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This document outlines the key topics to be covered in a chapter on operations strategy in a global environment. It includes an outline of subtopics, learning objectives, examples of Boeing's global suppliers, and definitions of mission and different strategies for achieving competitive advantage. The purpose is to provide students an overview of the concepts that will be discussed in the chapter.

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2 - 1© 2011 Pearson Education, Inc. publishing as Prentice Hall 2 Operations Strategy in a Global Environment PowerPoint presentation to accompany Heizer and Render Operations Management, 10e Principles of Operations Management, 8e PowerPoint slides by Jeff Heyl
2 - 2© 2011 Pearson Education, Inc. publishing as Prentice Hall Outline  Global Company Profile: Boeing  A Global View of Operations  Cultural and Ethical Issues  Developing Missions And Strategies  Mission  Strategy
2 - 3© 2011 Pearson Education, Inc. publishing as Prentice Hall Outline – Continued  Achieving Competitive Advantage Through Operations  Competing On Differentiation  Competing On Cost  Competing On Response  Ten Strategic OM Decisions
2 - 4© 2011 Pearson Education, Inc. publishing as Prentice Hall Outline – Continued  Strategy Development and Implementation  Key Success Factors and Core Competencies  Build and Staff the Organization  Integrate OM with Other Activities
2 - 5© 2011 Pearson Education, Inc. publishing as Prentice Hall Outline – Continued  Global Operations Strategy Options  International Strategy  Multidomestic Strategy  Global Strategy  Transnational Strategy
2 - 6© 2011 Pearson Education, Inc. publishing as Prentice Hall Learning Objectives 1. Define mission and strategy 2. Identify and explain three strategic approaches to competitive advantage 3. Identify and define the 10 decisions of operations management When you complete this chapter you should be able to:
2 - 7© 2011 Pearson Education, Inc. publishing as Prentice Hall Learning Objectives 4. Understand the significant key success factors and core competencies 5. Identify and explain four global operations strategy options When you complete this chapter you should be able to:
2 - 8© 2011 Pearson Education, Inc. publishing as Prentice Hall Some Boeing Suppliers (787) 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
2 - 9© 2011 Pearson Education, Inc. publishing as Prentice Hall Some Boeing Suppliers (787) 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
2 - 10© 2011 Pearson Education, Inc. publishing as Prentice Hall Some Boeing Suppliers (787) 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
2 - 11© 2011 Pearson Education, Inc. publishing as Prentice Hall Some Boeing Suppliers (787) Firm Country Component Korean Aviation South Wingtips Korea Saab Sweden Cargo access doors
2 - 12© 2011 Pearson Education, Inc. publishing as Prentice Hall 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
2 - 13© 2011 Pearson Education, Inc. publishing as Prentice Hall Global Strategies  Volvo – considered a Swedish company but until recently was controlled by an American company, Ford. The current Volvo S40 is built in Belgium and shares its platform with the Mazda 3 built in Japan and the Ford Focus built in Europe.  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
2 - 14© 2011 Pearson Education, Inc. publishing as Prentice Hall 35 – 30 – 25 – 20 – 15 – 10 – 5 – 0 –| | | | | | | | | | | 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 (est*) Year Percent Growth of World Trade Figure 2.1 Collapse of the Berlin Wall
2 - 15© 2011 Pearson Education, Inc. publishing as Prentice Hall Some Multinational Corporations % Sales % Assets Outside Outside Home Home Home % Foreign Company Country Country Country Workforce Citicorp USA 34 46 NA Colgate- USA 72 63 NA Palmolive Dow USA 60 50 NA Chemical Gillette USA 62 53 NA Honda Japan 63 36 NA IBM USA 57 47 51
2 - 16© 2011 Pearson Education, Inc. publishing as Prentice Hall Some Multinational Corporations % Sales % Assets Outside Outside Home Home Home % Foreign Company Country Country Country Workforce ICI Britain 78 50 NA Nestle Switzerland 98 95 97 Philips Netherlands 94 85 82 Electronics Siemens Germany 51 NA 38 Unilever Britain & 95 70 64 Netherlands
2 - 17© 2011 Pearson Education, Inc. publishing as Prentice Hall Reasons to Globalize Reasons to Globalize 1. Reduce costs (labor, taxes, tariffs, etc.) 2. Improve supply chain 3. Provide better goods and services 4. Understand markets 5. Learn to improve operations 6. Attract and retain global talent Tangible Reasons Intangible Reasons
