Relationship between Corporate
Strategy & Operation Strategy
Corporate
Strategy
Strategic Direction,
Resources
Organizational Process &
Coordination to Produce
Good & Services
Operations
Strategy
Corporate Strategy consists of the
decision made by the Top management
regarding issues that effect the long-term
survival and growth of the firm.
 It describes the future course of action
the firm needs to adopt for long term
success.
 Corporate strategy provides an overall
direction that serves as the framework for
carrying out all the organization's
functions.




Specifies the means by which operations
implements corporate strategy and helps build
a customer-driven firm.
Operations strategy links long term and short
term operations decisions to corporate
strategy.
Operations strategy helps the firm to be
competitive and to improve its performance
and profitability.
Corporate Strategy
• Environmental scanning
• Core competencies
• Core processes
• Global strategies
Market Analysis
• Market segmentation
• Needs assessment
Competitive Priorities
• Cost
• Quality
• Time
• Flexibility
New Service/
Product Development
• Design
• Analysis
• Development
• Full launch
No
Yes
Performance
Gap?
Operations Strategy
Decisions
• Managing processes
• Managing supply chains
Figure 1.5
Competitive Capabilities
• Current
• Needed
• Planned
Please see page 50
(book-1)for details


Environmental scanning (SWOT)
Developing core competencies

Core competencies refer to unique resources and strengths
that an organization’s management consider when
formulating strategies. These competencies include:
1.
2.
3.
4.


Workforce
Facilities
Market and financial know-how
Systems and technologies
Developing core processes
Global strategies

Strategic Alliances

Market Definition – STP decisions

Needs assessment
› Service or product needs
› Delivery system needs
› Volume needs
› Other needs
Please see page 53-56
(book-1)for details
TABLE 1.2
|
DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE PRIORITIES
COST
Definition
Process Considerations
Example
1. Low-cost
operations
Delivering a service or a
product at the lowest
possible cost
Processes must be designed and
operated to make them efficient
Costco
2. Top quality
Delivering an outstanding
service or product
May require a high level of customer
contact and may require superior
product features
Ferrari
3. Consistent
quality
Producing services or
products that meet design
specifications on a
consistent basis
Processes designed and monitored
to reduce errors and prevent defects
McDonald’s
4. Delivery speed
Quickly filling a customer’s
order
Design processes to reduce lead
time
Dell
5. On-time delivery
Meeting delivery-time
promises
Planning processes to increase
percent of customer orders shipped
when promised
United Parcel
Service (UPS)
6. Development
speed
Quickly introducing a new
science or a product
Cross-functional integration and
involvement of critical external
suppliers
Toyota
QUALITY
TIME
TABLE 1.2
|
DEFINITIONS, PROCESS CONSIDERATIONS, AND EXAMPLES OF COMPETITIVE PRIORITIES
FLEXIBILITY
Definition
Process Considerations
Example
7. Customization
Satisfying the unique
needs of each customer by
changing service or
products designs
Low volume, close customer
contact, and easily reconfigured
Ritz Carlton
8. Variety
Handling a wide
assortment of services or
products efficiently
Capable of larger volumes than
processes supporting
customization
Amazon.com
9. Volume
flexibility
Accelerating or
decelerating the rate of
production of service or
products quickly to handle
large fluctuations in
demand
Processes must be designed for
excess capacity
Coca cola
Design
 Analysis
 Development
 Full Launch

Please see page 62
(book-1)for details
TABLE 1.3
|
OPERATIONS STRATEGY ASSESSMENT OF THE BILLING AND PAYMENT PROCESS
Competitive Priority
Measure
Capability
Gap
Action
Low-cost operations


$0.0813



$17,000


0.90%

Acceptable

No action

0.74%

Acceptable

No action

48 hours

Acceptable

No action

98%


Consistent quality


Delivery speed

Volume flexibility

Cost per
billing
statement
Weekly
postage
Percent
errors in bill
information
Percent
errors in
posting
payments
Lead time to
process
merchant
payments
Utilization
Target is
$0.06
Target is
$14,000
Too high to
support rapid
increase in
volumes



Eliminate microfilming and storage
of billing statements
Develop Web-base process for
posting bills
Acquire temporary employees
Improve work methods
› Organizational processes:
 Point-to-point route system rather than hub-andspoke design used by others.
 Service to 57 cities in 29 states with average trip of
500 miles
 Operating costs kept low through the use of 737
aircrafts, and limited services (no meals).
 Minimizing time span from landing to departure.
 Operating business at very low costs.
› Coordination of Activities
 Simplification of functions
 Coordination among various dept. to deliver ontime service.
 Customer facilitation and easy access.
› Organizational processes:
$2 billion company with 924 stores in 31 countries
Production of 12,000 apparel styles each year.
Each is available in store in four weeks.
Renews nearly half their stock every two weeks.
Have more than 200 designer and produce two
third of it’s clothes in company-owned facility in
Spain.
 Hi-tech computer guided manufacturing and
facilities.
 Skills of unique design team.





› Coordination of Activities
 Cross functional coordination in new product
development.
 Short time span between idea and their
transformation into stores.
› Organizational processes:
 More than10,000 store in 28 countries with average
growth in profits is 30% per year.
 Secrets is their operations & service strategy.
 Supply of world famous coffee powder comes
directly from Java, Indonesia through an effective
supply chain.
 Quality is maintained in all stores worldwide with
standardized procedures and strong customer
feed back system.
 Wide range of products including a variety of
exotic coffee, cappuccino, espresso as well as
sandwiches, pastries, desserts even a music CDs of
pop stars and internet facilities.
 Services include order and payment via phone
and Starbucks web site and automated espresso
machines.
 Company uses cluster store strategy in populated
areas, e.g. there are 124 stores in just Manhattan
area, New York.