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Operations Strategy for

Competitive Advantage
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 Introduction
Business organizations craft their strategies in light of
the prevailing environmental realities.

Before conducting the SWOT analysis, however, they

have to really know what their strategic intents are
(mission, vision, and objectives).

The reason why they first scan the environmental

variables and then define their strategic intents is to
craft an appropriate strategy; a strategy that can help
them realize the strategic intents given the
environmental constraints and opportunities.

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Defining the Strategic Intents and Strategies
Mission
The mission states why a firm exists.
 Mission statements provide boundaries
and focus for organizations and the
concept around which the firm can rely.
It also clarifies and inculcates one with the
nature of a business an organization runs,
the type of products it produces, and the
needs it fills.
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 cont…
Once an organization’s mission has been decided, each
functional area within the firm determines its supporting
mission.
Vision
Visioning is visualizing things in mind and this is one of
the most important things in one’s life.
Objectives
Business mission and company directions have to be
defined in terms of performance standards, something by
which the business’s progress can be measured, evaluated
and rated.

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 cont…
 Objectives can be:
a) Short-term
b) Medium-term and
c) Long-term
Or
 Financial
return on investment, return on equity, amount of cash flow and cash
outflow, fixed assets turnover, accounts receivable turnover, fixed assets
turnover
 Business
Business objectives measure how the business performs relative to its rivals
and include:
 Leadership in technology
 Overtaking rivals’ customers
 Joining to foreign markets
 Improving quality
 Delivering better post-sales services

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 Strategy

Thamson and Strickland define strategy as a pattern of actions
and business approaches managers employ to please
customers, build attractive market position, and achieve
organizational objectives.
A company‘s actual strategy is partly planned and partly reactive
to changing situations.

Intended Strategy Realized Strategy Actual

Strategy

s tra tegy
Unrealized strategy m er g ent
E

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 Cont…
If you think of goals as destinations, then
strategies are the road maps for reaching
the destinations.
Strategies provide focus for decision-
making.
organizations have overall strategies called
organization strategies.
The functional strategies should support
the overall strategies of the organization.

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 Environmental Analysis
Business decisions, especially the strategic
ones need a clear identification of relevant
variables .
detailed and an in-depth analysis of the
relevant variables to understand their
impact and implication for the operations
function in particular and the organization
at large.
The environment to analyze can be broken
down into two:
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1. External Environment
The external environment is further divided
into two sub external environments:
a.Macro environment
The factors include:
i. Political and Legal
Taxation policy
Employment law
Foreign trade regulation
Monopolies legislation
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 Cont…
ii. Economic Factors
Gross domestic product

Disposable income

Unemployment

Exchange rate fluctuations

Interest rate

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 Cont…
iii. Socio-Cultural Factors
Demographic variables

Income distribution

Social mobility

Attitude to work and leisure

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 Cont…
iv. Environmental Factors
Energy consumption
Environmental Protection
Availability of infrastructural facilities

v. Technological Factors
Technology transfer
Pace of technological change

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b. Industry Analysis
Porter’s five competitive forces are:
The competitive pressure among the existing rivals

Threats from new entrants

Threats from substitute products

Threats from bargaining power of suppliers

Threats from bargaining power of customers

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 Operations Strategy Model: Levels at which a Strategy Operates

Corporate and
Business
Strategies

Internal Operations Strategy Functional Strategies

analysis
in marketing, finance,
Mission
engineering, human
Distinctive Competence
resource, and
External information system
analysis
Objectives
(Cost, Quality, Flexibility, and
Delivery)

Policies
(Process, quality, capacity, and
inventory)

Consistent Pattern
of decisions

Results
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 Cont…
Corporate strategy defines what businesses the
company is pursuing.
Business strategy follows from the corporate strategy
and defines how a particular business will compete.
Most large corporations have several different
businesses each competing in different market
segments.
Each business has to develop a strategy that states how
it will compete in the market which it sells its products
to.
Operations strategy, a functional strategy, is a
statement of how operations function will contribute to
the achievement of corporate goals.
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 Cont…
It is, therefore, narrower and much more specific
in scope than its corresponding business strategy
and corporate in that it addresses the following
specific questions:
What products can be produced in which facility
and how much?
Which products are going to be produced
internally, and which ones will be purchased?
What level of technology (automation, etc) will
be used?
Are the resources going to be owned or bought?
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 Cont…
How will the products be distributed to the end
customer?
Where will the facilities be located, with how
much capacity?
What type of processes will be utilized to
produce products?
How much flexibility is required from each
process and each product?
Which suppliers will provide materials, and
how much?
What kind of human skills are needed?
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 Cont…
Firms’ operations achieve missions in three conceptual
ways: (1) differentiation, (2) cost leadership, and (3) quick
response.
In practice, these three concepts- differentiation, low cost, and
response-are often translated into six specific strategies:
flexibility in design and volume
low price
delivery

quality

after-sale service, and

a broad product line

(typical Operations Objectives)

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 Focused Operations
Lack of focus in manufacturing plants and service
operations results from excessive attention to
economies of scale.
In the name of efficiency due to economies of
scale, different missions are being served by the
same operation.
The solution is to arrange each product as a
plant-within-a-plant (PWP).
PWP may, however, sacrifice some economies of
scale while doing a better job of meeting market
requirements and improving profitability.

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 Cont..

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After focusing the operations based on the volume of
the products, it is put as:
.

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