Operations Strategy in a Global Environment
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Outline Operations Management Global Company Profile: Boeing A Global View of Operations Chapter 2 – Operations Strategy in a Global Environment Cultural and Ethical Issues Developing Missions And Strategies Mission Strategy PowerPoint presentation to accompany Heizer/Render Principles of Operations Management, 7e Operations Management, 9e © 2008 Prentice Hall, Inc. Some additions and deletions have been made by Ömer Yağız to this slide set. (Revised February 2012) 2– 1 © 2008 Prentice Hall, Inc. Outline – Continued 2– 2 Outline – Continued Achieving Competitive Advantage Through Operations Issues In Operations Strategy Research Competing On Differentiation Preconditions Competing On Cost Dynamics Competing On Response Ten Strategic OM Decisions © 2008 Prentice Hall, Inc. 2– 3 © 2008 Prentice Hall, Inc. Outline – Continued Outline – Continued Global Operations Strategy Options Strategy Development and Implementation © 2008 Prentice Hall, Inc. 2– 4 Critical Success Factors and Core Competencies International Strategy Build and Staff the Organization Global Strategy Integrate OM with Other Activities Transnational Strategy Multidomestic Strategy 2– 5 © 2008 Prentice Hall, Inc. 2– 6 1 Learning Objectives Learning Objectives When you complete this chapter you should be able to: When you complete this chapter you should be able to: 1. Define mission and strategy 2. Identify and explain three strategic approaches to competitive advantage 3. Identify and define the 10 decisions of operations management © 2008 Prentice Hall, Inc. 4. Identify five OM strategy insights provided by PIMS research 5. Identify and explain four global operations strategy options 2– 7 © 2008 Prentice Hall, Inc. 2– 8 Global Strategies Global Strategies Volvo – considered a Swedish company but it is (was) controlled by an American company, Ford. Now it belongs to Geely, a Chinese company. The current Volvo S40 is built in Belgium and shares its platform with the Mazda 3 built in Japan and the Ford Focus built in Europe. Boeing – sales and production are worldwide Benetton – moves inventory to stores around the world faster than its competition by building flexibility into design, production, and distribution Sony – purchases components from suppliers in Thailand, Malaysia, and around the world © 2008 Prentice Hall, Inc. A comment made on the Net upon the purchase of Volvo by Geely: “Interesting. A brand renown for building cars that could survive a demolition derby with a couple of Sherman tanks will be made in a country renown for building cars that spontaneously disintegrate when a fly hits the windscreen.” 2– 9 © 2008 Prentice Hall, Inc. Some Multinational Corporations Global Strategies Haier – A Chinese company, produces compact refrigerators (it has one-third of the US market) and wine cabinets (it has half of the US market) in South Carolina Home Country % Sales Outside Home Country % Assets Outside Home Country % Foreign Workforce Citicorp USA 34 46 NA ColgatePalmolive USA 72 63 NA Dow Chemical USA 60 50 NA Gillette USA 62 53 NA Honda Japan 63 36 NA USA 57 47 51 Company Globalization means that producing locally and exporting is not a viable business model any more for many industries IBM © 2008 Prentice Hall, Inc. 2 – 10 2 – 11 © 2008 Prentice Hall, Inc. 2 – 12 2 Some Multinational Corporations Company ICI Some Boeing Suppliers (787) Home Country % Sales Outside Home Country % Assets Outside Home Country % Foreign Workforce Britain 78 50 NA Nestle Switzerland 98 95 97 Philips Electronics Netherlands 94 85 82 Siemens Germany 51 NA 38 Unilever Britain & Netherlands 95 70 64 © 2008 Prentice Hall, Inc. 2 – 13 Some Boeing Suppliers (787) Firm Cobham Rolls-Royce Smiths Aerospace Country UK UK UK BAE SYSTEMS Alenia Aeronautics UK Italy Toray Industries Japan Country France France France Messier-Bugatti Thales France France Messier-Dowty Diehl France Germany © 2008 Prentice Hall, Inc. 2 – 15 Saab © 2008 Prentice Hall, Inc. Country South Korea Sweden 2 – 14 Firm Fuji Heavy Industries Kawasaki Heavy Industries Country Japan Component Center wing box Japan Teijin Seiki Mitsubishi Heavy Industries Chengdu Aircraft Group Hafei Aviation Japan Japan Forward fuselage, fixed section of wing, landing gear well Hydraulic actuators Wing box China Rudder China Parts © 2008 Prentice Hall, Inc. Some Boeing Suppliers (787) Firm Korean Aviation Component Passenger doors Wiring Design and PLM software Electric brakes Electrical power conversion system and integrated standby flight display Landing gear structure Interior lighting Some Boeing Suppliers (787) Component Fuel pumps and valves Engines Central computer system