2 - 18© 2011 Pearson Education, Inc. publishing as Prentice Hall Reduce Costs  Foreign locations with lower wage rates can lower direct and indirect costs  Maquiladoras  World Trade Organization (WTO)  North American Free Trade Agreement (NAFTA)  APEC, SEATO, MERCOSUR, CAFTA  European Union (EU)
2 - 19© 2011 Pearson Education, Inc. publishing as Prentice Hall Improve the Supply Chain  Locating facilities closer to unique resources  Auto design to California  Athletic shoe production to China  Perfume manufacturing in France
2 - 20© 2011 Pearson Education, Inc. publishing as Prentice Hall Provide Better Goods and Services  Objective and subjective characteristics of goods and services  On-time deliveries  Cultural variables  Improved customer service
2 - 21© 2011 Pearson Education, Inc. publishing as Prentice Hall Understand Markets  Interacting with foreign customers and suppliers can lead to new opportunities  Cell phone design from Europe  Cell phone fads from Japan  Extend the product life cycle
2 - 22© 2011 Pearson Education, Inc. publishing as Prentice Hall Learn to Improve Operations  Remain open to the free flow of ideas  General Motors partnered with a Japanese auto manufacturer to learn new approaches to production and inventory control  Equipment and layout have been improved using Scandinavian ergonomic competence
2 - 23© 2011 Pearson Education, Inc. publishing as Prentice Hall Attract and Retain Global Talent  Offer better employment opportunities  Better growth opportunities and insulation against unemployment  Relocate unneeded personnel to more prosperous locations
2 - 24© 2011 Pearson Education, Inc. publishing as Prentice Hall 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
2 - 25© 2011 Pearson Education, Inc. publishing as Prentice Hall Companies Want To Consider  National literacy rate  Rate of innovation  Rate of technology change  Number of skilled workers  Political stability  Product liability laws  Export restrictions  Variations in language  Work ethic  Tax rates  Inflation  Availability of raw materials  Interest rates  Population  Number of miles of highway  Phone system
2 - 26© 2011 Pearson Education, Inc. publishing as Prentice Hall Match Product & Parent  Braun Household Appliances  Firestone Tires  Godiva Chocolate  Haagen-Dazs Ice Cream  Jaguar Autos  MGM Movies  Lamborghini Autos  Alpo Petfoods 1. Volkswagen 2. Bridgestone 3. Campbell Soup 4. Tata Motors Limited 5. Proctor and Gamble 6. Nestlé 7. Pillsbury 8. Sony
2 - 27© 2011 Pearson Education, Inc. publishing as Prentice Hall Match Product & Parent  Braun Household Appliances  Firestone Tires  Godiva Chocolate  Haagen-Dazs Ice Cream  Jaguar Autos  MGM Movies  Lamborghini Autos  Alpo Petfoods 1. Volkswagen 2. Bridgestone 3. Campbell Soup 4. Tata Motors Limited 5. Proctor and Gamble 6. Nestlé 7. Pillsbury 8. Sony
2 - 28© 2011 Pearson Education, Inc. publishing as Prentice Hall Match Product & Country  Braun Household Appliances  Firestone Tires  Godiva Chocolate  Haagen-Dazs Ice Cream  Jaguar Autos  MGM Movies  Lamborghini Autos  Alpo Pet Foods 1. Great Britain 2. Germany 3. Japan 4. United States 5. Switzerland 6. India
2 - 29© 2011 Pearson Education, Inc. publishing as Prentice Hall Match Product & Country  Braun Household Appliances  Firestone Tires  Godiva Chocolate  Haagen-Dazs Ice Cream  Jaguar Autos  MGM Movies  Lamborghini Autos  Alpo Pet Foods 1. Great Britain 2. Germany 3. Japan 4. United States 5. Switzerland 6. India
2 - 30© 2011 Pearson Education, Inc. publishing as Prentice Hall Developing Missions and Strategies Mission statements tell an organization where it is going The Strategy tells the organization how to get there
2 - 31© 2011 Pearson Education, Inc. publishing as Prentice Hall Mission  Mission - where are you going?  Organization‘s purpose for being  Answers ‗What do we provide society?‘  Provides boundaries and focus
2 - 32© 2011 Pearson Education, Inc. publishing as Prentice Hall Merck 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
2 - 33© 2011 Pearson Education, Inc. publishing as Prentice Hall Hard Rock Cafe 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
2 - 34© 2011 Pearson Education, Inc. publishing as Prentice Hall 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
2 - 35© 2011 Pearson Education, Inc. publishing as Prentice Hall Benefit to Society Mission Factors Affecting Mission Philosophy and Values Profitability and Growth Environment Customers Public Image
