Operations Management

1. Operations Management Chapter 2 – Global Environment and Operations Strategy PowerPoint presentation to accompany Heizer/Render Operations Management, 11 Ed. Some additions and deletions have been made by Ömer Yağız to this slide set. (Revised March 2014.

2. Outline • Global Company Profile: Boeing • A Global View of Operations • Cultural and Ethical Issues • Developing Missions And Strategies • Mission • Strategy

3. Outline – Continued • Achieving Competitive Advantage Through Operations • Competing On Differentiation • Competing On Cost • Competing On Response • Ten Strategic OM Decisions

4. Outline – Continued • Strategy Development and Implementation • Critical Success Factors and Core Competencies • Build and Staff the Organization • Integrate OM with Other Activities

5. Outline – Continued • Global Operations Strategy Options • International Strategy • Multidomestic Strategy • Global Strategy • Transnational Strategy

6. Learning Objectives When you complete this chapter you should be able to: Define mission and strategy Identify and explain three strategic approaches to competitive advantage Identify and define the 10 decisions of operations management

7. Learning Objectives When you complete this chapter you should be able to: Identify five OM strategy insights provided by PIMS research Identify and explain four global operations strategy options

8. Firm Country Component Latecoere France Passenger doors Labinel France Wiring Dassault France Design and PLM software Messier-Bugatti France Electric brakes Thales France Electrical power conversion system and integrated standby flight display Messier-Dowty France Landing gear structure Diehl Germany Interior lighting Some Boeing Suppliers (787)

9. Firm Country Component Cobham UK Fuel pumps and valves Rolls-Royce UK Engines Smiths Aerospace UK Central computer system BAE SYSTEMS UK Electronics Alenia Aeronautics Italy Upper center fuselage & horizontal stabilizer Toray Industries Japan Carbon fiber for wing and tail units Some Boeing Suppliers (787)

10. Firm Country Component Fuji Heavy Japan Center wing box Industries Kawasaki Heavy Japan Forward fuselage, Industries fixed section of wing, landing gear well Teijin Seiki Japan Hydraulic actuators Mitsubishi Heavy Japan Wing box Industries Chengdu Aircraft China Rudder Group Hafei Aviation China Parts Some Boeing Suppliers (787)

11. Firm Country Component Korean Aviation South Wingtips Korea Saab Sweden Cargo access doors Some Boeing Suppliers (787)

12. Global Strategies • Boeing – sales and production are worldwide • Benetton – moves inventory to stores around the world faster than its competition by building flexibility into design, production, and distribution • Sony – purchases components from suppliers in Thailand, Malaysia, and around the world

13. Global Strategies • Volvo – considered a Swedish company but it is (was) controlled by an American company, Ford. Now it belongs to Geely, a Chinese company. The current Volvo S40 is assembled in Belgium, South Africa, malaysia and China and shares its platform with the Mazda 3 built in Japan and the Ford Focus built in Europe.

14. Global Strategies • Haier – A Chinese company, produces compact refrigerators (it has one-third of the US market) and wine cabinets (it has half of the US market) in South Carolina Globalization means that producing locally and exporting is not a viable business model any more for many industries

15. Tangible Reasons Reasons to Globalize Reduce costs (labor, taxes, tariffs, etc.) Improve supply chain Improve products Understand markets Learn to improve operations Attract and retain global talent Intangible Reasons Reasons to Globalize

16. 1. Reduce Costs • Foreign locations with lower wage rates and tariffs can lower direct and indirect costs • Maquiladoras (free trade zones-Mexico) • World Trade Organization (WTO) • Trade blocs & agreements (reduced cost of operating) • North American Free Trade Agreement (NAFTA) • Asia-Pacific Economic Cooperation(APEC-21 countries) • South East Asia Treaty Org(SEATO-8 countries • MERCOSUR (Argentina, Brazil, Paraguay, and Uruguay • European Union (EU) Ex: Many U.S. businesses have their call centers in India

