Operations Strategy

Lecture 3 Operations Strategy Planning
Strategic Operations Management
Strategic Operations
Management
Lecture 3 Operations Strategy
Planning
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NCC Education Limited
Operations Strategy Planning Lecture 3 - 3.2
Learning Outcomes
Operations Strategy Planning
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Overview of This Lecture

Perspectives of Operations Strategy
The Five Ps of Operations Strategy
Strategic Reconciliation
Conclusions
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Visuals Handout Lecture 3 Page 1
Introduction to Operations
Strategy Planning
Operations Strategy Planning can take a number of
forms
This may depend upon the maturity of the
organisation and the maturity of the operations
themselves
Things dont always go to plan though, as you will
see at:
http://news.bbc.co.uk/player/nol/newsid_7310000/n
ewsid_7318700/7318730.stm?bw=bb&mp=wm&asb
=1&news=1&bbcws=1
When you watch the video!
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Four Perspectives of Operations

Strategy
Top-Down influence of business strategy on operations
decisions
Bottom-Up influence of operational experience on
operations decisions
Market Requirements performance objectives reflect
market position, also a perspective on operations strategy
Operation Resource Capabilities inherent ability of
operations processes and resources, also a perspective on
operations strategy
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Four Perspectives of Operations

Strategy
TopTop-Down
What the
Business
Wants
Operations
To Do
Operations Resource
Perspective
What Operation Can
Do
Based On: Slack, et al. (2007, p. 64)
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Operations
Strategy
Market Requirements
Perspective
What the Market Position
Requires Operations To Do
What Day-toDay
Experience
Suggests
Operations
Should Do
BottomBottom-Up
1 Top-Down Perspective
Reflects what the whole business wants to
do
Corporate mission and objectives
Business unit mission and objectives

Guides the business in relation to customers,
markets and competitors
Functional strategies
Each functions contribution to the strategic
objectives of the business
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Top-Down Perspective Example

Corporate Strategy Decisions
What business to be in?
Allocation of cash to businesses?
How to manage different relationships
between different businesses?
Printing Services Group Corporate

Decisions
Specialise in packaging business
Become a major player in all its markets
Business Strategy Decisions

Defining mission of the business: growth
targets, return on investment, profitability
targets, cash generation
Setting competitive objectives
Consumer Packaging Business Strategy

Rapid volume growth
Fast service
Economies of sale
Functional Strategy Decisions

Role of the function
Translating business objectives into functional
objectives
Allocation of resources to achieve functional
objectives
Performance improvement priorities
Operations Strategy
Capacity expansion
Tolerate short-term over-capacity
New locations established
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2 Bottom-Up Perspective
Emergent strategy
Gradually shaped over time based on real
life experiences
Business strategy is shaped through
knowledge gained from day-to-day activities
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Bottom-Up Perspective Example

Operations
Strategy
New FastFast-Service
Service
Division
Established
Emergent Sense of What

the Strategy Should Be
Operational Experience
Offers Option of Faster

Service at Premium Price
Surplus Capacity Allows Fast

Service
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3 Market Requirements Perspective

Competitive factors determine strategy, e.g.
delivery time, product specification, price,
etc.
Operations seek to develop strategy
through developing their five performance
objectives
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Quality
Being RIGHT
Speed
Being FAST
Dependability
Flexibility
Cost
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Being ON TIME
Being ABLE TO CHANGE
Competitiveness
Competitive Advantage Through

Performance
Being PRODUCTIVE
Competitive Factors vs Performance

Competitive Factors
If the Customers Value These
Performance Objectives
The Operation Needs to Excel at
Low Price
Cost
High Quality
Quality
Fast Delivery
Speed
Reliable Delivery
Dependability
Innovative Products/Services
Flexibility (Products/Services)
Wide Range Products/Services
Flexibility (Mix)
Ability to Change
Timing/Quantity of
Products/Services
Flexibility (Volume and/or

Delivery)
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Order-Winning and Qualifying Factors

Order-winning factors arrangement of resources devoted
to production and delivery of products and services
Qualifying factors aspects of competitiveness.
Performance has to be above a particular level to be
considered by the customer
Less important factors - competitive factors that are neither
order-winning nor qualifying
For more details see:
http://www.ifm.eng.cam.ac.uk/dstools/choosing/import.html
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Product/Service Life Cycle and

Performance Objectives
Customers
Competitors
Likely OrderOrderWinning
Factors
Likely
Qualifiers
Dominant
Operations
Performance
Objective
Emerging
Market
Growth
Market
Mature
Market
Declining
Market
Innovators
Early Adopters
Bulk of Market
Laggards
Few/None
Increasing
Numbers
Stable Number
Declining
Number
Product/Service
Specification
Availability
Low Price;
Dependable
Supply
Low Price
Quality
Price
Range
Range
Range
Quality
Flexibility
Quality
Dependable
Supply
Speed
Dependability
Cost
Dependability
Cost
Quality
Based On: Slack & Lewis (2008, p. 49)
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4 Resources Perspective
Perspective on strategy that stresses the importance of
capabilities (core competencies) in determining sustainable
competitive advantage
Resource constraints ability to produce products and
services in a way that will satisfy the market
Intangible resources for example, relationship with
suppliers and customers
Structural decisions primarily influencing design
Infrastructural decisions workforce organisation and
planning, control and improvement activities
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The Five Ps of Operations Strategy 1

Purpose needs shared understanding of
motivation, boundaries and context for
developing operations strategy
Point of entry analysis, formulation and
implementation process. Needs support
from senior management
Process formulation process must be
explicit, so all understand the strategy
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The Five Ps of Operations Strategy 2

Project management resource and time
planning, controls, communication mechanisms,
reviews, etc. need to be in place
Participation selection of staff to participate in
the implementation process is critical
Use consultants to provide additional specialist expertise?
Line managers and staff offer real world experiences
Cross-functional managers to help integration, etc.
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Reconciling Resources and

Requirements
Market
Requirements
Operations
Resources
What you
HAVE
What you
DO
in terms of
operations
capabilities
to maintain
your
capabilities
and satisfy
markets
What you
WANT
from your
operations to
help you
compete
What you
NEED
to compete
in the market
Strategic
Reconciliation
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Conclusions
There are four perspectives of operations strategy
Many organisations probably use a mix of all four
perspectives either explicitly, or more likely
implicitly
Process of operations strategy refers to procedures
required to formulate operations strategies within
the organisation
Remember the five Ps of operations strategy
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Bibliography
Slack, N., Chambers, S. & Johnston, R.
(2007) Strategic Operations
Management, 5th Edition: Harlow: FT
Prentice Hall.
Slack, N. & Lewis, M. (2008), Operations
Strategy, 2nd Edition, Harlow: FT
Prentice Hall.
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Lecture 3 Operations Strategy Planning

Strategic Operations Management

NCC Education Limited