e

--)
abtu
q&
30 rnioet
{.t*""
O*r
kehs
C
&m 3
pagi
Tr.rgos tceras
C
CRcbg)
"
Aga
iro iqlc.si
"
Apo ito
forr(e
rcodig
o
Cora \<ec1a perdqgangdn
Sohorc\
Jittr"p.rfko.l Setdah
OTS
ke AsdoS,/sdc>9nyar.eglis,l\
!
Operations
Management
Chapter 2
-
Operations Strategy in
a Global Environment
Powe.Point
Wsenlation
to ac@mpany
P t i n c i p l a ot Opeati on s Na n a g @.n t, 7 e
O
petatid
s M a n as em en t, I e
Outline
M Global Company Profile: Boeing
V A Global Wew of Opentions
g
Cuftural and Ethical lssues
M Developing Missions And Strategr'es
gMission
gStualgy
Outline- Continued
g
Achieving Competitive Advantage
Through Operations
g
Competing On Difrerentiation
gcompeting
On Cost
g
Competing On Response
g
Ten Strategic OM Decisions
Outline- Continued
Elssues ,n Operations Sttategy
EI Research
g
Preconditions
gDynamics
Outline- Continued
g
Strategy Development and
lmplementation
gcrtfical
Success Factors and Core
Compelencies
g
Build and Statr the Otganization
V lntegrcte OM with Othet Activities
Outline- Continued
g
Global Operations Stntegy
Options
g
Intemational Stntegy
g
Mu ltidomesaic Strategy
gclobat
Strabgy
g
T ra n s n ati o n al State gy
Learning Qhjectives
When you complete this chapter you
should be able to:
1, Define mission and strategy
2. Identity and explain three strategic
ap proaches to co mpetitive
advantage
3. ldentify and define the 10 decisions
of operatio ns m an agement
Leaming Ohjectives
When you complete this chapter
you
should be able to:
4. ldentify five OM strategy insights
provided by PIMS research
5. ldentify and explain four global
operati o ns strategy o ptio ns
Global Strategies
E Boeing- sales and production are
worldwide
@ Benetton
-
moves inventory to stores
around the world faster than iE
competition by building flexibility into
design, production, and distribution
g
Sony
-
purchases components lrom
suppliers in Thailand, Malaysia, and
arcund the world
Global Strategies
@ vovo
-
considered a Swedish company
but it is controtled by an American
company, Ford. The currenl Volvo S4O is
built in Belgium and shares its platfotm
with the Mazda 3 buin in Japan and the
Ford Focus built in Europe,
g
Haier- A Chinese company, produces
compact refrigarators (it has onethitd of
the US matket) and wine cabinets (it has
haff of the US matket) in South Carolina
Some Multinational
Corporations
%saks %Assets
Outside Outside
Hon6 Home Hone % Fotelgn
conpany Country counw country w.kto@
Citicotp US 34 46 NA
Colgata- US/4 72 6a NA
Dow USA 60 50
Gi edo USA 62 53
Honcl. Jaqan 63 35
IB" USA 57 47 51
Some Multinational
Corporations
%Sal6 %Issets
outside Outside
Hode Hom Hone % Fo.eign
C pany County Countty Countty Wb.ktotcE
lol Bitain 78 50 NA
rvesire Swiderlaad 98 95 97
Philips Nethedan.ls 94 a5 A2
Sie.mrs Gemany 51 NA
Unilevu Blitain & 95 70
Nelhedands
38
64
Some Boeing Suppliers (787)
ttessier-Augafti
;frcnce
Eteclricbrakes
Thales
"-$France
Eteclricat powet
conversion syste,n
and integradd
slandby Sight display
hlessier-Doifiy Fhdce Landing gear stuclure
Dieht
...,?^"n,
lntetio.lighling
Some Boeing Suppliers
ft87)
Fim Country Cotnponent
Fuji Heavy
lndustries
xawasaxi
srvy
lnatusfrles
Teiiin Seiki
ffipan
Mifsubishi tteavy
y
Japan
tnddstri6
ChengduAircraft China
Group
Japan Center wing bo*
China
landing geat well
Hydtaulic actuatots
Wingboc
Rudder
Patls
Some Boeing Suppliers (787)
Finn Coanby Component
Kotean Atiitlion South fit gtips
t<orca
saab
.,-li
sweaeo,-,$@{,{,ffi"gb!