Electronics Upper center fuselage & horizontal stabilizer Carbon fiber for wing and tail units © 2008 Prentice Hall, Inc. Firm Latecoere Labinel Dassault 2 – 16 Reasons to Globalize Component Wingtips Reasons to Globalize Tangible 1. Reduce costs (labor, taxes, tariffs, etc.) Reasons 2. Improve supply chain 3. Provide better goods and services 4. Understand markets Intangible 5. Learn to improve operations Reasons 6. Attract and retain global talent Cargo access doors 2 – 17 © 2008 Prentice Hall, Inc. 2 – 18 3 1. Reduce Costs 2. Improve the Supply Chain Foreign locations with lower wage rates and tariffs can lower direct and indirect costs Maquiladoras (free trade zones-Mexico) World Trade Organization (WTO) Trade blocs & agreements (reduced cost of operating) Locating facilities closer to unique resources Auto design to California Athletic shoe production to China (it was South Korea before) North American Free Trade Agreement (NAFTA) Asia-Pacific Economic Cooperation(APEC-21 countries) South East Asia Treaty Org(SEATO-8 countries MERCOSUR (Argentina, Brazil, Paraguay, and Uruguay European Union (EU) Perfume manufacturing in France Ex: Many U.S. businesses have their call centers in India © 2008 Prentice Hall, Inc. 2 – 19 3. Provide Better Goods and Services Interacting with foreign customers and suppliers can lead to new opportunities Cell phone design from Europe (Nokia) Cell phone fads (accessories) from Japan and Korea On-time deliveries • a device which converts your rear-view mirror into a display for the phone. So if someone is calling you, just look at the number on the mirror while you drive. Cultural variables (customized goods & services to meet unique cultural needs) • Sony Ericsson has launched stereophonic speakers called MDS-65, which can be attached to the phone and give the effect of a mini home theatre. Improved customer service (reduce response time) • just look at all the accessories for the Ipod and the Iphone. 2 – 21 5. BURADA…Learn to Improve Operations Extend the product life cycle © 2008 Prentice Hall, Inc. Offer better employment opportunities General Motors partnered with a Japanese auto manufacturer (Toyota) to learn (NUMMI-Calif.) Better growth opportunities and insulation against unemployment benchmarking - first practised by Xerox Corp. Relocate unneeded personnel to more prosperous locations during economic downturns (flexibility) Equipment and layout have been improved using Scandinavian ergonomic competence © 2008 Prentice Hall, Inc. 2 – 22 6. Attract and Retain Global Talent Remain open to the free flow of ideas TAV –- Tepe-Akfen-Vie (Tepe learned airport operations from Vie) 2 – 20 4. Understand Markets Objective and subjective characteristics of goods and services © 2008 Prentice Hall, Inc. © 2008 Prentice Hall, Inc. Incentives for people who like to travel 2 – 23 © 2008 Prentice Hall, Inc. 2 – 24 4 You May Wish To Consider Cultural and Ethical Issues Cultures can be quite different Attitudes can be quite different towards National literacy rate Work ethic Rate of innovation Tax rates Rate of technology change Inflation Punctuality Thievery Number of skilled workers Lunch breaks Bribery Political stability Environment Child labor Product liability laws Intellectual property My Saudi Arabian experience with punctuality! © 2008 Prentice Hall, Inc. 2 – 25 Match Product & & Parent Parent Match Product (Kimin eli kimin cebinde?) Availability of raw materials Interest rates Population Export restrictions Number of miles of highway Variations in language Phone system © 2008 Prentice Hall, Inc. 2 – 26 Match Product & Parent (Kimin eli kimin cebinde?) Braun Household Appliances 1. Volkswagen Braun Household Appliances 1. Volkswagen Firestone Tires 2. Bridgestone Firestone Tires 2. Bridgestone Godiva Chocolate 3. Campbell Soup Godiva Chocolate 3. Ülker Group Haagen-Dazs Ice Cream 4. Ford Motor Company Haagen-Dazs Ice Cream 4. Ford Motor Company Jaguar Autos MGM Movies Lamborghini Autos Alpo Petfoods 5. Gillette Jaguar Autos 6. Nestlé MGM Movies 7. Pillsbury Lamborghini Autos 8. Sony © 2008 Prentice Hall, Inc. Alpo Petfoods 2 – 27 Match Product & Country 5. Gillette 6. Nestlé 7. Pillsbury 8. Sony © 2008 Prentice Hall, Inc. 2 – 28 Match Product & Country Braun Household Appliances Braun Household Appliances Firestone Tires 1. Great Britain Firestone Tires 1. Great Britain Godiva Chocolate 2. Germany Godiva Chocolate 2. Germany Haagen-Daz Ice Cream Jaguar Autos MGM Movies Haagen-Daz Ice Cream 3. Japan 4. United States Jaguar Autos 5. Switzerland MGM Movies Lamborghini Autos Lamborghini Autos Alpo Pet Foods Alpo Pet Foods © 2008 Prentice Hall, Inc. 2 – 29 © 2008 Prentice Hall, Inc. 3. Japan 4. United States 5. Switzerland 6. Turkey 2 – 30 5 Developing