Operation Strategy

trading trading operations STRATEGY dodge The Concept of Stpacegy The word schema is derived from the Greek term strategos (plural strategoi Greek , , literally opineing army strikeer) is used in Greek to mean ordinary. However, the term is similarly used to describe a force g everyplacenor which command, plan and conduct of a war.When schema applied to channel wars, the scheme refers to the establishment of objectives, the setting of direction, and the prep atomic number 18ment and follow outation of plans, with the mark (in place of military victory) of achieving ascendancy over ones adversaries according to Andrews (1971), Ghemawat (2002) and porters beer (1980). In order to induct the desired rivalrous impact, a strategy has to operate over an extended cartridge holder horizon and embrace a colossal spectrum of activities, ranging from preference allocation do byes to day-to-day operations.It must integrate conclusions modify these different sets of act ivities into a dour pattern, both over time and crossship dopeal groups that often compete for the same resources. An effective strategy also ordinarily involves concentrating a alliances efforts and resources on a limited clasp of directions. Focusing resources on certain directions reduces available for opposites, nonetheless, so a coherent strategy usually required that a go with use up trade- aways among sundry(a) expected outcomes.TYPE OF STRATEGY The word strategy is used in numerous contexts that is useful to identify and contrast three different types of caution-related strategies. At the highest level, bodied strategy identifies the industries and securities industrys in which a company will operate. Corporate strategists make decisions that implement these choices, including investment in and divestment of furrowes unitedly with allocation of resources among existing occupancyes. personal credit line strategy, the befriend level of company strategy, is f ocused at the level of the individual blood or business unit at bottom the company, and is come to with where the business positions itself within a particular industry or market as hearty as with how and with what capabilities the business will win clients, cooperatively and in aspiration with other parties in its industries.In other word, the business strategy is also concerned with strategic business units (SBUs) as each SBU might deliver its declargon business strategy, which specifies (1) the scope of that business and its relation to the corporation as a whole, and (2) how it proposes to position itself within its particular industry to achieve competitive profit in confused ways according to Hayes et al (1988). To be effective, elaborated further from Porter (1980), this advantage must meet classic node needs, take into account competitors strengths and weaknesses, and be sustainable given the SBUs capabilities.Empirical evidence from a study over 100 companies by Sterman (2000) imbed that those companies that engaged in administration level thinking to the highest degree their business strategies significantly outperformed those that focused at the crossway level. To be more specific, Hax and Wilde 2001 place three medical prognosiss a company might consider in ontogenesis a strategy. For IBM4710 inhume OM Chayakrit Asvathitanont, Ph. D. 1. Best Product- this gull emerges from the classic competitive strategy.It focuses on competing by positioning the companys produces or operate as minor woo, having a unique set of features, or targeting a focused or niche segment in the market. 2. Total Customer Solution- the guest is at the center and the earliest to satisfy. It argues that very good understanding of customer and developing close relationships with those customers to sanction them in creating their hold economic value.Company competing with this view will focus on fork up set ups to retort to waive the goods family of crossings or advantages that well-nigh match customer requirement. 3. System Lock-In- this view comprehends the enterprise, the customers, the suppliers, and the most important those company whose harvest-tide and emoluments enhance the strategy-making companys avow ware and service portfolio. The key to success in this view is to identify, attract and nurture those companies whose harvest-feastions and services are complementary, engaging them in a collective effort to please the customer.In this study, companies engaged in system lock-in far outperformed those employing total customer solutions or best crossroad strategies on both Market Value Added (MVA) and Market-to-Book Value (MBV) as in march 1 Exhibit 1 sex act writ of execution of Three lieu Strategies system Best Product Total customer solutions System lock-in heel of companies in the study Relative Market Value Added Performance Relative Market-to-Book Value Performance 74 67 16 1. 0 1. 6 4. 0 1. 0 1. 2 2 . 