Operations
Management
Chapter 2 –
Operations Strategy in a
Global Environment
© 2006
Prentice
Hall, Inc. Hall, Inc.
©
2006
Prentice
2–1
Outline
 Global Company Profile: Boeing
 A Global View of Operations
 Developing Missions And Strategies
 Achieving Competitive Advantage Through
Operations
 Ten Strategic OM Decisions
 Issues In Operations Strategy
 Strategy Development And Implementation
 Global Operations Strategy Options
© 2006 Prentice Hall, Inc.
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Boeing’s Global Strategy
© 2006 Prentice Hall, Inc.
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Some Boeing Suppliers (787)
Firm
Latecoere
Labinel
Dassault
Country
France
France
France
Messier-Bugatti
Thales
France
France
Messier-Dowty
Diehl
France
Germany
© 2011 Pearson
© 2006 Prentice Hall, Inc.
Component
Passenger doors
Wiring
Design and
PLM software
Electric brakes
Electrical power
conversion system
and integrated
standby flight display
Landing gear structure
Interior lighting
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Some Boeing Suppliers (787)
Firm
Cobham
Rolls-Royce
Smiths Aerospace
Country
UK
UK
UK
BAE SYSTEMS
Alenia Aeronautics
UK
Italy
Toray Industries
Japan
© 2011 Pearson
© 2006 Prentice Hall, Inc.
Component
Fuel pumps and valves
Engines
Central computer
system
Electronics
Upper center
fuselage &
horizontal stabilizer
Carbon fiber for
wing and tail units
2–6
Global Strategies
 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
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Global Strategies
 Volvo – considered a Swedish company but
it is controlled by an American company,
Ford. 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.
 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
© 2006 Prentice Hall, Inc.
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Global Strategies
 Rapid growth in world trade and emerging
markets  need to extend operations
globally.
 Making a product only in the US and then
exporting it is no longer guarantees success
of even survival
 There are new standards of global
competitiveness that include quality, variety,
customization, timeliness, and cost.
© 2006 Prentice Hall, Inc.
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Some Multinational
Corporations
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
IBM
© 2006 Prentice Hall, Inc.
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Some Multinational
Corporations
Home
Country
% Sales
Outside
Home
Country
% Assets
Outside
Home
Country
% Foreign
Workforce
Britain
78
50
NA
Switzerland
98
95
97
Philips
Netherlands
Electronics
94
85
82
Siemens
Germany
51
NA
38
Unilever
Britain &
Netherlands
95
70
64
Company
ICI
Nestle
© 2006 Prentice Hall, Inc.
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Reasons to Globalize
Reasons to Globalize
Tangible  Reduce costs (labor, taxes, tariffs, etc.)
Reasons  Improve supply chain
 Provide better goods and services
 Understand markets
Intangible  Learn to improve operations
Reasons  Attract and retain global talent
Figure 2.1
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Reduce Costs
 Foreign locations with lower wage rates
can lower direct and indirect costs
 Maquiladoras (Free Trade Zones in Mexico)
 only pay tax on the value added by
Mexican workers
 Shifting low-skilled jobs to another country
 Reduce costs
 Free higher cost workers for more valuable
tasks
 Allow investing savings in improved products
and facilities
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Improve the Supply Chain
 Locating facilities closer to unique
resources (expertise, labor, or raw
material)
 Auto design to California
 Athletic shoe production to China
 Perfume manufacturing in France
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Provide Better Goods
and Services
 Objective and subjective
characteristics of goods and
services
 On-time deliveries
 Cultural variables
 Improved customer service
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Understand Markets
 Interacting with foreign customer
and suppliers can lead to new
opportunities
 Cell phone design
from Europe
 Cell phone fads from
Japan
 Extend the product
life cycle
© 2006 Prentice Hall, Inc.
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Learn to Improve Operations
 Learning does not take place in
isolation.
 Remain open to the free flow of ideas
 General Motors partnered with a
Japanese auto manufacturer to learn
 Scandinavian design ideas have been
used to improve equipment design and
layout
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Attract and Retain Global
Talent
 Offer better employment opportunities
 Better growth opportunities and
insulation against unemployment
 Relocate unneeded personnel to more
prosperous locations
 Incentives for people who like to travel
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Cultural and Ethical Issues
 Cultures can be quite different
 Attitudes can be quite different
towards
 Punctuality
 Thievery
 Lunch breaks
 Bribery
 Environment
 Child labor
 Intellectual
property
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Match Product & Parent
 Braun Household
Appliances
1. Volkswagen
 Firestone Tires
2. Bridgestone
 Godiva Chocolate
3. Campbell Soup
 Haagen-Dazs Ice
Cream
4. Ford Motor Company
 Jaguar Autos
 MGM Movies
 Lamborghini Autos
 Alpo Petfoods
© 2006 Prentice Hall, Inc.