Reduce Cosfs
g
Foreign locations with lower wage
rates can lower direct and indirect
cosfs
@ Maquiladoras
g
World Trade Otganization (WfO)
gMotth
American Free Trade
Agreement (NAFTA)
gAPEC,
SEATO, MERCOSUR
gEurcpean
Union (EU)
Reasons to Globalize
Reasons to Globalize
Tangible
1.
2.
3.
4.
Reduce costs (labot, taxes, taifrs, etc.)
lmptove supply chain
Ptovide better goods ardseryices
Underctand ma*ets
Leah to imptove operations
Altract and rctain global talent
+
lntangible
lmprove the Supply Chain
g
Locating facilities croser to
unique resources
g
Auto design to California
gAthletic
shoe
prcduclion to China
gPerfume
manuhcturing in France
Provide Better Goods
and Services
V Objective and subjective
chancteristics of goods and
sewices
@On-time delivertes
g
Culturat Yariables
g
lmproved customer sevice
Understand Markets
V tnteracting with foreign customers
and suppliers can lead to new
opportunities
-
--
E,
-E|r_-
gcell
phone
I
design from
'i
Europe
gcett
phone
&-
fads frcm
Japan
@ Extend the prcduct life cycle
Leam to lmprove Operations
A Remain open to the free ftow of
ideas
Aceneral Motorc paftnered with a
Japanese auto manufacturer to
leam
gEquipment
and layout have been
improved u sing Sca n d in avian
ergonomic competence
Attract and Retain Global
Talent
g
Otter belter employment
opportunities
gBetter
growth opportunities and
ins ulation against u nemployme nt
V Relocate unneeded
personnel to
more prcspero u s locations
glncentives
for people who tike to
tnvel
Cultural and Ethical lssues
V Cuftures can be quite
different
g
Altitude-s can be quite different
towards
E Punctualw
g
Thievery
g
Lunch breaks @ Bfibery
A Environmenl
g
Child labor
g
lntellectual
prcpe,ty
You May Wish To Consider
g
National litency nle
g
wofi ethic
l4 Rale of innovation
g
fax ftl6s
g
Rate oftechnology
g
lnflation
change g
Avaitabitity of 6w
g
Numbetofskiled mateials
wo*ers
@ hterest
'?]tes
g
Political sbbility
B
poputation
Z Ptoduct liability laws
g
Number of mites of
g
Export rcstrichons highwaY
g
vaiations in language
g
Phone syslem
Match Product & Parent
g
Braun Household
Apptiances
g
Firestone Tires
A Godiva Chocolate
g
Haagen-Dazs lce
Cream
g
Jaguat Aulos
d MGM Movles
g
Lamborghini Autos
g
Alpo Pedoods
l, Votkswagen
2, B dgesbne
3. Canpbe soup
4. Ford Molot Company
5. Gi efie
7. Pillsbury
8. Sony
Match Product & Parent
Vl *aun
A Godlva Chocolab
g
Fitestone Tircs
g
Haagen-Dazs lce
Cream
g
Jaguar Autos
vl MGM Movig-s
Volkswagen
B.iclgestone
Campbe Soup
Fotd Molor Cofipany
Gi efte
Nest6
Pillsbuty
Sony
4 Lamborghini
d Alpo Peffoods
Match Product & Country
gBnun
Household
Appliances
gFirestoneTircs
1. GrcatBrtbin
g
Godiva Chocolate
2. cermany
gHaagen-Dazlce
3- JaDan
Crcam
4. United States
g
Jaouet Autos
anin nori""
S switze ancl
g
Lambotghini Autos
g
Alpo Pel Foo.ls
Match Product & Country
g
Bnun Householc!