2 - 36© 2011 Pearson Education, Inc. publishing as Prentice Hall Sample Missions Sample Company Mission To manufacture and service an innovative, growing, and profitable worldwide microwave communications business that exceeds our customers‘ expectations. Sample Operations Management Mission To produce products consistent with the company‘s mission as the worldwide low-cost manufacturer. Figure 2.3
2 - 37© 2011 Pearson Education, Inc. publishing as Prentice Hall Sample Missions Figure 2.3 Sample OM Department Missions Product design To design and produce products and services with outstanding quality and inherent customer value. Quality management To attain the exceptional value that is consistent with our company mission and marketing objectives by close attention to design, procurement, production, and field service operations Process design To determine, design, and produce the production process and equipment that will be compatible with low-cost product, high quality, and good quality of work life at economical cost.
2 - 38© 2011 Pearson Education, Inc. publishing as Prentice Hall Sample Missions Figure 2.3 Sample OM Department Missions Location To locate, design, and build efficient and economical facilities that will yield high value to the company, its employees, and the community. Layout design To achieve, through skill, imagination, and resourcefulness in layout and work methods, production effectiveness and efficiency while supporting a high quality of work life. Human resources To provide a good quality of work life, with well-designed, safe, rewarding jobs, stable employment, and equitable pay, in exchange for outstanding individual contribution from employees at all levels.
2 - 39© 2011 Pearson Education, Inc. publishing as Prentice Hall Sample Missions Figure 2.3 Sample OM Department Missions Supply-chain management To collaborate with suppliers to develop innovative products from stable, effective, and efficient sources of supply. Inventory To achieve low investment in inventory consistent with high customer service levels and high facility utilization. Scheduling To achieve high levels of throughput and timely customer delivery through effective scheduling. Maintenance To achieve high utilization of facilities and equipment by effective preventive maintenance and prompt repair of facilities and equipment.
2 - 40© 2011 Pearson Education, Inc. publishing as Prentice Hall Strategic Process Marketing Operations Finance/ Accounting Functional Area Missions Organization‘s Mission
2 - 41© 2011 Pearson Education, Inc. publishing as Prentice Hall Strategy  Action plan to achieve mission  Functional areas have strategies  Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses
2 - 42© 2011 Pearson Education, Inc. publishing as Prentice Hall Strategies for Competitive Advantage  Differentiation – better, or at least different  Cost leadership – cheaper  Response – rapid response
2 - 43© 2011 Pearson Education, Inc. publishing as Prentice Hall Competing on Differentiation Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer‘s perception of value  Safeskin gloves – leading edge products  Walt Disney Magic Kingdom – experience differentiation  Hard Rock Cafe – dining experience
2 - 44© 2011 Pearson Education, Inc. publishing as Prentice Hall 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  Wal-Mart – small overhead, shrinkage, distribution costs  Franz Colruyt – no bags, low light, no music, doors on freezers
2 - 45© 2011 Pearson Education, Inc. publishing as Prentice Hall Competing on Response  Flexibility is matching market changes in design innovation and volumes  A way of life at Hewlett-Packard  Reliability is meeting schedules  German machine industry  Timeliness is quickness in design, production, and delivery  Johnson Electric, Pizza Hut, Motorola
2 - 46© 2011 Pearson Education, Inc. publishing as Prentice Hall OM’s Contribution to Strategy Product Quality Process Location Layout Human resource Supply chain Inventory Scheduling Maintenance DIFFERENTIATION Innovative design … Safeskin‘s innovative gloves Broad product line … Fidelity Security‘s mutual funds After-sales service … Caterpillar‘s heavy equipment service Experience … Hard Rock Café‘s dining experience COST LEADERSHIP Low overhead … Franz-Colruyt‘s warehouse-type stores Effective capacity use … Southwest Airline‘s aircraft utilization Inventory management … Wal Mart‘s sophisticated distribution system RESPONSE Flexibility … Hewlett-Packard‘s response to volatile world market Reliability … FedEx‘s ―absolutely, positively, on time‖ Quickness … Pizza Hut‘s 5-minute guarantee at lunchtime Figure 2.4 10 Operations Competitive Decisions Approach Example Advantage Response (faster) Cost leadership (cheaper) Differentiation (better)