0 Source Hax and Wilde, The Delta Project Discovering parvenu Sources of profitability in a Network Economy, Pelgrave, 2001.Thus, to develop business strategy, the company must think about its positioning not widely to its competitors tho also its customers, suppliers and potential complementary product or service producers. catch the system-level view, the company will be able to provide better solutions from integrating of value chain with attention to company produce the products or services that complement its products and services or any other solutions. However, the understanding customer is more unfavourable to strategy training and execution.Hayes and Wheelwright (1984) and Fine and Hax (1985) had proposed quintuple dimensions to use as the framework which are toll, Quality, availableness, Features/ modernisticness and environmental/ expecting into action. Cost The exist has been delineate as the bell of the product or service to the customer. Cost this h olds not only buy price of the product or service, just now the cost of ownership as well. The aspects of cost to customer will be vary on the industry or category of the product much(prenominal) as the cost customer consumer product will be only on its selling price.While industrial product, like machine and equipment, will be more likely For IBM4710 repose OM Chayakrit Asvathitanont, Ph. D. to extend its concern on installation, cite and others cost related not only to the equipment alone. Quality The caliber be by Garvin (1988) and King (1987) is broken down into two aspects, the tactile and intangible. The tangible aspects of quality include the aesthetics of the product, or output of the service, how reliable it is over period of time, whether or not it is safe, and how convenience to fix and etc.While the intangible aspects include the competence, courtesy, and credibility of the people involved in the crop, as well as the point to which those people understand the customers needs and convey well with the customers. They also include assessments of the environment surrounding the corrupt process or service, including considerations such as additionibility and security. In addition, to examine the quality, it may be important to differentiate assessments of the actual quality delivered from the quality perceived by the customer.Availability The availability dimension is increasingly important and geting by customers. Availability requirements clearly vary by business. Grocery store customers expect products to be available on the shelf when they go shopping. An out-of-stock item is a broken of sale for a particular brand or product and also may be lost of sale for the store itself. Airlines buying airplanes, on the other end of the spectrum, do not expect to buy their products off the shelf, further they do expect saving when promised.Plans are made months ahead, or in any(prenominal) cases years ahead, of projected delivery to put t he in the buff aircraft into service immediately upon delivery, possibly retiring and replacing other aircraft. new-made deliveries can cause great disruption to an airlines entire schedule. Availability applies to new product introductions as well. nearly industries such as consumer electronics focus on fast time-to-market for new products. Others have longer product development and introduction cycles except must delivery new products when promised. Moreover, availability refers to the variety of the products a company offers.There is a wide range of ways in which companies offer customized products or services to their customers. Hence, availability describes the stanchs ability to deliver the variety of products or services its customers insufficiency when they want them. Features and Innovativeness The inherent characteristics of the product or service is Features such as the have services from the first or business class fares on integral service airlines like Japan Ai rline, Thai Airways or less feature services, such as passage on Southwest Airlines, and Airasias no frills flight.Innovativeness is near related to features due to the fact that advanced technologies are substantial to be new featured of the product. For instance, global positioning systems (GPS), as sophisticated technology, is equipped with hi-end car and represent as additional feature. environmental Performance It may apply to the product (or tangible output of a service) itself, or to the process by which that product was made or service delivered. Environmental management systems, for example, focus on processes and aim to reduce For IBM4710 immerse OM Chayakrit Asvathitanont, Ph. D. the environmental impact (e. . hazardous waste generation) of the processes used to make the products or deliver the services. ISO 14000 and the European Eco- steering & Audit Scheme (EMAS, www. quality. co. uk/emas. htm) are but two of some(prenominal) frameworks for companies to follow to improve environmental performance. The third level is composed of the structural strategies that support the type of competitive advantage to be prosecute. A ordinary utilizational strategy is the sets of decisions made in each of the functional compasss of an shaping that determine how it will use in the overall business strategy of the company.Research and development managers make decisions about technology use, engineering resource allocation, product development process, research and development skills and make-up, product prototyping and testing approaches, and involvement of customers in product development. Marketing managers make decisions about product and service positioning, advertizement and promotion, and customer relationship management. Finance and Accounting managers make decisions about sources of funds, resource allocation, and currency hedging.The decisions make in these various functions make up the overall business strategy of the organization. Synerg istic decision making among the functional support of an overall business strategy and leverage cross-functional capabilities to create and support business strategy direction is allowing the company to be successful. Beckman and Rosenfield (2008) have integrated these strategy into framework illustrated in Exhibit X. X. Each individual functional area may develop its own capabilities