Appliances
I Firastone Tires
Great Britain
Genany
Japan
Urr'aed States
Switze enc!
gGodiva
Chocolate
dHaagen-Dazlce
Cr.am
g
Jaguat Autos
attcv Movies
/
/ ./'
E Lamborcthini Autos ./
g,eboPe;rooa/
Developing Missions and
Sfrafegies
Mission statements tell an
organization where it is going
The Strategy tells the
organization how to get there
Mission
fl Mission - where are
you going?
gOrganization's
purpose for being
gAnswels'what
do
we prcvide society?'
@Provides bounda es
and focus
FedEx
FedEx is committed to our People-Setuice-Ptorit
philosophy. We will ptoduce oulstanding financial
retums by providing total rcliable, competitively
supeioL global aiFground transpottation of high
p ority goods and documents that require rapid,
time-cettain delivery. Equally impottant positive
control of each package will be maintained using real
ttme electronic tracking and tracing syslcms. A
compleE recoral of each shipment and ddivery will
be plesenteal with our request for payfient We will
be helpful, coudeous, and professional to each othel
anc! the public. We will sttive to have a conpletely
salisfied custaner at the end of each ttansaction,
Merck
The mission of Merck is to provide
society with superior
products and
servictis - innoiations and solutions
that improve the
qualw of life and
satisfu customer needs - to orovide
emptdyees with meaningful ivo* and
edv-a n cement opportu n iti es a n d
investors with a siierior rate of return
Hard Rock Cafe
Our Mission: Ta spread the spirit of Rock
'n'
Ro by delivertng an exceptional
enteftainment and dining experience, We
are commilted to being an impoftant,
confibuting member of our community and
offertng the Hard Rock hmily a fun, heawy,
and nuttuting wo* environment while
ensuring our long-lerm success.
Arnold Palmer Hospital
Amold Palmer Hospital is a healing
environment
providing hmiry-centered
care with compassion, comfott and
respect..- when it malters the most.
Factors Affecting Mission
Prcfitability
Sample ll4issions
Sample Company Mlssion
lo manulactute an.! ae|lce an ianovative, grcwihg, an.l
prcfi la b I e wo ddw i cle n ic mwav e c o n m u n ic ation s b u s i n o s s
th at
q
ceed t our c lslom er s'
q p e.tali on s.
Sample Opeations Management Mission
lo prcdrce p,o.lu.ts consistent wilh the compaoy's missioo
dslheM dwide low-cost manufdctun.
Sample Missions
Sample OM Depaftmenl Missions
Io dstgn and prcduc. pftductt and
tetuicq with ou&ndhv q@ltty
and
inhorcft c6tomr val@.
to .GlD ua ex..ptidar vatuo rhEt E
cofttsTeit with ou. .ohp.ny mi$18 and
na*6tlng obj.ctiv@ by cl..o ttenti.n to
&slgn, prccut.mn1 ptuductior, aa.! tjatd
rod.@din and d@ign ot ptuduca the
prtdu.tion pGg atd .qoipm.t t th.r wi
h.compa bl. wlth ]*"ed ptudu.t, high
qu.ftty, .nrr qood qualily o, wtk liL Et
Sample Missions
Sample OM Departrnent Missions
to b..re, c6tgn, ard build .ni.i6.r and
Eonoi',c lacltltlsthat
g ylald hlgh
val@ to dE .ohpary, iE .ntploya, .nd tha
ro .chtes tttuqgh stit, h.ghzd@. .nd
rcerc.fuln* ln l.yout and wo* @tha4.,
ptudu.tion erfstituna tad efrici6tuy whil6
tupp.ning a high qtulily ol wqk liL.
ro prcvid. a good qu.tity o, vottr n , vhh
wo
..l61gn
.l, s.r6, tu
^lit9j6b.,
sabl.