17. 2. Improve the Supply Chain • Locating facilities closer to unique resources • Auto design to California • Athletic shoe production to China (it was South Korea before) • Perfume manufacturing in France

18. 3. Provide Better Goods and Services • Objective and subjective characteristics of goods and services • On-time deliveries • Cultural variables (customized goods & services to meet unique cultural needs) • Improved customer service (reduce response time)

19. 4. Understand Markets • Interacting with foreign customers and suppliers can lead to new opportunities • Cell phone design from Europe (Nokia) • Cell phonefads (accessories) fromJapan and Korea • a device which converts your rear-view mirror into a display for the phone. So if someone is calling you, just look at the number on the mirror while you drive. • Sony Ericsson has launched stereophonic speakers called MDS-65, which can be attached to the phone and give the effect of a mini home theatre. • just look at all the accessories for the Ipod and the Iphone. • Extend the product life cycle

20. 5. Learn to Improve Operations • Remain open to the free flow of ideas • General Motors partnered with a Japanese auto manufacturer (Toyota) to learn (NUMMI-Calif.) • benchmarking - first practised by Xerox Corp. • Equipment and layout have been improved using Scandinavian ergonomic competence • TAV –- Tepe-Akfen-Vie (Tepe learned airport operations from Vie)

21. 6. Attract and Retain Global Talent • Offer better employment opportunities • Better growth opportunities and insulation against unemployment • Relocate unneeded personnel to more prosperous locations during economic downturns (flexibility) • Incentives for people who like to travel

22. Cultural and Ethical Issues • Cultures can be quite different • Attitudes can be quite different towards • Punctuality • Lunch breaks • Environment • Intellectual property • Thievery • Bribery • Child labor My Saudi Arabian experience with punctuality!

23. Companies Want To Consider • Work ethic • Tax rates • Inflation • Availability of raw materials • Interest rates • Population • Number of miles of highway • Phone system • National literacy rate • Rate of innovation • Rate of technology change • Number of skilled workers • Political stability • Product liability laws • Export restrictions • Variations in language

24. Match Product & Parent (Kimin eli kimin cebinde?) Match Product & Parent • Volkswagen • Bridgestone • Campbell Soup • Ford Motor Company • Gillette • Nestlé • Pillsbury • Sony • Braun Household Appliances • Firestone Tires • Godiva Chocolate • Haagen-Dazs Ice Cream • Jaguar Autos • MGM Movies • Lamborghini Autos • Alpo Petfoods

25. Match Product & Parent (Kimin eli kimin cebinde?) • Volkswagen • Bridgestone • Ülker Group • Ford Motor Company • Gillette • Nestlé • Pillsbury • Sony • Braun Household Appliances • Firestone Tires • Godiva Chocolate • Haagen-Dazs Ice Cream • Jaguar Autos • MGM Movies • Lamborghini Autos • Alpo Petfoods

26. Match Product & Country • Braun Household Appliances • Firestone Tires • Godiva Chocolate • Haagen-Daz Ice Cream • Jaguar Autos • MGM Movies • Lamborghini Autos • Alpo Pet Foods Great Britain Germany Japan United States Switzerland

27. Match Product & Country • Braun Household Appliances • Firestone Tires • Godiva Chocolate • Haagen-Daz Ice Cream • Jaguar Autos • MGM Movies • Lamborghini Autos • Alpo Pet Foods Great Britain Germany Japan United States Switzerland Turkey India

28. Mission: overall purpose of an organization (misyon; varoluş nedeni). • The mission of an organization defines its reason for existence. “Why are we in business?” • Mission statements tell an organization where it is going • Mission of the organization plus mission of the functional areas (prod, mktg, finance, R&D, etc) Developing Missions and Strategies

29. Developing Missions and Strategies • The strategy is an organization’s action plan to achieve its mission and goals • It is a long term plan

30. Developing Missions and Strategies • Mission statements tell an organization where it is going • The strategy tels the organization how to get there

