Chapter 2 of Heizer, Render, and Munson's text, "Operations Strategy in a Global
Environment," makes a case for operations management being a key enabler of
corporate strategy, rather than as a secondary function focused upon internal efficiency
(Heizer et al., 2014). The authors describe a model that starts from the key components
of any organization, namely its mission and strategy, and thoroughly demonstrates the
way that such components need to be translated into operations management decisions
if a sustainable competitive advantage is to be obtained within an increasingly
integrated global marketplace. The mission statement provides the foundation and
defines the organization's purpose, going beyond profit-making. This mission then leads
to creating a wider corporate strategy that provides the overall idea of how the
organization will achieve its mission and long-term objectives. In the case of operations
managers, corporate strategy is an instruction that needs operationalizing. This
transformation occurs by targeting competitive priorities that are expressed through
three strategic manifestations: differentiation, cost leadership, and response.
Differentiation involves creating goods and services that are recognized by the
customer as new and superior. Cost leadership involves commitment to operational
efficiency that enables the business unit to become the industry's low-cost producer by
creating economies of scale, process innovation, and lean supply chain management.
Lastly, response is all about the predominant need for matching customer needs with
top speed, flexibility, and reliability through product development, wider customization
options, or consistent delivery periods. The modern business environment, with
increased globalization, puts an intense focus on these strategic decisions. Operations
managers could no longer focus on building systems solely for one domestic market.
Operations are organized within a complex web of worldwide suppliers, end-users, and
competitors. The case of Boeing's 787 Dreamliner offers an example. Boeing's strategy
involved an advanced approach towards global integration aimed at tapping specialized
know-how, passing on a large portion of financial risks, and integrating innovative
technologies from an international network of partners. That case offers an illustration
that a well-designed global operations strategy constitutes an effective competitive
asset that facilitates the design of products and services that could otherwise become
impossible to create within the local environment. Such a strategy demands thorough
and ongoing analysis from internal as well as external perspectives. The use of the
SWOT analysis is featured as an effective instrument of such a procedure that allows an
ongoing systematic identification of internal Strengths and Weaknesses alongside
external Opportunities and Threats by the management. The process shows the
environment necessary for the identification of Key Success Factors, which represent
the essential actions that are found necessary for successful competitiveness in each
industry, next to Core Competencies, defined as the unique, deeply ingrained strengths
inherent within a company that are hard for competitors to replicate. The goal of the
process is to create an integrated system around such core competencies. The idea is
illustrated by the example of Southwest Airlines, where the airline's rapid gate
turnarounds, consistent aircraft variety of types flown, direct route structure, and flexible
workforce are not just separate strategies but an organically related set of activities that
work collectively to reinforce the airline's strategy of low-cost leadership.
From its main idea, the chapter provides two of the most essential choices of today's
operations managers: partner selection for outsourcing and creating an international
operations strategy. Outsourcing is redefined from its traditional narrow focus with
economies of cost reduction as a strategic instrument for improving organizational
focus. The central assumption is based on the economic concept of comparative
advantage, which states that total value is maximized if companies focus their efforts on
those tasks where they share a relative advantage by delegating other tasks to external
partners who are superior at managing them. This strategic mode of delegation allows a
business enterprise to focus its limited resources, money, and managerial capabilities
on its core competence, its tasks that uniquely characterize its competitive edge in the
marketplace. An ideal case study is provided by Apple Inc., where its internal
capabilities are focused on designing products, software development, and marketing
strategies, while parts manufacturing as well as final assembling are outsourced from
specialized contract manufacturing ventures like Foxconn. To properly handle such a
high-level decision environment that is complex and navigate related risks that could
arise, the chapter recommends a systematic analytical approach. The factor rating
approach is suggested as a practical as well as favorable instrument that could attain
such an end. This approach causes managers to identify key selection criteria that
could include cost, technical competence, manufacturing capabilities, past quality
performances, and cultural fit. In addition to the make-or-buy dilemma that relates to
outsourcing, the chapter offers an essential framework for understanding the overall
pattern of international operations by differentiating four separate strategic options. The
chapter ends by saying operations management is linked with corporate strategy in the
environment of the 21st-century globalized economy.
References
Heizer, J., Render, B., & Munson, C. (2014). Operations management: Sustainability and Supply
Chain Management. Pearson.