companys products/services, and provides a road map for the production function in helping to achieve the business strategy.
Product/service plans
Outsourcing plans Process and technology plans Strategic allocation of resources Facility plans: capacity, location, and
layout
system
Product focused Process focused
policy
Produce-to-stock Produce-to-order
PRODUCT/SERVICE PLANS
As a product is designed, all the detailed characteristics of the product are established.
Each product characteristic directly affects how the product can be made. How the product is made determines the design of the production system.
are developing, profits are negative. Growth - sales grow dramatically, marketing efforts intensify, capacity is expanded, profits begin. Maturity - production focuses on high-volume, efficiency, low costs; marketing focuses on competitive sales promotion; profits are at peak. Decline - declining sales and profit; product might be dropped or replaced.
Color Copier
CD Player
B&W TV
Introduction
Growth
Maturity
Decline
OUTSOURCING PLANS
Outsourcing refers to hiring out or subcontracting
some of the work that a company needs to do. This strategy is being used more and more as companies strive to operate more efficiently. Outsourcing has many advantages and disadvantages. Companies try to determine the best level of outsourcing to achieve their operations & business goals. More outsourcing requires a company to have less equipment, fewer employees, and a smaller facility.
OUTSOURCING PLANS
A company might outsource any of the
OUTSOURCING PLANS
Many companies even outsource some
is the determination of how products/services will be produced. The range of technologies available to produce products/services is great and is continually changing.
the firms resources are used in production/operations. Some or all of these resources are limited. The resources must be allocated to products, services, projects, or profit opportunities in ways that maximize the achievement of the operations objectives.
FACILITY PLANS
How to provide the long-range capacity to
produce the firms products/services is a critical strategic decision. The location of a new facility may need to be decided. The internal arrangement (layout) of workers, equipment, and functional areas within a facility affects the ability to provide the desired volume, quality, and cost of products/services.
possible.
production process
competitive priorities defined in the business strategy. Adjust to the evolving positioning strategies. Link to the marketing strategies. Look at alternative operations strategies.
to evolve as products move through their product life cycles. Operations strategies must include plan for modifying production systems to a changing set of competitive priorities as products mature. The capital and production technology required to support these changes must be provided.
To-Order To-Order To-Stock To-Stock Very Small Small Large Very Large
Marketing Strategy
Low production cost Fast delivery of products Quality
Example: TV sets
Marketing Strategy
Low production cost Keeping delivery promises Quality
Marketing Strategy
Flexibility Quality Fast delivery of products
Marketing Strategy
Keeping delivery promises Quality Flexibility
new products and services in high volume soon after introduction Such companies must have two key strengths:
Highly capable technical people Sufficient capital