Missions and Strategies Developing Missions and Strategies Mission: overall purpose of an organization (misyon; varoluş nedeni). The strategy is an organization‟s action plan to achieve its mission and goals The mission of an organization defines its reason for existence. “Why are we in business?” It is a long term plan Mission statements tell an organization where it is going Mission of the organization plus mission of the functional areas (prod, mktg, finance, R&D, etc) © 2008 Prentice Hall, Inc. 2 – 31 © 2008 Prentice Hall, Inc. FedEx‟s Mission Merck‟s Mission FedEx is committed to our People-Service-Profit philosophy. We will produce outstanding financial returns by providing total reliable, competitively superior, global air-ground transportation of high priority goods and documents that require rapid, time-certain delivery. Equally important, positive control of each package will be maintained using real time electronic tracking and tracing systems. A complete record of each shipment and delivery will be presented with our request for payment. We will be helpful, courteous, and professional to each other and the public. We will strive to have a completely satisfied customer at the end of each transaction. The mission of Merck is to provide society with superior products and services - innovations and solutions that improve the quality of life and satisfy customer needs - to provide employees with meaningful work and advancement opportunities and investors with a superior rate of return Figure 2.2 © 2008 Prentice Hall, Inc. Figure 2.2 2 – 33 © 2008 Prentice Hall, Inc. Hard Rock Cafe‟s Mission 2 – 34 Arnold Palmer Hospital Our Mission: To spread the spirit of Rock „n‟ Roll by delivering an exceptional entertainment and dining experience. We are committed to being an important, contributing member of our community and offering the Hard Rock family a fun, healthy, and nurturing work environment while ensuring our long-term success. Arnold Palmer Hospital is a healing environment providing family-centered care with compassion, comfort and respect… when it matters the most. Figure 2.2 © 2008 Prentice Hall, Inc. 2 – 32 Figure 2.2 2 – 35 © 2008 Prentice Hall, Inc. 2 – 36 6 TAI‟s Mission (old version) TAI‟s Mission (current version) TAI is a company of dedicated, dynamic and resourceful people searching for excellence and continued growth in the field of aerospace. Our mission is to fulfil the aerospace requirements of our nation and world markets with commitment to high quality, value and on time delivery. With our great leader Atatürk‟s vision: “The Future is in the Skies” and our nation‟s eagerness to “Build its own aircraft”; TAI has dedicated itself to be in the skies and space and be pioneers in developing Turkey‟s aviation and space industry. © 2008 Prentice Hall, Inc. Mission statements may change over time.. 2 – 37 © 2008 Prentice Hall, Inc. TAI‟s Mission (most current version) 2 – 38 NETAŞ‟s Mission To provide excellent telecommunication solutions within the framework of Total Quality Management philosophy. © 2008 Prentice Hall, Inc. 2 – 39 2 – 40 Factors Affecting Mission Arçelik‟s Mission Fully satisfying customer expectations and requirements is the guiding mission of Arçelik. In order to achieve and maintain the high standards it has, Arçelik has a continual programme of investment which encompasses plants, manufacturing equipment, research & development and most importantly personnel. © 2008 Prentice Hall, Inc. © 2008 Prentice Hall, Inc. Philosophy and Values Profitability and Growth Environment Mission Customers Public Image Benefit to Society 2 – 41 © 2008 Prentice Hall, Inc. Benefit to stockholders 2 – 42 7 Sample Missions Sample Missions Sample OM Department Missions Sample Company Mission To manufacture and service an innovative, growing, and profitable worldwide microwave communications business that exceeds our customers‟ expectations. Product design To design and produce products and services with outstanding quality and inherent customer value. Quality management To attain the exceptional value that is consistent with our company mission and marketing objectives by close attention to design, procurement, production, and field service operations Process design To determine and design or produce the production process and equipment that will be compatible with low-cost product, high quality, and good quality of work life at economical cost. Sample Operations Management Mission To produce products consistent with the company‟s mission as the worldwide low-cost manufacturer. Figure 2.3 © 2008 Prentice Hall, Inc. Figure 2.3 2 – 43 © 2008 Prentice Hall, Inc. 2 – 44 Sample Missions Sample Missions Sample OM Department Missions Sample OM Department