Chapter 2

Operations Strategy and

Competitiveness

Strategic Planning

A process for getting from where

the company is today to where
company would like to be in the
future.
A process for getting from here
to there.

Strategic Planning Steps

Preparing a mission statement

Creating a vision
Setting goals
Formulating strategies
Designing tactics
Evaluating process and taking
corrective action
Measuring results or outcomes

Strategic Planning Steps

Mission

What is our business? (Who we are?)

Focus is on today (Here!)

Vision
What we hope to be.

Focus is on future (There!)

Strategic Planning Steps

Goals

What we must do to achieve vision.

Should be measurable.

Strategies

In broad terms, what must we do to

achieve goal?
Does not say how.

Strategic Planning Steps

Depends on opportunities and threats

Conduct environmental scan

Also depends on companies strengths

(core competencies) and weakness

Conducting an environmental scan

and identifying companies
strengths and weakness is a SWOT
analysis.

SWOT
Internal

S = Strengths

W=
Weakness

External

O=
Opportunities

T = Threats

Strategic Planning Steps

Tactics

What must we do to make strategies

work?

Evaluation and corrective action

Are tactic working?

Are they moving you closer to achieving
goal?
If not, take corrective action by changing
tactics.

Strategic Planning Steps

Outcome

Outcome of strategic planning process

Tells us if strategic planning process was
successful.

Was goal was achieved?

If not, repeat.

Example 1: Strategic Plan

Mission

Sue is a 17 yr. old high school

senior

Vision

Be successful in business

Goal

Become a CFO of a major co. at 35

Strategies

Get a business degree

Tactics

Go to CSUN, major in Finance, get

internship with Fidelity
Investments, become president of
SFA, get 3.8 or better GPA

Evaluation/
Corrective
action

Are tactics working?

Outcome

Position at age 35

Example 2: Strategic Plan

Mission

Ed is a 42 yr. old overweight

male

Vision

Look better, feel better

Goal

Lose 80 lbs. in 6 mos.

Strategies

Diet, exercise

Tactics

Go on Jenny Craig diet, join 24

Hr. Fitness Center, get a trainer,
go to gym 5 days/wk.

Evaluation/
Track weight loss weekly; adjust
Corrective action tactics if necessary
Outcome

Weight lost at end of 6 mos.

Example 3: Strategic Plan

Mission

We are in business of selling

mens dress shoes in SFV

Vision

Expand market area to include So.

Ca.

Goal

Capture 30% of So. Ca. market in

1 yr.

Strategies

Expand product line, increase

marketing effort

Tactics

Carry womens shoes; carry more

shoe lines including athletic shoes
and sandals; Advertise in major
newspapers.

Evaluation/
Corrective

Are tactics working?

Starbucks Strategic Plan

Mission statement

'Establish Starbucks as the premier purveyor of

the finest coffee in the world while maintaining
our uncompromising principles while we grow.

Whats wrong with Starbucks mission

statement?

Starbucks Strategic Plan

Goal

To establish Starbucks as the most

recognized and respected brand in the
world.

What is requirement that goal should

meet?

Does Starbucks goal meet it?

Starbucks Strategic Plan

To achieve this goal, the Starbucks

plans to

rapidly expand its retail operations,

grow its specialty sales and other
operations, and
selectively pursue opportunities to
leverage the Starbucks brand through the
introduction of new products and
the development of new distribution
channels.

Starbucks Strategic Plan

Are these steps strategies or

tactics?

Answer

They are Strategies - board statement

of what company will do to achieve
goals, but doesnt say how.
Tactics would tell us, for example,
how the company plans to expand
retail operations.

For example, open more retail stores in

airports and malls.

FedExs Mission
FedEx provides access to a growing
global marketplace through a network of
supply chain, transportation, business and
related information services.

Lexus Mission
Lexus has revolutionized the luxury
motoring experience through its
passionate commitment to the finest
products and the most satisfying
automobile ownership experience.
We vow to value the customer as an
important individual; to do things right the
first time; and to always exceed
expectations.
We brought together these principles in
the Lexus Covenant, which inspires our
dealers and associates to treat customers
as they would treat guests and to go to

More on Lexus

In order to make certain that a

Lexus is a Lexus no matter where it
is built, the entire workforce at
Cambridge was trained to follow the
Passionate Pursuit of Perfection that
drives Lexus associates worldwide.
Is there any connection between
Lexus and McDonalds?

