UNIT 2

Operations Strategy and

Competitiveness
 Strategic Planning
 A process for getting from where
the company is today to where
company would like to be in the
future.
 A process for getting from “here”

to “there.”
 Strategic Planning Steps
 Preparing a mission statement
 Creating a vision
 Setting goals
 Formulating strategies
 Designing tactics
 Evaluating process and taking corrective action
 Measuring results or outcomes
 Strategic Planning Steps
 Mission
 What is our business? (Who we

are?)
 Focus is on “today” (Here!)

 Vision
 What we hope to be.
 Focus is on “future” (There!)
 Strategic Planning Steps
 Goals
 What we must do to achieve vision.
 Should be measurable.
 Strategies
 In broad terms, what must we do to

achieve goal?
 Does not say how.
 Strategic Planning Steps
 Depends on opportunities and threats
 Conduct environmental scan

 Also depends on companies strengths

(core competencies) and weakness

 Conducting an environmental scan and
identifying companies strengths and
weakness is a SWOT analysis.
 SWOT

Internal S = Strengths W= Weakness

External O = Opportunities T = Threats

 Strategic Planning Steps
 Tactics
 What must we do to make strategies work?

 Evaluation and corrective action

 Are tactic working?

 Are they moving you closer to achieving

goal?
 If not, take corrective action by changing

tactics.
 Strategic Planning Steps
 Outcome
 Outcome of strategic planning

process
 Tells us if strategic planning process

was successful.
 Was goal was achieved?

 If not, repeat.
 Example 1: Strategic Plan
Mission AMA is a 17 yr. old high school senior
Vision Be successful in business
Goal Become a CFO of a major co. at 35
Strategies Get a business degree
Tactics Go to UCC, major in Finance, get internship
with Fidelity Investments, become
president of SFA, get 3.8 or better GPA

Evaluation/ Are tactics working?

Corrective action
Outcome Position at age 35
Example 2: Strategic Plan
Mission KOFI is a 42 yr. old overweight
male
Vision Look better, feel better
Goal Lose 80 lbs. in 6 mos.
Strategies Diet, exercise
Tactics Go on diet, join 24 Hr. Fitness
Center, get a trainer, go to gym 5
days/wk.
Evaluation/ Track weight loss weekly; adjust
Corrective action tactics if necessary
Outcome Weight lost at end of 6 mos.
Example 3: Strategic Plan
Mission We are in business of selling men’s
dress shoes in Koforidua
Vision Expand market area to include Oda.
Suhum and Nkawkaw.
Goal Capture 30% of Oda. Suhum and
Nkawkaw.market in 1 yr.
Strategies Expand product line, increase
marketing effort
Tactics Carry women’s shoes; carry more
shoe lines including athletic shoes and
sandals; Advertise in major
newspapers.
Evaluation/ Are tactics working?
Corrective action
 Starbuck’s Strategic Plan
 Mission statement
 'Establish Starbucks as the premier

purveyor of the finest coffee in the

world while maintaining our
uncompromising principles while we
grow.‘
 What’s wrong with Starbuck’s mission
statement?
 Starbuck’s Strategic Plan
 Goal
 To establish Starbuck’s as the most

recognized and respected brand in the

world.
 What is requirement that goal should
meet?
 Does Starbuck’s goal meet it?
 Starbuck’s Strategic Plan
 To achieve this goal, the Starbuck’s plans to
 rapidly expand its retail operations,
 grow its specialty sales and other

operations, and
 selectively pursue opportunities to leverage

the Starbuck’s brand through the

introduction of new products and
 the development of new distribution

channels.
Starbuck’s Strategic Plan
 Are these steps strategies or tactics?
 Answer
 They are Strategies - broard statement of
what company will do to achieve goals, but
doesn’t say how.
 Tactics would tell us, for example, how the
company plans to expand retail operations.
 For example, open more retail stores in airports
and malls.
 FedEx’s Mission