Missions Location To locate, design, and build efficient and economical facilities that will yield high value to the company, its employees, and the community. Layout design To achieve, through skill, imagination, and resourcefulness in layout and work methods, production effectiveness and efficiency while supporting a high quality of work life. Human resources To provide a good quality of work life, with well-designed, safe, rewarding jobs, stable employment, and equitable pay, in exchange for outstanding individual contribution from employees at all levels. Supply chain management To collaborate with suppliers to develop innovative products from stable, effective, and efficient sources of supply. Inventory To achieve low investment in inventory consistent with high customer service levels and high facility utilization. Scheduling To achieve high levels of throughput and timely customer delivery through effective scheduling. Maintenance To achieve high utilization of facilities and equipment by effective preventive maintenance and prompt repair of facilities and equipment. Figure 2.3 © 2008 Prentice Hall, Inc. Figure 2.3 2 – 45 © 2008 Prentice Hall, Inc. Strategic Process 2 – 46 Strategy Action plan to achieve mission Organization‟s Mission Functional areas have strategies Functional Area Missions Marketing © 2008 Prentice Hall, Inc. Operations Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses Finance/ Accounting 2 – 47 © 2008 Prentice Hall, Inc. 2 – 48 8 Strategies for Competitive Advantage (OM) Competing on Differentiation Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer‟s perception of value Compete on differentiation – better, or at least different Compete on cost – cheaper Compete on response – rapid response (hızlı hareket) Kimberly Clark‟s Safeskin gloves – leading edge products My idea : Maybe a fourth one is quality © 2008 Prentice Hall, Inc. Walt Disney Magic Kingdom theme park – experience differentiation Hard Rock Cafe – dining experience 2 – 49 © 2008 Prentice Hall, Inc. 2 – 50 Competing on Cost Competing on Differentiation Provide the maximum value as perceived by customer. Does not imply low quality. • Honda cars with Qiblah (Kıble) indicator sold in Saudi Arabia and Gulf countries Southwest Airlines – secondary airports, no frills service, efficient utilization of equipment • Prayer carpets with built-in compass made in Taiwan and sold in Arab countries Pegasus Airlines in Turkey • Cell phones cameraFM videogames GPS wi-fi other applications Wal-Mart – small overheads, decreased shrinkage, distribution costs Belgian discount food retailer Franz Colruyt – no bags, low light, no music, doors on freezers saves energy costs © 2008 Prentice Hall, Inc. 2 – 51 Competing on Response © 2008 Prentice Hall, Inc. Low-cost leadership 2 – 52 Competing on Response Flexibility is matching market changes in design innovation and volumes Flexible, reliable and quick response. Values related to Institutionalization at Hewlett-Packard timely product development and delivery Reliability is meeting schedules reliable scheduling Timeliness is quickness in design, production, and delivery German machine industry flexible performance Johnson Electric, Bennigan‟s(restaurant; delivery in 15 minutes), Motorola, Domino‟s Pizza © 2008 Prentice Hall, Inc. 2 – 53 © 2008 Prentice Hall, Inc. 2 – 54 9 Competing on Response Competing on Response Examples for Quick Response: Domino‟s Pizza “Türkiye‟nin en sevdiği pizzaları hazırlayan Domino‟s Pizza olarak evlere serviste yepyeni bir dönem başlatıyoruz. Ülkemizde 30 dakikada teslim garantisi veren tek firma olan Domino‟s Pizza bugüne dek "eğer geç kalırsak, sonraki siparişinizde bir pizzanız hediye" diyorduk. Şimdi de yepyeni bir söz daha veriyor ve “eğer 30 dakikada gelemezsek siparişinizdeki kapınızda hemen bir pizzanın ücretini almıyoruz” diyoruz.” Flexibility is matching market changes in design innovation and volumes Institutionalization at Hewlett-Packard Reliability is meeting schedules German machine industry Timeliness is quickness in design, production, and delivery Johnson Electric, Bennigan‟s(restaurant), Motorola, Domino‟s Pizza Tansaş 3 dakika içinde yeni bir kasanın açılması garantisi © 2008 Prentice Hall, Inc. 2 – 55 OM‟s Contribution to Strategy Operations Decisions Product Specific Strategy Used Examples Process 10 Strategic OM Decisions Southwest Airlines No-frills service……..…..LOW COST Location DELIVERY: Pizza Hut‟s 5-minute guarantee at lunchtime…………………..…..………………….Speed Federal Express‟s “absolutely, positively on time”………………………..….Dependability Layout Human resource QUALITY: Motorola‟s HDTV converters….……........Conformance Motorola‟s pagers………………………..