CSUN College of Business/Econ

Mission
The College of Business and Economics at
California State University, Northridge is dedicated to
educating the leaders of tomorrow.
By offering a challenging curriculum, smaller class
sizes, state-of-the-art facilities, and nationally
recognized programs, the College offers a truly
unique educational experience.

Developing an Operations
Strategy

Operations Strategy is a plan for using

the operational capabilities of a
company to decide how it will
compete.
Will it compete on

Price,
Quality,
Time,
Flexibility?

One, some or all?

Competing on Price?

Offering product at a lower price

relative to competition
Works if there are many competitors
offering same product or service.
If you of a product with a high degree
of customization, does it make sense
for you to compete on price?
Must also have lower ??? relative to
competitors.

Competing on Quality?

Quality of product
Quality of service
Both
Does competing on quality mean
that a company cant compete on
price because it, if it offers better
quality, it will charge a higher price?
Depends on how quality affects ???
If it increases ????, yes.
If it decreases ???, not necessarily.

Competing on Time?

Time/speed one of most important

competition priorities

Time related issues involve

Rapid delivery:

Focused on shorter time between order

placement and delivery

On-time delivery:

Deliver product exactly when needed every

time

Competing on Flexibility?

Product flexibility:

Easily switch production from one item to

another
Easily customize product/service to meet
specific requirements of a customer

Volume flexibility:

Ability to ramp production up and down to match

market demands

Measuring Productivity
Productivity is a measure of how efficiently
inputs are converted to output.

Output
Productivity =
Inputs

Measuring Productivity

Partial measures

output/(single input)

Multi-factor measures
Uses some but not all inputs
output/(multiple inputs)

Total measure
uses all inputs
output/($ value of all inputs)

Measures of Productivity
Partial
measures
Multifactor
measures
Total
measure

Output
Labor

Output
Machine

Output
Labor + Machine

Output
Energy
Output
Labor + Capital + Energy

Goods or Services Produced

$ value of all inputs used to produce them

Examples of Partial Productivity

Measures
Labor
Productivity

Units of output per labor-hour

Dollar value of output per labor-hour

Machine
Productivity

Units of output per machine-hour

Dollar value of output per machinehour

Energy
Productivity

Units of output per kilowatt-hour

Dollar value of output per kilowatthour

Numerical Example
Output

Labor

Machine

Units

500

Hours

26

Cost/unit x

$8

$3

Price/unit $15

Partial Measures
Units Produced
Labor Productivity
Labor hrs.

500
Labor Productivity
19.3
26
Explain meaning?

Partial Measures
Dollar Value of Output
Labor Productivity
Labor hrs.

500 x $15/unit $7,500

Labor Productivity

$288.46
26 hrs.
26 hrs.
Explain meaning?

Partial Measures
Units Produced
Labor Productivity
Labor cost
Units Produced

(Labor hrs.) x (Labor cost/hr.)

50
Labor Productivity
2.4
26 x $8
Explain meaning?

Partial Measures
Units Produced
Machine Productivity
Machine hrs.

500
Machine Productivity
83.3
6
Explain meaning?

Multi-factor
MFP

Units Produced
Machine Cost Labor Cost

Units Produced

(Machine hrs.) x (Machine cost/hr.) (Labor hrs.) x (Labor cost/hr.)

Multi-factor
MFP

Units Produced
(Machine hrs.) x (Machine cost/hr.) (Labor hrs.) x (Labor cost/hr.)
500
6 x $3 26 x $8

2.21

Measuring Productivity
Measure
Partial
Multi-factor
Total

Outputs
Units or
dollars
Units or
dollars
Units or
dollars

Inputs
Units or
dollars
Dollars
Dollars

Summary

Output in units/Input in hrs. = Output

per input hour
Output in $/Input in hrs. = X
Produced output worth $X per input hr.
Output in units/Input in $ = Y
Produced Y units per $ spent on input
Output in $/Input in $ = Z
Produced Z units per $ spent on input

Bottleneck Operation

Sanding
Sanding
Machine
Machine

50 units/hr

Polishing
Polishing

Bottleneck
operation

30
units
/hr

Improving Productivity

Eliminate bottleneck operations

Eliminate non-value added steps

Use improved technology

Improve quality

Less rework

More good units produced the first time

Productivity should measure number of good

units produced the first time