.nploynd4 .nr! .qiEblB p.y, ln r.hang.
ta outsE.dlng h vlduol conbi&'tion lfta
Sample Mrlssions
ituvdtive ptude6 lrcn iablo,
.nd. ciott.,@$ ol tuwly.
consisb tt with hlgh cuttnet aeryi@ tov.ls
and sh lrdltty tiilEation.
equipn.dt by af,.di@ preYennva
tuid.nanc. and Nonit tuDait ol fdcilid.s
Strategic Process
Strategy
g
Action plan
to
achieve mission
g
Funclional areas
have strategies
g
Strategies exploit
opportunities and
strengths,
threats, and avoid
weakaesses
Strafegies fo r C o m petitiv e
Advantage
g
Differentiation
-
befter, or at teast
different
V Cost leadership
-
cheaper
El Response
-
raprd response
Competing on
Differentiation
Uniqueness can
go beyond both the
physical characteristics and service
altributes to encompass everything
that impacts custome,us perception ot
value
@ Safeskin gloy6
-
Ieading edge
producls
d Walt Disney Magic Kingdom
-
expe ence difrerentiation
g
Hard Rock Cafe
-
dining expeience
Competing on Cost
Provide the maximum value as
perceived by customer. Does not
impty low quality.
g
SouthwestAi ines
-
secondary
airyofts, no fills seryice, efrcient
util ization of eq ui pfl ent
g
Wal-Mart- small overheads, shrinkage
distribution costs
g
Franz Colruyt- no bags, Iow light no
music, doots on freezers
Competing on Response
g
Flexibility is matching ma*et changes in
design innovation and votumes
g
Institutionalization at Hewletl-Packatd
g
Reliability is meeling schedules
g
Getmen machine industry
M lr:merrress is guick ess
in design, production,
and delivery
g
Johnson Electric,
Bennigan's, Motorola
k thh;et
10 Strategic OM Decisions
1, Goodsand
6. Human resources
sevice design
andjob design
2. Quality
7. Suppty chain
3. Processand management
caoacifu desion
- 6, tnventory
4. Location
selection
9. Scheduling
5. Layoutdesign
10. Maintenance
Goods and Services and
the 10 OM Decrsrons
Operations
Decr:tiors
Goo(kand Prcductis usually Ptoduct is not
sewice tangible tangible
design
Qualily Manyobjective Manysubjective
standards standards
Process Custome]'s not Customer may be
and involved directly involved
clQlcitY
caoacitv must
destgn
mirch ]emand
Goods and Services and
the 10 OM Decrrons
Operations
Decisions Goods Servtces
Locffi
selection materialsand
labor
Layout Production Enhances prcaluct
design efricie'ncy and production
Human Technicalskills, lntetactwith
resorlces consistertlabot customets,labor
andjob slandards, output shndatds vary
design brsedwages
Goods and Services and
the 10 OM Decisions
Ope'ations
Supply
Goods
Relafionship
c tical lo tinal
ptoc!lct
Impoftant, but
may not be
c tical
lnventory Rawfiateials, Cannot be stored
work in"ptocess,
andfinished
goocls may be
held
Scheduling la9dschedules Meetimmediate
pcsrlbre customer demand
Goods and Services and
the 10 OM Decrsions
Operations
Decisions
Mainbnance Often preventive Often "repaif'and
andtakes place takes place
at
at production silt cusaomert sr:ie
Managi ng Global Service
Operations
Requires a difterent
perspective
on:
g
Capacity planning
g
Localion
ptanning
g
Facilities design and layout
g
Scheduling
Process Design
O
peratio ns Strateg ies for
Two Drug Companies
Btun.t Name Dtugs,lnc. Genqk Drus Corp.
Ptoduct H@ryR&D investm@t Low R&D ihveshent;
Sele.tion anct exbnsivelabs; tocus on tocuson developnent
Deeign developmeat in a brca.! otg.nqictlrugs
nnge ot.hag
crtegodes
Quality Maio.pnorhy,4.4.l MeelsGgulatory
rcsulalory requiremenls requircment ona
countty by counlry
basis
Operati ons Strategi es for
Two Drug Companies
Band Na/me Druss,lnc. Genenc Drus Co.p.