….Performance Supply chain Caterpillar‟s after-sale service on heavy equipment……………....AFTER-SALE SERVICE Inventory 2 – 56 Competitive Advantage FLEXIBILITY: Sony‟s constant innovation of new products………………………………....Design HP‟s ability to lead the printer market………………………………Volume Quality © 2008 Prentice Hall, Inc. Differentiation (Better) Response (Faster) Cost leadership (Cheaper) 1. Goods and service design 2. Quality 3. Process and capacity design 4. Location selection 5. Layout design 6. Human resources and job design 7. Supply chain management 8. Inventory 9. Scheduling 10. Maintenance Fidelity Security‟s broad line of mutual funds………….BROAD PRODUCT LINE Scheduling Maintenance Figure 2.4 © 2008 Prentice Hall, Inc. 2 – 57 Goods and Services and the 10 OM Decisions Operations Decisions Goods and service design © 2008 Prentice Hall, Inc. Goods and Services and the 10 OM Decisions Goods Services Product is usually Product is not tangible tangible Operations Decisions Location selection Quality Many objective standards Many subjective standards Process and capacity design Customers not involved Customer may be directly involved Capacity must match demand Goods Near raw materials and labor Services Near customers Layout design Production efficiency Enhances product and production Human resources and job design Technical skills, Interact with consistent labor customers, labor standards, output standards vary based wages Table 2.1 © 2008 Prentice Hall, Inc. 2 – 58 Table 2.1 2 – 59 © 2008 Prentice Hall, Inc. 2 – 60 10 Goods and Services and the 10 OM Decisions Operations Decisions Supply chain Goods and Services and the 10 OM Decisions Operations Goods Decisions Services Maintenance Often preventive Often “repair” and and takes place takes place at at production site customer‟s site Goods Relationship critical to final product Services Important, but may not be critical Inventory Raw materials, work-in-process, and finished goods may be held Cannot be stored Scheduling Level schedules possible Meet immediate customer demand Table 2.1 Table 2.1 © 2008 Prentice Hall, Inc. 2 – 61 An example: Process Design Variety of Products High Moderate © 2008 Prentice Hall, Inc. Managing Global Service Operations Process-focused Mass Customization JOB SHOPS Customization at high Volume (Print shop, emergency room, machine shop, (Dell Computer‟s PC, fine-dining Repetitive (modular) cafeteria) restaurant) focus ASSEMBLY LINE (Cars, appliances, TVs, fast-food Product focused restaurants) CONTINUOUS (steel, beer, paper, bread, institutional kitchen) Requires a different perspective on: Capacity planning Location planning Facilities design and layout Scheduling Low Low © 2008 Prentice Hall, Inc. Example on p. 40 Moderate Volume High 2 – 63 Operations Strategies for Two Drug Companies (Diff vs low cost) Brand Name Drugs, Inc. Competitive Advantage Product Selection and Design Quality Product Differentiation Heavy R&D investment; extensive labs; focus on development in a broad range of drug categories Major priority, exceed regulatory requirements © 2008 Prentice Hall, Inc. 2 – 64 Operations Strategies for Two Drug Companies Brand Name Drugs, Inc. Generic Drug Corp. Competitive Advantage Low Cost Process Low R&D investment; focus on development of generic drugs Meets regulatory requirements on a country by country basis Location Table 2.2 © 2008 Prentice Hall, Inc. 2 – 62 2 – 65 Product Differentiation Product and modular process; long production runs in specialized facilities; build capacity ahead of demand Still located in the city where it was founded Generic Drug Corp. Low Cost Process focused; general processes; “job shop” approach, shortrun production; focus on high utilization Recently moved to lowtax, low-labor-cost environment Table 2.2 © 2008 Prentice Hall, Inc. 2 – 66 11 Operations Strategies for Two Drug Companies Brand Name Drugs, Inc. Competitive Advantage Operations Strategies for Two Drug Companies Generic Drug Corp. Product Differentiation Brand Name Drugs, Inc. Competitive Advantage Low Cost Generic Drug Corp. Product Differentiation Low Cost Scheduling Centralized production planning Many short-run products complicate scheduling Human Resources Hire the best; nationwide searches Very experienced top executives; other personnel paid below industry average Layout Layout supports automated productfocused production Layout supports process-focused “job shop” practices Supply Chain Long-term supplier relationships Tends to purchase competitively to find bargains Table 2.2 © 2008 Prentice Hall, Inc. 2 – 67 Brand Name Drugs, Inc. High finished goods inventory to ensure all demands are met Maintenance Highly trained staff; extensive parts inventory Operations managers must consider three issues related to strategy formulation: Generic