Operations Strategy

A process by which key operations decisions are made that are consistent with the overall strategic objectives of the company. For example, the extent of capacity to be built into the system, the type of process and manufacturing technology to be used, the nature of products to be manufactured and the type of supply chain to configure.

Kmart Vs Wal-Mart
Both chains started in 1962 In 1987, Kmart had 2223 store to Wal-Marts 1198. Kmarts sales were $25.63 billion to Wal-Marts $15.96 billion. By 1991, Wal-Marts sales exceeded Kmarts In the year ending Jan 1996, Wal-Marts sales were $93.6 billion to Kmarts $34.6 billion. During this time, Kmart emphasized on marketing and merchandising; Wal-Mart was investing millions in its operations to lower cost. Wal-Mart developed sophisticated distribution system that integrated its computer system with its distribution. Kmarts employees lacked skills needed to plan and control inventory. Period form 1987 to 1995 Kmarts market share declined from 34.5% to 22.7%, Wal-Marts increased from 20.1% to 41.6%.

Air Deccan Indias first low cost airline

Basic Strategy: To make air travel accessible to every Indian pricing their services at 30-40% of regular airline services. Service Delivery System
Uses airbuses on heavy traffic routes & smaller aircraft for lower traffic routes Elimination of in-flight food, business class and lounges at airports No refunds and compensation or accommodation facilities for missing a flight.

Ticketing & Distribution System

Traditionally, 90% of ticketing is done through travel agents and agents gets a commission of 7-10%, lock up of funds, multiple booking in flights by travel agents, high fluctuating occupancy levels, high cost in printing and distribution of tickets. Developed its own CRS (Computer Reservation System), has a call centre at Bangalore that can book tickets 24 hours, concept of e-ticketing.

Adopted Point-to-Point flying model instead of (Hub & Spoke model) More flying hours per aircraft Elimination of inter-airline arrangements Outsources facilities in all airports due to poor utilization of resources

Strategy formulation process

Competitive dynamics at the market place
ORDER WINNER ORDER QUALIFIERS

Strategic options for sustaining competitive advantage

Firm level strengths & weaknesses

Generic Competitive Priorities: Quality, Cost, Delivery, Flexibility

Corporate Strategy

Decisions for operations systems

Operations Strategy

Measure for operational excellence

Strategy formulation process

Competitive dynamics at the market place
ORDER WINNER ORDER QUALIFIERS

Scanning the market place: Competitors Firm level nature of offerings strengths & Corporate Strategy customer expectations weaknesses technology change

Strategic options for sustaining competitive advantage

Generic Competitive Priorities: Quality, Cost, Delivery, Flexibility

Decisions for operations systems

Operations Strategy

Measure for operational excellence

Strategy formulation process

Competitive dynamics at the market place
ORDER WINNER ORDER QUALIFIERS

Generic Order level of Competitive Priorities: requirement for considering the product or service. Quality, Cost, Delivery, Firm level Flexibility Order winning attributes: Potential to sufficiently strengths & Corporate Strategy weaknesses motivate the customers to buy the product or Strategic options for sustaining competitive advantage qualifying attributes: Minimum

service
Decisions for operations systems Operations Strategy Measure for operational excellence

Strategy formulation process

Competitive dynamics at the market place
ORDER WINNER ORDER QUALIFIERS

Strategic options for sustaining competitive advantage

Firm level strengths & weaknesses

Generic Competitive Priorities: Quality, Cost, Delivery, Flexibility

Corporate Strategy

Decisions for operations systems

Operations Strategy

Measure for operational excellence

Strategy formulation process

Competitive dynamics at the marketthat place Measures help
ORDER WINNER ORDER QUALIFIERS organization to evaluate

how well the operations system is responding to the requirement of the market. Eg. yield, indices, lead time, delays, number of models introduced, process flexibility, process rate to sales Firm level ratio, average training time per employee, no. of strengths & Corporate Strategy suggestions weaknesses per employee etc.
Strategic options for sustaining advantage percentage competitive defects, process capability Generic Competitive Priorities: Quality, Cost, Delivery, rate Flexibility

Decisions for operations systems

Operations Strategy

Measure for operational excellence

Strategy formulation process

Competitive dynamics at the market place
ORDER WINNER ORDER QUALIFIERS

Choices are made in the following domains: 1. Product portfolio Strategic options for sustaining 2. Process competitive advantage 3. Technology 4. Capacity 5. Supply chain issues Firm level
strengths & weaknesses Corporate Strategy

Generic Competitive Priorities: Quality, Cost, Delivery, Flexibility

Decisions for operations systems

Operations Strategy

Measure for operational excellence