Changes in Operations Strategy
.... An Example
Ford (1915)
Pre-Ford (1900)
Changes in Operations Strategy
.... An Example
• From 1909 to 1923 Ford Model T improved
in price by a factor of 4
• Primary competitive priority (order winner)
was clearly COST
• Ford’s competitive priorities gave rise to a
coherent set of STRUCTURAL and
INFRASTRUCTURAL decisions with a
single, over-riding objective
Ford Motor Co.
* Methods Used *
•
•
•
•
•
•
Product Stability
Capital Equipment Specialization
Process Rationalization
Scale Economies
Material Specialization
Labor Specialization
Too much of a good thing .....
• By 1920 Ford was SO
SUCCESSFUL and
TOO RIGID ....
• Henry’s motto was
“You can have it in
any color ....
• .... So long as it is
BLACK!!!
Time for A NEW Strategy!
• GM could not beat Ford at COST, so Sloan
decided to beat them with FLEXIBILITY.
– More models, more colors
• Ford became so inflexible, that in 1926 had
to shutdown for one year to retool for
Model A
• Ford fell from No. 1 automaker .... and has
never recovered.
Ford (1915)
Pre-Ford
(1900)
GM (1930)
Another Example ....
• Anybody ever heard of Mostronics
Calculators?
• In 1970’s they were a leading manufacturer,
BUT Texas Instruments aggressively
reduced prices to fit experience curve
• Drove Mostronics out of business because
they could not compete based on cost.
An Alternative Strategy
• Hewlett Packard remained in the business
by emphasizing QUALITY and
FLEXIBILITY rather than low price.
• Similar example: IBM vs. Compaq or Dell
computers (1st generation), Packard Bell or
Gateway (2nd generation)
Trade-off Model of Competitive
Priorities
• This is the traditional model
• Companies can only emphasize a single
priority at a time.
• i.e. COST ....
• or ................. FLEXIBILITY or
• QUALITY
• or ............................................ DELIVERY
Cumulative or “Sand-cone”
Model
• Companies can simultaneously compete on
several competitive priorities.
• Possible due to advanced manufacturing
technologies (CIM & FMS)
FLEXIBILITY
COST
DELIVERY
QUALITY
Operations:
Reactive or Proactive?
3 Dimensions of Proactivity
• Manufacturing Involvement
– Operations is centrally involved in formulating business
strategy as well as other functional areas
• Technical Assertiveness (Structure)
– Operations makes efforts to anticipate the potential of
new technologies
• Capability Building (Infrastructure)
– Operations pursues long-range programs in order to
acquire capabilities in advance of needs.