Drug Corp. Product Differentiation Inventory 2 – 68 Issues In Operations Strategy Operations Strategies for Two Drug Companies Competitive Advantage Table 2.2 © 2008 Prentice Hall, Inc. Research about effective operations management strategies Low Cost Process focus drives up work-in-process inventory; finished goods inventory tends to be low Highly trained staff to meet changing demand Preconditions for developing effective OM strategies The dynamics of OM strategy development Table 2.2 © 2008 Prentice Hall, Inc. 2 – 69 Characteristics of High ROI Firms: High capacity utilization High operating efficiency Low investment intensity (amount of capital required to produce a lira of sales) Data on 3000 organizations collected. ROI used as measure of success From the PIMS (profit impact of market strategy) program of the Strategic Planning Institute in cooperation with GE 28% - Operations Management 18% - Marketing/distribution 17% - Momentum/name recognition 16% - Quality/service ROI = net income/total assets 14% - Good management 4% - Financial resources Low direct cost per unit © 2008 Prentice Hall, Inc. 2 – 70 Strategic Options to Gain a Competitive Advantage 1. Research High product quality © 2008 Prentice Hall, Inc. Results of a study concerning importance of each area for competitive advantage 3% - Other 2 – 71 © 2008 Prentice Hall, Inc. 2 – 72 12 2. Preconditions to strategy development Elements of Operations Management Strategy One must understand: Low-cost product Product-line breadth (ürün yelpazesi (gamı) genişliği) Technical superiority Product characteristics/differentiation Continuing product innovation Low-price/high-value offerings Efficient, flexible operations adaptable to consumers Engineering research development Location Scheduling © 2008 Prentice Hall, Inc. Strengths and weaknesses of competitors and possible new entrants into the market Current and prospective environmental, technological, legal, and economic issues The product life cycle Resources available within the firm and within the OM function Integration of OM strategy with company‟s strategy and with other functional areas 2 – 73 © 2008 Prentice Hall, Inc. 3. Dynamics of Strategic Change Product Life Cycle (extremely important for strategy development) Strategies change for two reasons: Changes within the organization Introduction Company Strategy/Issues Personnel Finance Technology Product life Changes in the environment © 2008 Prentice Hall, Inc. Microsoft (SW hardware) Paşabahçe Şişe Cam (product + delivery + service) OM Strategy/Issues Introduction Growth Forecasting critical Product and process reliability Competitive product improvements and options Increase capacity Shift toward product focus Enhance distribution Maturity Standardization Less rapid product changes – more minor changes Optimum capacity Increasing stability of process Long production runs Product improvement and cost cutting Maturity Practical to change price or quality image Poor time to change image, price, or quality R&D engineering is critical Strengthen niche Competitive costs become critical Defend market position Internet search engines LCD & plasma TVs Sales Drive-through restaurants Decline Cost control critical CD-ROMs Analog TVs iPods 3 1/2” Floppy disks Xbox 360 tablets Figure 2.5 2 – 75 © 2008 Prentice Hall, Inc. 2 – 76 SWOT Analysis Decline Little product differentiation Cost minimization Overcapacity in the industry Prune line to eliminate items not returning good margin Reduce capacity Mission Internal Strengths External Opportunities Analysis Internal Weaknesses External Threats Strategy Figure 2.5 © 2008 Prentice Hall, Inc. Growth Best period to increase market share Product Life Cycle Product design and development critical Frequent product and process design changes Short production runs High production costs Limited models Attention to quality 2 – 74 2 – 77 © 2008 Prentice Hall, Inc. Competitive Advantage 2 – 78 13 Strategy Development and Implementation Strategy Development Process Environmental Analysis Identify the strengths, weaknesses, opportunities, and threats. Understand the environment, customers, industry, and competitors. Identify critical success factors Build and staff the organization Determine Corporate Mission Integrate OM with other activities State the reason for the firm‟s existence and identify the value it wishes to create. The operations manager‟s job is to implement an OM strategy, provide competitive advantage, and increase productivity Form a Strategy Build a competitive advantage, such as low price, design, or volume flexibility, quality, quick delivery, dependability, aftersale service, broad product lines. Figure 2.6 © 2008 Prentice Hall, Inc. 2 – 79 2 – 80 Critical