31. FedEx’s Mission FedEx is committed to our People-Service-Profit philosophy. We will produce outstanding financial returns by providing total reliable, competitively superior, global air-ground transportation of high priority goods and documents that require rapid, time-certain delivery. Equally important, positive control of each package will be maintained using real time electronic tracking and tracing systems. A complete record of each shipment and delivery will be presented with our request for payment. We will be helpful, courteous, and professional to each other and the public. We will strive to have a completely satisfied customer at the end of each transaction. Figure 2.2

32. Merck’s Mission The mission of Merck is to provide society with superior products and services - innovations and solutions that improve the quality of life and satisfy customer needs - to provide employees with meaningful work and advancement opportunities and investors with a superior rate of return Figure 2.2

33. Hard Rock Cafe’s Mission Our Mission: To spread the spirit of Rock ‘n’ Roll by delivering an exceptional entertainment and dining experience. We are committed to being an important, contributing member of our community and offering the Hard Rock family a fun, healthy, and nurturing work environment while ensuring our long-term success. Figure 2.2

34. Arnold Palmer Hospital Arnold Palmer Hospital for Children provides state-of-the-art, family centered healthcare focused on restoring the joy of childhood in an environment of compassion, healing, and hope.. Figure 2.2

35. TAI’s Mission (old version) • TAI is a company of dedicated, dynamic andresourceful people searching for excellenceand continued growth in the field of aerospace. Our mission is to fulfil the aerospace requirements of our nation and world markets with commitment to high quality, value and on time delivery.

36. TAI’s Mission (current version) • With our great leader Atatürk’s vision: “The Future is in the Skies” and our nation’s eagerness to “Build its own aircraft”; TAI has dedicated itself to be in the skies and space and be pioneers in developing Turkey’s aviation and space industry. Mission statements may change over time..

37. TAI’s Mission (most current version)

38. NETAŞ’s Mission To provide excellent telecommunication solutions within the framework of Total Quality Management philosophy.

39. Arçelik’s Mission Fully satisfying customer expectations and requirements is the guiding mission of Arçelik. In order to achieve and maintain the high standards it has, Arçelik has a continual programme of investment which encompasses plants, manufacturing equipment, research & development and most importantly personnel.

40. Philosophy and Values Profitability and Growth Environment Mission Customers Public Image Benefit to Society Factors Affecting Mission Benefit to stockholders

41. Sample Missions Figure 2.3

42. Sample Missions Figure 2.3

43. Sample Missions Figure 2.3

44. Sample Missions Figure 2.3

45. Functional Area Missions Finance/ Accounting Marketing Operations Strategic Process Organization’s Mission

46. Strategy • Action plan to achieve mission • Functional areas have strategies • Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses

47. Strategies for Competitive Advantage (OM) • Compete on differentiation – better, or at least different • Compete on cost – cheaper • Compete on response – rapid response (hızlı hareket) • My idea : Maybe a fourth one is quality

48. Competing on Differentiation Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer’s perception of value • Kimberly Clark’s Safeskin gloves – leading edge products • Walt Disney Magic Kingdom theme park – experience differentiation • Hard Rock Cafe – dining experience • Tschibo stores – different concept

49. Competing on Differentiation • Honda cars with Qiblah (Kıble) indicator sold in Saudi Arabia and Gulf countries • Prayer carpets with built-in compass made in Taiwan and sold in Arab countries • Cell phones cameraFMvideogames  GPS  wi-fi  other applications • Iphone and Ipad with all those wonderful applications • Cameras with built in wi-fi • The list goes on and on….

50. Competing on Cost Provide the maximum value as perceived by customer. Does not imply low quality. • Southwest Airlines – secondary airports, no frills service, efficient utilization of equipment • Pegasus Airlines in Turkey • Wal-Mart – small overheads, decreased shrinkage, distribution costs • Belgian discount food retailer Franz Colruyt – no bags, low light, no music, doors on freezers saves energy costs • Low-cost leadership