Chapter 3
Operations strategy
Source: courtesy of Justin Waskovich
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Levels of Decisions in Operations
Decision
Strategic
Tactical
Operational
Level of
Management
Timescale
Risk
Detail
Structure
Focus
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
What is strategy?
Strategic decisions – means those decisions which …
Are widespread in their effect on the organization to
which the strategy refers
Define the position of the organization relative to its
environment
Move the organization closer to its long-term goals.
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
‘Operations’ is not the same as ‘operational’
‘Operations’ are the resources that create products and
services
‘Operational’ is the opposite of strategic, meaning day-today and detailed
So, one can examine both the operational and the
strategic aspects of operations
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
The strategy hierarchy
Key strategic
decisions
Influences on
decision making
Corporate
strategy
What business to be in?
What to acquire?
What to divest?
How to allocate cash?
Economic environment
Social environment
Political environment
Company values and ethics
Business
strategy
What is the mission?
What are the strategic
objectives of the firm?
How to compete?
Customer/market dynamics
Competitor activity
Core technology dynamics
Financial constraints
Functional
strategy
How to contribute to the
strategic objectives?
How to manage the
function’s resources?
Skills of function’s staff
Current technology
Recent performance of the
function
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Sales
volume
The effects of the product/service life cycle on the
organisation
Introduction
Volume Slow growth in
sales
Customers Innovators
Competitors Few or none
Variety of
product /
service
design
Possible high
customisation or
frequent design
changes
Growth
Maturity
Decline
Rapid growth in
sales volume
Sales slow down
and level off
Market needs
largely met
Early adopters
Bulk of market
Laggards
Increasing
numbers
Stable number
Declining
numbers
Increasingly
standardised
Emerging
dominant types
Possible move to
commodity
standardisation
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Sales
volume
The effects of the product/service life cycle on the
organization
Introduction
Likely order Product/service
winners characteristics,
performance or
novelty
Likely Quality
qualifiers Range
Dominant Flexibility
operations Quality
performance
objectives
Growth
Maturity
Decline
Availability of
quality
products/services
Low price
Dependable
supply
Low price
Price
Range
Quality
Range
Dependable
supply
Speed
Dependability
Quality
Cost
Dependability
Cost
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Different competitive factors imply different performance
objectives
Competitive factors
If the customers value these ...
Performance objectives
Then, the operations will need to
excel at these ...
Low price
Cost
High quality
Quality
Fast delivery
Speed
Reliable delivery
Dependability
Innovative products and services
Flexibility (products and services)
Wide range of products and services
Flexibility (mix)
Ability to change the timing or quantity
of products and services
Flexibility (volume and/or delivery)
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007
Operations strategy is …
‘… the decisions which shape the longterm capabilities of the company’s
operations and their contribution to overall
strategy through the on-going
reconciliation of market requirements and
operations resources …’
Slack, Chambers and Johnston, Operations Management 5th Edition © Nigel Slack, Stuart Chambers, and Robert Johnston 2007