Success Factors Critical success factors (CSF) Marketing Finance/Accounting Service Distribution Promotion Channels of distribution Product positioning (image, functions) Activities or factors that are of key importance for achieving competitive advantage You have to get them right to survive and achieve goals McDonald‟s – efficient layout, play area for children, efficient kitchen Hes Kablo – quality (purity) of fiber optic cable www.hes.com.tr © 2008 Prentice Hall, Inc. © 2008 Prentice Hall, Inc. 2 – 81 Decisions Sample Options Chapter Product Quality Process Location Layout Human resource Supply chain Inventory Schedule Maintenance Customized, or standardized Define customer expectations and how to achieve them Facility size, technology, capacity Near supplier or near customer Work cells or assembly line Specialized or enriched jobs Single or multiple suppliers When to reorder, how much to keep on hand Stable or fluctuating production rate Repair as required or preventive maintenance 5 6, S6 7, S7 8 9 10, S10 11, S11 12, 14, 16 13, 15 17 Figure 2.7 © 2008 Prentice Hall, Inc. 2 – 82 Activity mapping Core competencies A graphical link of Temel beceriler (yetenekler) A set of skills, talents and activites that a firm does particularly well. competitive advantage They allow a firm to set itself apart from competitors and gain competitive advantage. supporting activities CSF‟s Next an example from airline industry Southwest airlines IMPORTANT – CFS‟s and Core competencies must be supported by related activities activity mapping © 2008 Prentice Hall, Inc. Production/Operations Leverage Cost of capital Working capital Receivables Payables Financial control Lines of credit Pegasus Airlines 2 – 83 © 2008 Prentice Hall, Inc. 2 – 84 14 Activity Mapping CSF‟s Courteous, but Limited Passenger Service Lean, Productive Employees Activity Mapping Courteous, but Limited Passenger Service Lean, Productive Employees Short Haul, Point-toPoint Routes, Often to Secondary Airports Automated ticketing machines Competitive Advantage: No seat assignments Low Cost No baggage transfers Competitive Advantage: Low Cost High Aircraft Utilization Frequent, Reliable Schedules Standardized Fleet of Boeing 737 Aircraft Short Haul, Point-toPoint Routes, Often to Secondary Airports High Aircraft Utilization Frequent, Reliable Schedules No meals (peanuts) Standardized Fleet of Boeing 737 Aircraft Figure 2.8 © 2008 Prentice Hall, Inc. Figure 2.8 2 – 85 © 2008 Prentice Hall, Inc. Activity Mapping 2 – 86 Activity Mapping Courteous, but Limited Passenger Service Courteous, but Limited Passenger Service No meals (peanuts) Lean, Lower gate costs at Productive secondary airports Employees Lean, Productive Employees Short Haul, Point-toPoint Routes, Often to Secondary Airports High number of flights Advantage: reducesCompetitive employee idle time Low Cost between flights High number of flights Competitive Advantage: reduces employee idleCost time Low between flights High Aircraft Utilization Standardized Fleet of Boeing 737 Aircraft Short Haul, Point-toPoint Routes, Often to Secondary Airports High Saturate a Aircraft lowering Utilization city with flights, administrative Standardized costs (advertising, HR, etc.) of Boeing per passengerFleet for city 737 that Aircraft Frequent, Reliable Schedules Frequent, Reliable Schedules Figure 2.8 © 2008 Prentice Hall, Inc. Figure 2.8 2 – 87 © 2008 Prentice Hall, Inc. Activity Mapping 2 – 88 Activity Mapping Pilot training required on Courteous, but onlyLimited one type of aircraft Passenger Courteous, but Limited Passenger Reduced maintenance Service Service Reduced maintenance inventory required because Lean, Short Haul, Point-toProductive of only one type of aircraft Point Routes, Often to Employees Secondary Airports Excellent supplier relations with Boeing has aided Competitive Advantage: financing Low Cost High Aircraft Utilization Standardized Fleet of Boeing 737 Aircraft Lean, Productive Employees Flexible union contracts Frequent, Reliable Schedules High Aircraft Utilization Point Routes, Often to Flexible employeesSecondary and Airports standard planes aid Competitive Advantage: scheduling Low Cost Maintenance personnel trained only one type of Frequent, Reliable aircraft Schedules Standardized 20-minute gate turnarounds Fleet of Boeing 737 Aircraft Figure 2.8 © 2008 Prentice Hall, Inc. inventory required because of only one type of aircraft Short Haul, Point-to- Figure 2.8 2 – 89 © 2008 Prentice Hall, Inc. 2 – 90 15 Activity Mapping Automated ticketing High High employee Short Haul, Point-toPoint Routes, Often to compensation Lean, Productive Employees Secondary Airports Hire for attitude, then train Competitive Advantage: High level of stock Low Cost ownership