Operations
Management
Chapter 2 –
Operations Strategy in a
Global Environment
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 6e
Operations Management, 8e
© 2006
Prentice
Hall, Inc. Hall, Inc.
©
2006
Prentice
2–1
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
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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
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Improve the Supply Chain
 Locating facilities closer to
unique resources
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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
 Extend the product life cycle
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Learn to Improve Operations
 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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Developing Missions and
Strategies
Mission statements tell an
organization where it is going
The Strategy tells the
organization how to get there
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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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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
 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
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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
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Elements of Operations
Management Strategy







Low-cost product
Product-line breadth
Technical superiority
Product characteristics/differentiation
Continuing product innovation
Low-price/high-value offerings
Efficient, flexible operations adaptable to
consumers
 Engineering research development
 Location
 Scheduling
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Product Life Cycle
Company Strategy/Issues
Introduction
Growth
Maturity
Best period to
increase market
share
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
CD-ROM
Internet
Sales
Decline
Cost control
critical
Fax machines
Drive-through
restaurants
Color printers
Flat-screen
monitors
DVD
3 1/2”
Floppy
disks
Figure 2.5
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Product Life Cycle
OM Strategy/Issues
Introduction
Product design
and
development
critical
Frequent
product and
process design
changes
Growth
Forecasting
critical
Product and
process
reliability
Maturity
Standardization
Less rapid
product changes
– more minor
changes
Competitive
product
improvements
and options
Optimum
capacity
High production
costs
Shift toward
product focus
Long production
runs
Limited models
Enhance
distribution
Product
improvement
and cost cutting
Short production
runs
Attention to
quality
Increasing
stability of
Increase capacity process
Decline
Little product
differentiation
Cost
minimization
Overcapacity
in the
industry
Prune line to
eliminate
items not
returning
good margin
Reduce
capacity
Figure 2.5
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Strategy Development and
Implementation
 Identify critical success factors
 Build and staff the organization
 Integrate OM with other activities
The operations manager’s job is to implement
an OM strategy, provide competitive
advantage, and increase productivity
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