Chapter 2

1. Chapter 2 Operations Strategy and Competitiveness

2. 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.”

3. 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

4. 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!)

5. 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.

6. 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.

7. SWOT

8. 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.

9. Strategic Planning Steps • Outcome • Outcome of strategic planning process • Tells us if strategic planning process was successful. • Was goal was achieved? • If not, repeat.

10. Example 1: Strategic Plan

11. Example 2: Strategic Plan

12. Example 3: Strategic Plan

13. Starbuck’s 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.‘ • What’s wrong with Starbuck’s mission statement?

14. Starbuck’s Strategic Plan • Goal • To establish Starbuck’s as the most recognized and respected brand in the world. • What is requirement that goal should meet? • Does Starbuck’s goal meet it?

15. Starbuck’s Strategic Plan • To achieve this goal, the Starbuck’s plans to • rapidly expand its retail operations, • grow its specialty sales and other operations, and • selectively pursue opportunities to leverage the Starbuck’s brand through the introduction of new products and • the development of new distribution channels.

16. Starbuck’s Strategic Plan • Are these steps strategies or tactics?

17. Answer • They are Strategies - board statement of what company will do to achieve goals, but doesn’t say how. • Tacticswould tell us, for example, how the company plans to expand retail operations. • For example, open more retail stores in airports and malls.

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

19. 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 any lengths to serve them better.

20. 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 McDonald’s?

21. 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.

22. 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?

23. 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.

24. Competing on Quality? • Quality of product • Quality of service • Both • Does competing on quality mean that a company can’t 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.

25. 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

26. 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

27. Output Productiv ity = Inputs Measuring Productivity • Productivity is a measure of how efficiently inputs are converted to output.

28. 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)

29. Partial Output Output Outputmeasures Labor Machine Energy Multifactor Output Output measures Labor + Machine Labor + Capital + Energy Total Goods or Services Produced measure $ value of all inputs used to produce them Measures of Productivity

30. Labor Productivity Machine Productivity Energy Productivity Units of output per kilowatt-hour Dollar value of output per kilowatt-hour Examples of Partial Productivity Measures Units of output per labor-hour Dollar value of output per labor-hour Units of output per machine-hour Dollar value of output per machine-hour

31. Numerical Example

32. Partial Measures Explain meaning?

33. Partial Measures Explain meaning?

34. Partial Measures Explain meaning?

35. Partial Measures Explain meaning?

36. Multi-factor

37. Multi-factor

38. Measuring Productivity

39. 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

40. 30 units /hr 50 units/hr Sanding Machine Polishing Bottleneck operation Bottleneck Operation

41. 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