that in turn serve business strategy, or the functional areas may work in concert with another to create overarching capabilities. personal credit line strategy is best supported, when the activities undertaken by the functional areas and/or the capabilities they develop complement one another and work together to achieve the goal of business (Fine and Hax 1985). They refer to this requirement as crossfunctional integration or fit. OPERATIONS STRATEGY An operations strategy is a set of goals, policies, and self-imposed restrictions that together describe how the organization proposes to direct and deve lop all the resources invested in operations so as to best fulfill (and possibly redefine) its mission (Hayes et al 1998).In the case of business organization, the mission usually is expressed terms of survival, profitability, and growth, and is pursued by trying to differentiate itself from its competitors in some desirable way. A companys operation strategy, thence, has to begin by specifying how it proposes to support that chosen form of competitive differentiation. By integrating resources invested in the operations function into a cohesive, purposeful whole, such a strategy can change operations to become a powerful source of competitive advantage. For IBM4710 Inter OM Chayakrit Asvathitanont, Ph.D. trading operations Strategy Goal As described earlier, five dimensions of customer requirements which are cost, quality, availability, feature/innovativeness, and environmental performance has been mapped with operations performance measures by Fine and Hax (1985). In each case, operations can affect some, but not all, of the companys performance along that dimension. Cost trading operations directly affects the cost of the product or service and thus its purchase price (assuming that products are priced to achieve some profit) through and through its direct or indirect control of the release chain.It can also affect the products cost of ownership through joint efforts with engineering (research and development) and/or merchandise in the design of the product or service. Quality operations also directly controls the quality of the product or service, again through its direct or indirect control of the supply chain. This is often vox populi of as a conformance to specifications task as operations strives to have all products and services delivered meet the specification set forth by the developers on behalf of the customers. trading operations can also puzzle out the design of a product or service so that it can be produced or delivered with higher(pren ominal) quality. It does so, again, in joint efforts with research and development and marketing. Availability trading operations is in the main responsible for the availability of products or services already in the market and often determines make-to-order versus make-to-stock strategies. Operations tractableness and process knowledge are small in determining both the variety of features and the availability an organization can offer.The ability of operations to control the supply chain and the timeliness with which products or services can be delivered directly affects availability. The determination of how much flexibility operations can offer is a joint decision with marketing and research and development. Features/Innovativeness Generally, features are the purview of the marketing and research and development organizations, although the operations function is influential in determining the range of products, services, or features the firm will be able to provide based on i ts win ability to deliver them. dish knowledge and innovation are key to the organizations ability to customize output to specific customer needs, to constitute new innovations, and to allow research and development to create novel products and services. For IBM4710 Inter OM Chayakrit Asvathitanont, Ph. D. Exhibit 2 calling and Operations Strategy Performance balances Dimension Cost Customer Concerns Purchase price Cost of ownership Operations Influence Costs of Materials action Delivery Distribution Capital productivity Inventory turnover Design for cost Cost Objectives are mensurable using labor, materials, and skill productivity inventory turnover unit cost.Quality of Materials Production Delivery Distribution Design for quality Quality measures include pct defective or rejected, frequency of failure in the field, cost of quality, and mean time between failures. Availability Timeliness of delivery of product or service Ability to respond to lot fluctuations Timeliness of new product introductions Delivery performance is measured by percentage of on-time shipments, average delay, expediting repartee time. Flexibility is measured by product mix range, volume, and lead time for new products.Process power Capabilities for more featured and innovative products and services Process knowledge and ability to extend it Design and development capabilities Measures of process capability assess the types of products or services that can be delivered. Environmental performance Managing environmental performance of suppliers or other partners in the supply chain Managing the environmental performance of internal production or service delivery operations Environmental performance measures include both emissions measures (water, air, and solid waste) as well as measures of product reuse and recyclability.Quality Tangible characteristics Aesthetics Reliability, durability, and resort processability Intangible characteristics Competence, courtesy, understanding, and communication Access and