2 - 47© 2011 Pearson Education, Inc. publishing as Prentice Hall 10 Strategic OM Decisions 1. Goods and service design 2. Quality 3. Process and capacity design 4. Location selection 5. Layout design 6. Human resources and job design 7. Supply-chain management 8. Inventory 9. Scheduling 10. Maintenance
2 - 48© 2011 Pearson Education, Inc. publishing as Prentice Hall Goods and Services and the 10 OM Decisions Operations Decisions Goods Services Goods and service design Product is usually tangible Product is not tangible Quality Many objective standards Many subjective standards Process and capacity design Customers not involved Customer may be directly involved Capacity must match demand Table 2.1
2 - 49© 2011 Pearson Education, Inc. publishing as Prentice Hall Goods and Services and the 10 OM Decisions Operations Decisions Goods Services Location selection Near raw materials and labor Near customers Layout design Production efficiency Enhances product and production Human resources and job design Technical skills, consistent labor standards, output based wages Interact with customers, labor standards vary Table 2.1
2 - 50© 2011 Pearson Education, Inc. publishing as Prentice Hall Goods and Services and the 10 OM Decisions Operations Decisions Goods Services Supply chain Relationship critical to final product Important, but may not be critical Inventory Raw materials, work-in-process, and finished goods may be held Cannot be stored Scheduling Level schedules possible Meet immediate customer demand Table 2.1
2 - 51© 2011 Pearson Education, Inc. publishing as Prentice Hall Goods and Services and the 10 OM Decisions Operations Decisions Goods Services Maintenance Often preventive and takes place at production site Often ―repair‖ and takes place at customer‘s site Table 2.1
2 - 52© 2011 Pearson Education, Inc. publishing as Prentice Hall Managing Global Service Operations  Capacity planning  Location planning  Facilities design and layout  Scheduling Requires a different perspective on:
2 - 53© 2011 Pearson Education, Inc. publishing as Prentice Hall Process Design Low Moderate High Volume High Moderate Low VarietyofProducts Process-focused JOB SHOPS (Print shop, emergency room, machine shop, fine-dining restaurant) Repetitive (modular) focus ASSEMBLY LINE (Cars, appliances, TVs, fast-food restaurants) Product focused CONTINUOUS (Steel, beer, paper, bread, institutional kitchen) Mass Customization Customization at high Volume (Dell Computer‘s PC, cafeteria)
2 - 54© 2011 Pearson Education, Inc. publishing as Prentice Hall Operations Strategies of Two Drug Companies Brand Name Drugs, Inc. Generic Drug Corp. Competitive Advantage Product Differentiation Low Cost Product Selection and Design Heavy R&D investment; extensive labs; focus on development in a broad range of drug categories Low R&D investment; focus on development of generic drugs Quality Major priority, exceed regulatory requirements Meets regulatory requirements on a country by country basis Table 2.2
2 - 55© 2011 Pearson Education, Inc. publishing as Prentice Hall Operations Strategies of Two Drug Companies Brand Name Drugs, Inc. Generic Drug Corp. Competitive Advantage Product Differentiation Low Cost Process Product and modular process; long production runs in specialized facilities; build capacity ahead of demand Process focused; general processes; ―job shop‖ approach, short- run production; focus on high utilization Location Still located in the city where it was founded Recently moved to low- tax, low-labor-cost environment Table 2.2
2 - 56© 2011 Pearson Education, Inc. publishing as Prentice Hall Operations Strategies of Two Drug Companies Brand Name Drugs, Inc. Generic Drug Corp. Competitive Advantage Product Differentiation Low Cost Scheduling Centralized production planning Many short-run products complicate scheduling Layout Layout supports automated product- focused production Layout supports process-focused ―job shop‖ practices Table 2.2