Process Pto.luct and tu lula. P.ocssfocused;
pmcess: loog senetat
prccesses;
'lob
pto.tucton tuns in shop" approach, short-
specialae.lracilities; run production;f@us
buil.l capacilv ahead o, on hish utilhalion
denand
Locetis stillocatedin thecity R*en ytuve.lto lovt-
where il was ,ouacle.l lax, low-laboFcat
envircnm.nt
Operations Strategies for
Two Drug Companies
BBn.t Name Dtug.,Inc. Gene.ic Dtug C.tP.
Sch.clulidg Centalize.l
Ptu
luction Many short+un
Plannlng Prcducts
comPlicate
scheduling
La@ut L4tout suwo^s LaWUt sqqo.ls
.ttbnatedpro.tuct-
prc.e$-tocused'roD
tocused W.luction
shop" pdcti.es
O
perati
o ns Strateg i es for
Two Drug Companies
Bran.t Name D.uss,lnc. Geneic Dtug Cotp.
Hun.n Hire the bst; Very exPenence.ltoP
Aesoorces natio|wi<,4sea.ches ex.culves;othet
perconn.l
Pai.t
b.low
in.lqstY avaage
Supplych.in Long-lenn sudtet Tek.ls to purchasa
rchtionshiPs co
Petitirelyto
fincl
hargains
Operations Strategies for
Two Drug Companies
Bla,dNaneDrugs,lnc. Geneic Drug CotP.
c9fpofrtue
ptodu.tDitt.tentiation
lowcosr
lnvdtlory Highrinkheclgoocls Prccas focus .l.ivs up
inventorytoensurcall work-ituPtoc$s
clanan.lsarenet inventoty;tinish9<t
goocls lnveotory tencls
Io be lo|'
Maintdan@ Highlytaitedstaft: Highlyttaine<lstafrlo
ertensive palts Mt changing dennn.l
inv.ntory
lssues ln Operations Strategy
fl Research about dfective
operations management
strategies
g
Preconditions for developing
ef f ectiv e O M strate g i es
V The dynamics of OM strategy
development
Characteristics of
Hiqh ROI Firms
g
High product quality
g
High capacity utilization
g
High opeftting efficiency
V Low invest nent intensity
g
Low dircct cost
per unit
to Gain a
Advantage
28Yo - Operatlons Management
1 8% - M arketi ng/distribution
171/o - Momentum/name recognition
16% -
Qualtty/selice
14ok - Good management
496 - Financial resources
se6 - Other
Elements of Operations
Management Strategy
Low-cost product
g
Ptoducuine brcadth
g
Technical supefiodty
g
P rod u ct ch a n cle d s7.i c s,/d iffe te n ti a ti o n
E Continuing prcatuct innovation
g
Low-pdcelhigh-value offefihgs
g
Efricient flexible operations adaplable to
A Englneefing.esearch developmenl
@ Location
A Scheduling
Preconditions
One must understand:
g
Strcngths and weaknesses of corrpeffors ard
possible new entanE into the ma*et
g
Cuftent and prcspective environmenbt,
technological, legal, and economic issues
g
The product life cycle
g
Resources available within the finn and within
the ott funcuoh
g
lhbgration of OM stategy with company's
stntegy andwith othq functional areas
Dynamics of
Strategic Change
g
Change-s within the organization
g
Personnel
g
Finance
@ Technology
g
Produc, life
V Changes in the environment
Product Life Cycle
Product Life Cycle
.9
\
e
=o
M*
ffiffi
frnK*
SWOT Analysis
Strategy Development and
lmplementation
g
ldentify critical succe-ss factors
V Build and staff the organization
g
lntegrate OM with other activities
The operations manager's
job
is to imptement
an OM stralegy, ptovide
competjtive
advantage, and increase prcductivity
Activity Mapping
C o m petiti v e A atu a nla g e :
Low Cost
Strategy Devel o
p me nt P roces s
Envtrcnmnt lA.aiy.ts
tdtry rh..t aNnE, t*d'ft e, df@tunr3, dn we.
ttu@f,,,dtE e :Mtu4 cdM.E tt d6ty, ddce'.nbB.
