STRATEGY

Chapter Two
McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
 Strategy
 A strategy is a plan for creating
value.
 A strategy is a pattern of

decisions of an organization.
 A strategy links resource

decisions to goals.
 A strategy will influence business

model and the operating plan.

2-2
 Sustainable Strategy
 The firm’s strategy describes how it will create
and sustain value for its current shareholders
 Shareholders – individuals or companies that
legally own one or more shares of stock in the
company
 Stakeholders – individuals or organizations who
are directly or indirectly influenced by the actions
of the firm
 Triple bottom line – evaluating the firm
against social, economic, and
environmental criteria

2-3
Triple Bottom Line

2-4
Operations and Supply
Chain (OSC) Strategy
 OSC strategy is concerned with
setting broad policies and
plans for using the resources
of a firm and must be integrated
with corporate strategy.

2-5
Functional strategies
must support one
another as well as the
higher level strategies!!
3-6
Operations Strategy
(Operating Plan)

2-7
 Competitive Effects of
Structural Decisions

Insert Exhibit 3.10

8
 Competitive Effects of
Infrastructural Decisions

Insert Exhibit 3.11

9
3-9
2-10
 Trade-Offs
 Management must decide which
parameters of performance are
critical and concentrate
resources on those characteristics
 For example, a firm that is focused
on low-cost production may not be
capable of quickly introducing new
products

2-11
Order Winners and Order Qualifiers

 Order qualifiers are those dimensions

that are necessary for a firm’s products to
be considered for purchase by
customers
 Features customers will not forego

 Order winners are criteria used by

customers to differentiate the products
and services of one firm from those of
other firms
 Features that customers use to

determine which product to ultimately 2-12

 Good Operations
Strategy
 Adopt a focused competitive
strategy
 Excelling
on winners and
meeting the qualifiers.
 Maintain external consistency.
 Fit with the way the firm wants to
compete.
 Monitor internal consistency.
 All strategic structural- 13
14
 Risk Management
Framework
1. Identify the sources of
potential disruptions.
2. Assess the potential impact
of the risk.
3. Develop plans to mitigate the
risk.

2-15
2-16
 Productivity
Measurement
 Productivity is a measure of how well resources
are used
 Productivity =
 Productivity is a relative measure
 Must be compared to something else to be meaningful
 Operations can be compared to each other
 Firms can be compared to other firms

 Partial productivity measures compare output to a

single input
 Multifactor productivity measures compare
output to a group of inputs
 Total productivity measures compare output to all
inputs
2-17
vity
Calculati
on

2-18
 Operations Strategy of
Zara
 DESIGN
 Concurrent design processes
(Procurement, Designers, Market
specialists, Sales executive, Store manager)
 Spotting the latest trends from fashion
shows, magazines, new released movie,
trade fairs
 Proposed designs were consulted with the
Procurement and Production
departments.
 12,000 designs every year

 New designs appear in the stores globally 2-19

 Operations Strategy of
Zara
 PRODUCTION
 60% by own factories (Zara had 25 factories
across the world)
 Most plants run on a single shift basis
 Unused capacity is used for quick response
for seasonal demand
 Most labor intensive activities were
outsourced to reduce overall cost
 Lead time (from fashion concept into product in
store) was 2 weeks
 Ability to launch new trends, designs
product variation in a short time
2-20
 Operations Strategy of
Zara
 COST LEADERSHIP
 A fashionable range of product at
affordable price and lower price
than competitors due to its policy
for maintaining low level of
inventory in stores
 Efficient distribution system
allows to put products in store just
in time
 Higher inventory turn over than 2-21
 Operations Strategy of
Zara
 LOGISTICS
 Used a centralized distribution
unit: observing, analyzing, and
applying various research findings
of the talent spotting team
 Used all modes of
transportation for shipment
 Trucks were loaded in the evening
and dispatched at night
2-22
 Operations Strategy of
Zara
 INVENTORY MANAGEMENT
 Replenishment at least twice a
week
 Limited inventory (not to carry
excess inventory)

2-23
 Operations Strategy of
Zara
 TQM
 Since 1995 has implemented TQM
 Continues improvement of their
processes
 Invested a lot in the motivation
process of employees

2-24
 Operations Strategy of
Zara
 INFORMATION SYSTEMS
 Most designs were done through CAD
(precise, rapid)
 Invested in technology for flows of
information
 Store managers had hand-held PDA
(personal digital assistant) to send
information (e.g., sale figures, order
placement, customer feedback) to
the head office
2-25