High Aircraft Utilization Strategy Cost Reduction Considerations Courteous, but machines Limited Passenger Service Empowered employees Four International Operations Strategies International High number of flightsFrequent, Reliable reduces employee idle time Schedules Standardized Fleetbetween of Boeing flights Import/export or license existing product Examples U.S. Steel Harley Davidson Low 737 Aircraft Low Figure 2.8 © 2008 Prentice Hall, Inc. (Quick Response and/or Differentiation) © 2008 Prentice Hall, Inc. Four International Operations Strategies Strategy High Standardized product Economies of scale Cross-cultural learning Cost Reduction Considerations Cost Reduction Considerations 2 – 92 Four International Global Operations Strategies High International Strategy Import/export or license existing product Examples U.S. Steel Harley Davidson Low Examples Texas Instruments Examples Caterpillar U.S. Steel Otis Elevator Harley Davidson International Strategy Import/export or license existing product Low Low © 2008 Prentice Hall, Inc. High Low Local Responsiveness Considerations (Quick Response and/or Differentiation) (Quick Response and/or Differentiation) 2 – 93 © 2008 Prentice Hall, Inc. High Use existing domestic model globally Examples Texas Instruments Franchise, joint Caterpillar Otis Elevatorventures, subsidiaries Global Strategy Cost Reduction Considerations Global Strategy Standardized product Economies of scale Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator International Strategy Import/export or license existing product Examples U.S. Steel Harley Davidson Low Standardized product Economies of scale Cross-cultural learning International Strategy Examples Heinz McDonald‟s The Body Shop Hard Rock Cafe Import/export or license existing product Examples U.S. Steel Harley Davidson Low Low High Low Local Responsiveness Considerations (Quick Response and/or Differentiation) 2 – 94 Four International Multidomestic Operations Strategies Strategy High Cost Reduction Considerations High Local Responsiveness Considerations Four International Operations Strategies © 2008 Prentice Hall, Inc. High Local Responsiveness Considerations 2 – 91 High Local Responsiveness Considerations 2 – 95 © 2008 Prentice Hall, Inc. (Quick Response and/or Differentiation) 2 – 96 16 Four International Operations Strategies Four International Transnational Operations Strategies High Strategy High Move material, people, ideas Examples across national Texas Instruments Caterpillar boundaries Otis Elevator Economies of scale Cross-cultural International Strategy Multidomestic Strategy Use existing learning Import/export or domestic model globally Global Strategy Global Strategy Examples Texas Instruments Caterpillar Otis Elevator International Strategy Import/export or license existing product Multidomestic Strategy Use existing domestic model globally Franchise, joint ventures, subsidiaries Examples U.S. Steel Harley Davidson Examples Heinz The Body Shop McDonald‟s Hard Rock Cafe Standardized product Economies of scale Cross-cultural learning Cost Reduction Considerations Cost Reduction Considerations Standardized product Economies of scale Cross-cultural learning Low license existing product Low Low High 2 – 97 © 2008 Prentice Hall, Inc. Four International Operations Strategies Cost Reduction Considerations Global Strategy Transnational Strategy Standardized product Economies of scale Cross-cultural learning Move material, people, ideas across national boundaries Economies of scale Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator Examples Coca-Cola Nestlé Import/export or license existing product Multidomestic Strategy Use existing domestic model globally Franchise, joint ventures, subsidiaries Examples U.S. Steel Harley Davidson Examples Heinz The Body Shop McDonald‟s Hard Rock Cafe Rank 1 1 1 5 7 11 14 15 16 17 20 34 70 121 60 Low High Local Responsiveness Considerations (Quick Response and/or Differentiation) High (Quick Response and/or Differentiation) 2 – 98 Ranking Corruption High Low Examples Heinz The Body Shop McDonald‟s Hard Rock Cafe Local Responsiveness Considerations (Quick Response and/or Differentiation) International Strategy Franchise, joint ventures, subsidiaries Low Local Responsiveness Considerations © 2008 Prentice Hall, Inc. © 2008 Prentice Hall, Inc. Examples Coca-Cola Nestlé Examples U.S. Steel Harley Davidson 2 – 99 © 2008 Prentice Hall, Inc. Country 2006 CPI Score (out of 10) Finland 9.6 Least Corrupt Iceland 9.6 New Zealand 9.6 Singapore 9.4 Switzerland 9.1 UK 8.6 Canada 8.5 Hong Kong 8.3 Germany 8.0 Japan 7.6 USA, Belgium 7.3 Israel, Taiwan 5.9 Most Brazil, China, Mexico 3.3 Corrupt Russia 2.5 Turkey 3.8 Table 8.2 www.transparency.org 2 – 100 17
