MD 021 - Management and Operations Operations Strategy

Definitions of strategy and operations strategy Levels of strategy: corporate, business, functions Evaluating an operations strategy Example: McDonald's

Definition of Strategy Strategy is a deliberate search for a plan of action that will develop a business's distinctive competence and compound it.

Definition of Operations Strategy An operations strategy consists of a sequence of decisions that, over time, enables a business unit to achieve a desired operations structure, infrastructure, and set of specific capabilities in support of the competitive priorities.

Order-Qualifiers and Order-Winners

Order-qualifiers are those criteria that a company must meet for a customer to even consider it as a possible supplier. Companies need only be as good as competitors. Order-winners are those criteria that win the order. Companies need to be better than their competitors.

Levels of Strategy
What business are we in?

Corporate

Divisional (Business)

How do we compete?

Fin

HR

Mkt

Prod Dev

Ops

Role of each function?

Components of the Operations Strategy Structural decision categories: Infrastructural decision categories: Capabilities: Competitive priorities: Capacity Facilities Vertical integration Technology Workforce Organization Information/control systems Unique to each firm Cost Quality High-performance design Consistent quality Time Fast delivery time On-time delivery Development speed Flexibility Customization Volume flexibility

Criteria for Evaluating an Operations Strategy Consistency (internal and external) Between the operations strategy and the overall business strategy Between the operations strategy and the other functional strategies within the business Among the decision categories that make up the operations strategy Between the operations strategy and the business environment (resources available, competitive behavior, governmental restraints, etc.) Contribution (to competitive advantage) Making trade-offs explicit, enabling operations to set priorities that enhance the competitive advantage Directing attention to opportunities that complement the business strategy Promoting clarity regarding the operations strategy throughout the business unit so its potential can be fully realized Providing the operations capabilities that will be required by the business in the future

Statement of McDonalds Operations Strategy To provide unmatched consistency in operations in support of high product quality. This must be accomplished with adequate speed, low cost, and process innovation to accommodate changes in consumer tastes. From the statement of McDonalds operations strategy, it is clear that both consistent and highperformance quality are considered order winners, while speed, cost, and innovation are considered order qualifiers.

McDonalds Operations Strategy

Dimension Capacity Facilities Process Technology Vertical Integration Workforce Strategy Growth as needed through additional stores - but capacity added carefully Well-utilized - franchisee's well-being depends on it being used heavily Distributed facilities, each facility being very similar to the next, all focused around the same menu - although the uniformity is beginning to change High degree of process understanding, emphasis on "fool-proof" processes A leader in the technology of fast-food delivery Partnership arrangement Long-term relationship with suppliers to promote innovation and quality improvement Franchisees: well-trained, carefully selected, entrepreneurs Operators: high-turnover, cheap Guidelines provided by corporation, but franchisees push to locally optimize Centralized buying Bulk contracts "Push" system for basic supplies, "pull" system day-today in the restaurants

Organization Control Systems

Evaluation of the operations strategy:

Internal and external consistency - Looking at the operations

strategy along the seven dimensions, they all support the operations mission and the business strategy from the previous page. creates unmatched consistency in operations that has been difficult to imitate.

Contribution to competitive advantage - Systemic strategy