FedEx provides access to a

growing global marketplace
through a network of supply chain,
transportation, business and
related information services.
 Lexus’ Mission
Lexus has revolutionized the luxury motoring
experience through its passionate commitment to the
finest products and the most satisfying automobile
ownership experience.
We vow to value the customer as an important
individual; to do things right the first time; and to
always exceed expectations.
We brought together these principles in the Lexus
Covenant, which inspires our dealers and associates to
treat customers as they would treat guests and to go
to any lengths to serve them better.
 More on Lexus
 “In order to make certain that a Lexus is
a Lexus no matter where it is built, the
entire workforce at Cambridge was
trained to follow the Passionate Pursuit
of Perfection that drives Lexus associates
worldwide.”
 Is there any connection between Lexus
and McDonald’s?
 EXAMPLE OF A UNIVERSITY
faculty of Business/mgt Mission
 The Faculty of Business and
management studies is dedicated to
educating the leaders of tomorrow.
 By offering a challenging curriculum,

smaller class sizes, state-of-the-art

facilities, and nationally recognized
programs, the Faculty offers a truly
unique educational experience.
Developing an Operations
Strategy
 Operations Strategy is a plan for using the
operational capabilities of a company to
decide how it will compete.
 Will it compete on
 Price,
 Quality,
 Time,
 Flexibility?
 One, some or all?
 Competing on Price?
 Offering product at a lower price relative
to competition
 Works if there are many competitors
offering same product or service.
 If you of a product with a high degree of
customization, does it make sense for you
to compete on price?
 Must also have lower ??? relative to
competitors.
 Competing on Quality?
 Quality of product
 Quality of service
 Both
 Does competing on quality mean that a
company can’t compete on price because it, if
it offers better quality, it will charge a higher
price?
 Depends on how quality affects ???
 If it increases ????, yes.
 If it decreases ???, not necessarily.
 Competing on Time?
 Time/speed one of most important
competition priorities
 Time related issues involve
 Rapid delivery:
 Focused on shorter time between order placement
and delivery
 On-time delivery:
 Deliver product exactly when needed every time
Competing on Flexibility?
 Product flexibility:
 Easily switch production from one item to
another
 Easily customize product/service to meet
specific requirements of a customer

 Volume flexibility:
 Ability to ramp production up and down to
match market demands
 Measuring Productivity

 Productivity is a measure of how efficiently

inputs are converted to output.

Output
Productivity =
Inputs
Measuring Productivity
 Partial measures
 output/(single input)
 Multi-factor measures
 Uses some but not all inputs
 output/(multiple inputs)

 Total measure
 uses all inputs
 output/($ value of all inputs)
 Measures of Productivity

Partial Output Output Output

measures Labor Machine Energy

Multifactor Output Output

measures Labor + Machine Labor + Capital + Energy

Total Goods or Services Produced

measure $ value of all inputs used to produce them
 Examples of Partial Productivity Measures
Labor
Productivity Units of output per labor-hour
Dollar value of output per labor-hour

Machine Units of output per machine-hour

Productivity Dollar value of output per machine-hour

Energy Units of output per kilowatt-hour

Productivity Dollar value of output per kilowatt-hour
 Numerical Example
Output Labor Machine

Units 500 x x

Hours x 26 6

Cost/unit x Gh8 Gh3

Price/unit Gh15 x x
Partial Measures

Units Produced
Labor Productivity 
Labor hrs.

500
Labor Productivity   19.3
26
 Partial Measures

Dollar Value of Output

Labor Productivity 
Labor hrs.

500 x $15/unit $7,500

Labor Productivity    $288.46
26 hrs. 26 hrs.
 Partial Measures

Units Produced
Labor Productivity 
Labor cost

Units Produced

(Labor hrs.) x (Labor cost/hr.)

50
Labor Productivity   2.4
26 x $8

Explain meaning?
Partial Measures

Units Produced
Machine Productivity 
Machine hrs.

500
Machine Productivity   83.3
6
 Multi-factor

Units Produced
MFP 
Machine Cost  Labor Cost

Units Produced

(Machine hrs.) x (Machine cost/hr.)  (Labor hrs.) x (Labor cost/hr.)
 Multi-factor

Units Produced
MFP 
(Machine hrs.) x (Machine cost/hr.)  (Labor hrs.) x (Labor cost/hr.)

500

6 x $3  26 x $8

 2.21
Improving Productivity
 Eliminate bottleneck operations
 Eliminate non-value added steps
 Use improved technology
 Improve quality
 Less rework
 More good units produced the first time
 Productivity should measure number of good
units produced the first time