5. Gillette
6. Nestlé
7. Pillsbury
8. Sony
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Match Product & Parent
 Braun Household
Appliances
1. Volkswagen
 Firestone Tires
2. Bridgestone
 Godiva Chocolate
3. Campbell Soup
 Haagen-Dazs Ice
Cream
4. Ford Motor Company
 Jaguar Autos
 MGM Movies
 Lamborghini Autos
 Alpo Petfoods
© 2006 Prentice Hall, Inc.
5. Gillette
6. Nestlé
7. Pillsbury
8. Sony
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Match Product & Country
 Braun Household
Appliances
 Firestone Tires
1. Great Britain
 Godiva Chocolate
2. Germany
 Haagen-Dazs Ice
Cream
 Jaguar Autos
 MGM Movies
3. Japan
4. United States
5. Switzerland
 Lamborghini Autos
 Alpo Petfoods
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Match Product & Country
 Braun Household
Appliances
 Firestone Tires
1. Great Britain
 Godiva Chocolate
2. Germany
 Haagen-Dazs Ice
Cream
 Jaguar Autos
 MGM Movies
3. Japan
4. United States
5. Switzerland
 Lamborghini Autos
 Alpo Petfoods
© 2006 Prentice Hall, Inc.
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Developing Missions and
Strategies
Mission statements tell an
organization where it is going
The Strategy tells the
organization how to get there
© 2006 Prentice Hall, Inc.
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Mission
 Mission - where are
you going?
 Organization’s
purpose for being
 Answers ‘What do we
provide society?’
 Provides boundaries
and focus
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Hard Rock Café
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.
Figure 2.2
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Factors Affecting Mission
Philosophy
and Values
Profitability
and Growth
Environment
Mission
Customers
Public Image
Benefit to
Society
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Sample Missions
Sample Company Mission
To manufacture and service an innovative, growing, and
profitable worldwide microwave communications business
that exceeds our customers’ expectations.
Sample Operations Management Mission
To produce products consistent with the company’s mission
as the worldwide low-cost manufacturer.
Figure 2.3
© 2006 Prentice Hall, Inc.
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Sample Missions
Sample OM Department Missions
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.
Figure 2.3
© 2006 Prentice Hall, Inc.
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Strategic Process
Organization’s
Mission
Functional
Area Missions
Marketing
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Operations
Finance/
Accounting
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Strategy
 Action plan to achieve
mission
 Functional areas have
strategies
 Strategies exploit
opportunities and
strengths, neutralize
threats, and avoid
weaknesses
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Strategies for Competitive
Advantage
 Differentiation – better, or at least
different
 Cost leadership – cheaper
 Quick response – more responsive
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Competing on
Differentiation
Uniqueness can go beyond both the
physical characteristics and service
attributes to encompass everything that
impacts customer’s perception of value
 Safeskin gloves – leading edge products
 Walt Disney Magic Kingdom – experience
differentiation
 Hard Rock Cafe – theme experience
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Competing on Cost
Provide the maximum value as
perceived by customer. Does not
imply low quality.
 Southwest Airlines – secondary airports,
no frills service, efficient utilization of
equipment
 Wal-Mart – small overheads, shrinkage,
distribution costs
 Franz Colruyt – no bags, low light, no
music, doors on freezers
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Competing on Response
 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, Motorola
© 2006 Prentice Hall, Inc.
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OM’s Contribution to Strategy
Operations
Decisions
Product
Quality
Process
Examples
Specific
Strategy Used
Competitive
Advantage
FLEXIBILITY
Sony’s constant innovation
of new products………………………………....Design
HP’s ability to follow
the printer market………………………………Volume
Southwest Airlines No-frills service……..…..LOW COST
Location
Layout
Human
resource
Supply-chain
Inventory
Scheduling
Maintenance
© 2006 Prentice Hall, Inc.
DELIVERY
Pizza Hut’s five-minute
guarantee at lunchtime…………………..…..……..Speed
Federal Express’s “absolutely,
positively on time”………………………..….Dependability
Differentiation
(Better)
Response
(Faster)
QUALITY
Motorola’s automotive products
ignition systems…………………………......Conformance
Motorola’s pagers………………………..….Performance
IBM’s after-sale service
on mainframe computers……....AFTER-SALE SERVICE
Fidelity Security’s broad
line of mutual funds………….BROAD PRODUCT LINE
Cost
leadership
(Cheaper)
Figure 2.4
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