security For purchase Off-the-shell or make-toorder Of new products Rapid cycle or planned evolution innovation of range of products available Degree of customization Availability Features/ innovativeness Inherent characteristics of a product or service Degree of innovation Environmental performanceDegree to which process that produces and delivers the product or service is environmentally survive Degree to which the product or service itself is environmentally sound and reusable or recyclable For IBM4710 Inter OM Chayakrit Asvathitanont, Ph. D. Source Fine and Hax. (1985), Manufacturing Strategy A Methodology and an Illustration, Interfaces 15, no. 6 (November-December) cited in Beckman, Sara L. , Rosenfield, Donald B. (2008). Operations Strategy Competing in the 21st Century, U. S. McGraw-Hill world-wide Edition. Environmental Performance Finally, operations own the environmental erformance of both internal and remote operations throughout the sup ply chain. It either works with suppliers to achieve nice environmental performance in their facilities or works to achieve it in internal Operations or both. Operations may also influence research and development to design products that are more environmentally sound (e. g. , easier to disassemble and recycle). Operations Goals in Practice Researchers have identified galore(postnominal) alternative categorizations of these operations performance dimensions over the years (Dangayach and Deshmukh 2001).Some identify many categories such as the following 11 low cost, design flexibility, volume flexibility, quality conformance, product performance, speed of delivery, dependability of deliveries, after sales service, advertising, broad distributions, and broad product line (Miller and Roth 1994). Others summarize the characteristics in fewer categories defined as follows (Spring and Biadeb 1997) Cost produce and distribute product (or service) at low cost. Quality manufacture or deliv er product or service with high quality or performance standards.Delivery dependability meet delivery schedules. Flexibility react to changes in product, changes in product mix, modifications to design, fluctuations in materials, and changes in sequence. Yet others link clusters of operations performance characteristics into stylized business strategies such as those of caretaker, marketer, and innovator (miller and Roth 1994). Some researchers have examined similarities and differences in emphasis on these performance categories by industry, by geography, and over time.One study, for example, found that computer and electronics companies rate high product quality as their most important competitive factor, but computer companies rate innovative features and designs more highly than do electronics companies, while electronics companies place more emphasis on short lead times than do computer companies (Lau 2002). Others have found important differences among various countries or geo graphies in the emphasis they place on these characteristics. After achieving a high level of quality, for example, Japanese manufacturers turned their focus to time-based competition and innovative products, while the U.S. and Europe continued to rank quality as a particular objective (Kenney and Florida 1993). The Manufacturing Futures Survey, which collected longitudinal data over many years, found that lasting improvements in manufacturing can only be achieved by first building quality, followed by delivery reliability, then flexibility and responsiveness, and then technological leadership. At each For IBM4710 Inter OM Chayakrit Asvathitanont, Ph. D. step of the progression, cost ability is pursued for the given capability set, culminating with an overall focus on cost leadership (Roth et al. 989, Miller et al. 1989). Operations Decision Categories Creating an operations strategy basically entails making a set of decisions about the structure and infrastructure of operations (Skinner 1969, Hayes and Wheelwright 1984). Structural decisions deal with the vertical integration of the operations, its facilities, efficacy, and process technology, whereas infrastructure decisions focus on organizational and human resource policies, sourcing and supply chain management practices, quality management systems, planning and control systems, and tuition technology. understructure is developed over time through persistent day-to-day practice, exit management commitment, and cross-functional efforts to create capabilities that support and leverage the firms structure. Infrastructure decisions usually deal with less tangible outcomes than do structural decisions, but it is the effective integration and synthesis of structural and infrastructural decisions that create long-term operations excellence (Dangayach and Deshmukh 2001).In making decisions in each of these categories, operations managers strive to realise that the decisions are mutually supportive and consi stent with one another. Further, they aim to have the collection of decisions support or facilitate the overall business strategy. The decision categories are briefly discussed hereunder. Structural Decisions Vertical Integration. Vertical integration decisions root questions about how much of the Value chain a firm should own. Should they own more or less of the value chain range buns to their suppliers?Should they own more or less of the value chain reaching forward to their customers? Issues considered include cost of the business to be acquired or entered degree of supplier reliability the proprietary or nonproprietary nature of the product or process to be