2 - 57© 2011 Pearson Education, Inc. publishing as Prentice Hall Operations Strategies of Two Drug Companies Brand Name Drugs, Inc. Generic Drug Corp. Competitive Advantage Product Differentiation Low Cost Human Resources Hire the best; nationwide searches Very experienced top executives; other personnel paid below industry average Supply Chain Long-term supplier relationships Tends to purchase competitively to find bargains Table 2.2
2 - 58© 2011 Pearson Education, Inc. publishing as Prentice Hall Operations Strategies of Two Drug Companies Brand Name Drugs, Inc. Generic Drug Corp. Competitive Advantage Product Differentiation Low Cost Inventory High finished goods inventory to ensure all demands are met Process focus drives up work-in-process inventory; finished goods inventory tends to be low Maintenance Highly trained staff; extensive parts inventory Highly trained staff to meet changing demand Table 2.2
2 - 59© 2011 Pearson Education, Inc. publishing as Prentice Hall Issues In Operations Strategy  Resources view  Value Chain analysis  Porter‘s Five Forces model  Operating in a system with many external factors  Constant change
2 - 60© 2011 Pearson Education, Inc. publishing as Prentice Hall Product Life Cycle Best period to increase market share R&D engineering is critical Practical to change price or quality image Strengthen niche Poor time to change image, price, or quality Competitive costs become critical Defend market position Cost control critical Introduction Growth Maturity Decline CompanyStrategy/Issues Figure 2.5 Internet search engines Sales Drive-through restaurants CD-ROMs Analog TVs iPods Boeing 787 LCD & plasma TVs Twitter Avatars Xbox 360
2 - 61© 2011 Pearson Education, Inc. publishing as Prentice Hall Product Life Cycle Product design and development critical Frequent product and process design changes Short production runs High production costs Limited models Attention to quality Introduction Growth Maturity Decline OMStrategy/Issues Forecasting critical Product and process reliability Competitive product improvements and options Increase capacity Shift toward product focus Enhance distribution Standardization Fewer product changes, more minor changes Optimum capacity Increasing stability of process Long production runs Product improvement and cost cutting Little product differentiation Cost minimization Overcapacity in the industry Prune line to eliminate items not returning good margin Reduce capacity Figure 2.5
2 - 62© 2011 Pearson Education, Inc. publishing as Prentice Hall Strategy Analysis SWOT Analysis Internal Strengths Internal Weaknesses External Opportunities External Threats Mission
2 - 63© 2011 Pearson Education, Inc. publishing as Prentice Hall Strategy Development Process Determine the Corporate Mission State the reason for the firm‘s existence and identify the value it wishes to create. Form a Strategy Build a competitive advantage, such as low price, design, or volume flexibility, quality, quick delivery, dependability, after- sale service, broad product lines. Analyze the Environment Identify the strengths, weaknesses, opportunities, and threats. Understand the environment, customers, industry, and competitors. Figure 2.6
2 - 64© 2011 Pearson Education, Inc. publishing as Prentice Hall Strategy Development and Implementation  Identify key success factors  Build and staff the organization  Integrate OM with other activities The operations manager’s job is to implement an OM strategy, provide competitive advantage, and increase productivity
2 - 65© 2011 Pearson Education, Inc. publishing as Prentice Hall Key Success Factors Production/Operations Figure 2.7 Marketing Service Distribution Promotion Channels of distribution Product positioning (image, functions) Finance/Accounting Leverage Cost of capital Working capital Receivables Payables Financial control Lines of credit Decisions Sample Options Chapter Product Quality Process Location Layout Human resource Supply chain Inventory Schedule Maintenance Customized, or standardized Define customer expectations and how to achieve them Facility size, technology, capacity Near supplier or near customer Work cells or assembly line Specialized or enriched jobs Single or multiple suppliers When to reorder, how much to keep on hand Stable or fluctuating production rate Repair as required or preventive maintenance 5 6, S6 7, S7 8 9 10 11, S11 12, 14, 16 13, 15 17 Support a Core Competence and Implement Strategy by Identifying and Executing the Key Success Factors in the Functional Areas
2 - 66© 2011 Pearson Education, Inc. publishing as Prentice Hall Courteous, but Limited Passenger Service Standardized Fleet of Boeing 737 Aircraft Competitive Advantage: Low Cost Lean, Productive Employees Short Haul, Point-to- Point Routes, Often to Secondary Airports High Aircraft Utilization Frequent, Reliable Schedules Figure 2.8 Activity Mapping at Southwest Airlines