JL
Itu fltl@ C.tqofti. ision
sbir dt d'o
'o.
rt frnt q/5@c.
d d4r6y th.
-.t L
Fofrt stt t gy
alcd.cdnpdiitu.et bst..uct' $ tow Nie. d.4sn, I
votm.ndihw,
stdht,
qr'tc* dzti'dy d.p@d*]w 2a4
.4..ei.4h@dp'.delfrn..
Critica I S u ccess Facfors
Activity Mapping
Automated ai ckeling m a chi nes
/Vo seat assrSnmenrs
No baggage transfets
No meals (peanub)
Activity Mapping
No meals (peanuts)
Lowergate costs al
secondary airpot/s
High nutnber of flights
raduces etuployee idle lime
between flights
Activity Mapping
P ilot ttainin g rcqui rcd on
only one type of aircnft
Reduced maintenance
invenlory required because
of only one type of aircrcft
Excellent suppliet rclat ons
with Boeing has alded
linancing
Activity Mapping
High number ot flighb
rcduces employee idle time
between f,ights
Saturete a city with flighE,
I owe fi n g a dm i n i s tralive
cosls (advetTishg, HR, etc.)
per passenget fot lhat city
Pllot taining rcquired on
only one type of aircnft
Reduced maintqbnce
i n ven to
ry
re q u i red b eca us e
of only one lype of aircm{l
Activity Mapping
i Re<tuced meintenence
I
inventory requited because
I
of only one type of aircnft
l- J\
Fleribre emproyees and
-)
standarcl planes
eid
'
schecluling
Maintenance personnet
Uained only one type of
eircnfr
2O4n i n ute g ate tu m a rc u n a! s
"."rlr):.
aiooj,/
-,1\
t*-'
Flexible union
_t_
z'
ry'nn\ rt
\!ttEatay
\:"-^':-,
Activity Mapping
Automated ticketing
machines
funpowered
qnployeas
High employee
compensation
Hirc hr attitude, then train
High level of stock
ownership
High number of flights
rcduces employee ialle time
between flights
Four International
Operations Sfrafegies
g
Standatdized
product
@ Economies of scate
@ Cross-cultural
leaming
Examples
Texas lnstrumen'f
lnlernational
Strategy
V Impod/export or
license existlng
ptoducl
Examples
U-S. Stee,
Harley Davidson
Four lnternational
Operations Sfrafegies
/
",**
\
t@t
\ ffi,ffi ,/
-.\'./
t,-<\
dn@*;;; *
arM.r4oartotutu)
g
Use existing
domestic model
globatly
g
Fnnchise,
joint
ventutes,
srbsr'diarl'es
Examples
Heinz
McDonald's
The Body Shop
Hard Rock Cafe
Four International
Operations Sfrafegies
-Z
**
-"-
/
",^..*^-
\
/ e@a.d \
I
\ .:dk' ,/
-..-.''''-l
-.il;;--.- -,d;;;-'..
/
"*.
'\
/
"!*i::g-""*^
\
( [m*
) / 'Hfi**"* \
\
"im"
,/ \ "*- *** /
\,!^,-l_,/
y:*?/
)
Htch
E
!

V Movematerial,
people, ideas
across national
boundaries
EI Econornrbsofscale
V Cross-cuftural
leaming
Examples
Four Internatlonal
Operations Sfrafegies
c
P
I
c
o
E
i
c
o
-z----=-\
/-----------\
/-
au$tg
\ ///
M$ry\
/ alj}ffitu \ /
gtu@,'dtu
\
/dMd*\/mlldrl.'i&\
I ao,MW \ / EMd* \
I I I Be@ffi I
\@/\J
\t.atu/\ffi/
\@/\&&/
Y-----
t-t---'---
/---\\ _./,-------\
,/@W\/ft@sry\
/ atqqtrytt \ /
"H,H!:**
\
/ ffi.rry \ / nffie.M. \
tpffill*ttu6)
\m/\
VFm* ,/ \ffi* h*w,/
U
tN<
-
>tryr
\
to.aR*pwi* Cwi.tqfror
v
(wtuweW