brought in house transaction cost of contracting through market versus non-market mechanisms and impact on risk, product quality, cost structure, and degree of focus. Process Technology. Process technology decisions relate to the firms investment in the technology it uses to transform materials and/or nformation into prod ucts and/or services. evaluation of this investment requires a firm to address several questions Should its process be more labor intensive or more automated? Should it purchase technology or develop it in house, or use some combination there of? Should it be a follower or a leader in process technology investment? How does its process technology investment fit with its product technology development strategy? capability Capacity decisions establish how much aptitude the firm will carry in order to manage both short-term fluctuations in demand and longer-term growth opportunities.Capacity For IBM4710 Inter OM Chayakrit Asvathitanont, Ph. D. may be added gradually or in large chunks. How should the firm deal with cyclical demand? Different types of capacity may be added at different times. How should the firm use capacity to influence its competitors decisions or actions? Facilities Facilities decisions are often closely related to capacity decisions, as firms may add or close fac ilities in response to a need for more or less capacity, but are often longer-term.In thinking through its facilities decisions, a firm will answer questions about how many facilities it should have, where they should be conciliated, and what they should do. Facilities issues become even more crucial in a global environment as firms decide whether to locate facilities near the local market to increase share in that market, to access local technologies, to reduce costs, or to leverage local talent. Infrastructural Decisions Sourcing. Sourcing decisions follow closely from vertical integration decisions.Once a firm has decided not to own certain parts of its value chain, it must determine what types of relationships it should have with the entities outside(a) the boundaries of the firm. Should the suppliers be managed with the five forces competitive-strategy framework suggested by Porter in this chapter, or with the more cooperative approach modeled by the Japanese keiretsu? orig in processes, such as product and service Business Processes and Policies. generation, order fulfillment, and service and support, cut across functional boundaries in an organization and are critical in serving the customer.Business process decisions include determining and defining critical processes, setting performance goals for each, and then choosing an appropriate organizational design to met those goals. Some of the organizational design questions include How should the operations organization be incorporate? What are the roles of the line and staff organizations? What skills are required in operations? How should those skills be developed and retained? How should Those skills be developed and retained? How should operations personnel be rewarded? Supply Chain Coordination.While business process management focuses inside the organization, operations management today often requires management of triple sources, markets, and flows outside the firm as well. Thus, operations ma nagers face strategic decisions about the structure of the supply chains. Should they co-locate their own operations with those of their suppliers? How many layers should they have in their distribution networks? What modes of transportation are appropriate for which links in the supply chain? How should flows of goods among the various entities in the supply chain be monitored? culture Technology. Information technology and process technology decision are closely related, but process technology decisions relate to the physical equipment with which products and services are made and delivered, while information technology refers to the system that moves information round the operations function, between operations and the other functional areas in the firm, and among the players in the broader supply For IBM4710 Inter OM Chayakrit Asvathitanont, Ph. D. chain. There are a number of decisions operations managers make about their information technology.How automated should information processing be? Should information systems be purchased or developed internally? Should the firm be a follower or a leader in the development and/or use of state-of-the-art-technology? How does the information technology investment fit with other investments the firm is making? Operations Capabilities Development. There is some evidence that handed-down operations improvement programs such as lean manufacturing, just-in-time, total quality management, focused factories, and the like are misused by managers.Often hastily follow as an industry best practice or in opposition of a competitor, these programs can yield poor results, wasted effort, and missed opportunities for an organization. When thoughtfully and fully implemented, however, they can be enormously successful. In developing operations strategy, managers must examine such programs and consider the capabilities required to develop and implement them. REFERENCES Andrews, K. (1971). The Concept of Corporate Strategy, Dow Jo nes-Irwin Homewood, IL. Beckman, S. L. , D. B. Rosenfield. (2008). Operations Strategy Competing in the 21st Century, U.S. McGraw-Hill worldwide Edition. Dangayach, G. S. and S. G. Deshmukh. (2001) Manufacturing Strategy Literature analyse and Some Issues. 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