Service Operations
Management
Operations Strategy
Lecture 2
Team Members

Arzina Ackbar

Beryl Laure

Erica Rath

Karen Sham-Laye

Valentina Barra
Lecture Outline

Definition of business policy and the role of
business strategy

Definition of operations strategy

The development of an Operations
Strategy

Operations Strategy Model

Characteristics of an effective operations
strategy
Business Policy; Operations
Strategy
•
Business Policy
•
Business Strategy
•
Operations Strategy
Developing a Business Strategy

MISSION;
“To build a globally recognized brand which, by
inspiring exceptional experiences among our
guests, instilling pride and integrity in our
associates and enhancing both the physical
and human environment in which we operate,
will deliver attractive returns to our
shareholders.”

ENVIRONMENTAL SCANING

CORE COMPETENCIES
Developing an Operations
Strategy
1. Developing a Business Strategy
Environmental
Scanning: Monitoring the
business environment for
market trends, threats,
and opportunities
Mission: Statement that
defines what our
business is; who our
clients are; and how our
values define our
business
Business Strategy: Defined
long-range plan for the
company
Core Competencies:
Our unique strengths
that help us win in the
marketplace
Identifying Competitive Priorities
Common priorities include:
• Cost:
Low production costs enables the company to price its
product below competitors
- Eg: Lincoln Electric
• reduced costs by $10 million a year for 10 years
• Quality:
Higher performance or a more consistent product can
support a price premium
- Eg: Ritz-Carlton
• Every employee is empowered to satisfy a guest’s
wish
• Teams at all levels set objectives and devise quality
action plans
Common priorities include: cont…
• Time:
Faster delivery or consistent on-time delivery can support
a price premium
- Eg: Wal-Mart
• replenishes its stock twice a week
• Flexibility:
Highly customized products or volume flexibility can
support a price premium
- Eg: Andersen Windows
• number of products offered grew from 28,000 to
86,000
• number of errors are down to 1 per 200 truckloads
Examples
1. Custom Foot Shoe Store:
• customer’s feet are scanned electronically to capture
measurements
• custom shoes are mailed to the customer’s home in
weeks
2. Ritz-Carlton –
Quality reports tracks:
• guest room preventive maintenance cycles
• percentage of check-ins with no waiting
• time spent to achieve industry-best clean room
appearance
Examples
3. L.L. Bean
• ships orders the day they are received
4. Southwest Airlines
• direct flights mean no baggage transfers
• $30 million annual savings in travel agent
commissions by requiring customers to contact the
airline directly
5. Hewlett-Packard
• produces electronic testing equipment in five days
Translate Priorities into Design
Business Strategy
Operation Strategy
Based on competitive priorities
Design of Operations
Structure & Infrastructure
Structural
strategy
Infrastructural
strategy
New
product/service
development
strategy
Workforce and
organization
strategy
Facilities
strategy
Supplier
development
strategy
Technology
strategy
Planning and
control systems
strategy
Factors that Influence Strategy
Internal
• Human resources
• Facilities and equip
• Financial resources
• Customers
• Products and services
• Technology
• Suppliers
External
• Economic conditions
• Political conditions
• Legal environment
• Technology
• Competition
• Markets
Example: British Airways
• Corporate Mission: To be the undisputed
leader in world travel
• Operations Mission: Deliver overall superior
service and good value to the customer
• Distinctive Competence: Friendly,
professional service
• Objectives:Well-trained, motivated employees
• Policies: Fast turnaround at counter, quick
complaint responses, etc.
Characteristics of an
effective operations strategy:
• Internally and externally consistent with...
– corporate/business strategy
– other functional strategies (marketing, finance)
– pattern of structural/infrastructure investment
– competitive environment (customers, competitors)
• Builds core operations capabilities
– competitive advantages
– new opportunities
• Timeless and enduring
• Explicit recognition of trade-offs
– targets key performance dimensions
– sets clear priorities/ promotes clarity
Understand Tradeoffs
Example: Made-to-Order Pizza
TIME
Fresh, Natural
Ingredients
Low Volume
Ovens
Slow to cook
Expensive
Ingredients
COST
Toppings Choice
QUALITY & DESIGN
FLEXIBILITY
QUALITY
VOLUME
FLEXIBILITY