2 - 67© 2011 Pearson Education, Inc. publishing as Prentice Hall Activity Mapping at Southwest Airlines Courteous, but Limited Passenger Service Standardized Fleet of Boeing 737 Aircraft Competitive Advantage: Low Cost Lean, Productive Employees Short Haul, Point-to- Point Routes, Often to Secondary Airports High Aircraft Utilization Frequent, Reliable Schedules Figure 2.8 Automated ticketing machines No seat assignments No baggage transfers No meals (peanuts)
2 - 68© 2011 Pearson Education, Inc. publishing as Prentice Hall Activity Mapping at Southwest Airlines Courteous, but Limited Passenger Service Standardized Fleet of Boeing 737 Aircraft Competitive Advantage: Low Cost Lean, Productive Employees Short Haul, Point-to- Point Routes, Often to Secondary Airports High Aircraft Utilization Frequent, Reliable Schedules Figure 2.8 No meals (peanuts) Lower gate costs at secondary airports High number of flights reduces employee idle time between flights
2 - 69© 2011 Pearson Education, Inc. publishing as Prentice Hall Activity Mapping at Southwest Airlines Courteous, but Limited Passenger Service Standardized Fleet of Boeing 737 Aircraft Competitive Advantage: Low Cost Lean, Productive Employees Short Haul, Point-to- Point Routes, Often to Secondary Airports High Aircraft Utilization Frequent, Reliable Schedules Figure 2.8 High number of flights reduces employee idle time between flights Saturate a city with flights, lowering administrative costs (advertising, HR, etc.) per passenger for that city Pilot training required on only one type of aircraft Reduced maintenance inventory required because of only one type of aircraft
2 - 70© 2011 Pearson Education, Inc. publishing as Prentice Hall Activity Mapping at Southwest Airlines Courteous, but Limited Passenger Service Standardized Fleet of Boeing 737 Aircraft Competitive Advantage: Low Cost Lean, Productive Employees Short Haul, Point-to- Point Routes, Often to Secondary Airports High Aircraft Utilization Frequent, Reliable Schedules Figure 2.8 Pilot training required on only one type of aircraft Reduced maintenance inventory required because of only one type of aircraft Excellent supplier relations with Boeing has aided financing
2 - 71© 2011 Pearson Education, Inc. publishing as Prentice Hall Activity Mapping at Southwest Airlines Courteous, but Limited Passenger Service Standardized Fleet of Boeing 737 Aircraft Competitive Advantage: Low Cost Lean, Productive Employees Short Haul, Point-to- Point Routes, Often to Secondary Airports High Aircraft Utilization Frequent, Reliable Schedules Figure 2.8 Reduced maintenance inventory required because of only one type of aircraft Flexible employees and standard planes aid scheduling Maintenance personnel trained only one type of aircraft 20-minute gate turnarounds Flexible union contracts
2 - 72© 2011 Pearson Education, Inc. publishing as Prentice Hall Activity Mapping at Southwest Airlines Courteous, but Limited Passenger Service Standardized Fleet of Boeing 737 Aircraft Competitive Advantage: Low Cost Lean, Productive Employees Short Haul, Point-to- Point Routes, Often to Secondary Airports High Aircraft Utilization Frequent, Reliable Schedules Figure 2.8 Automated ticketing machines Empowered employees High employee compensation Hire for attitude, then train High level of stock ownership High number of flights reduces employee idle time between flights
2 - 73© 2011 Pearson Education, Inc. publishing as Prentice Hall Four International Operations Strategies CostReductionConsiderations High Low HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation) Figure 2.9  Import/export or license existing product Examples U.S. Steel Harley Davidson International Strategy
2 - 74© 2011 Pearson Education, Inc. publishing as Prentice Hall Four International Operations Strategies CostReductionConsiderations High Low HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation) International Strategy  Import/export or license existing product Examples U.S. Steel Harley Davidson Figure 2.9
2 - 75© 2011 Pearson Education, Inc. publishing as Prentice Hall Four International Operations Strategies CostReductionConsiderations High Low HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation) International Strategy  Import/export or license existing product Examples U.S. Steel Harley Davidson Figure 2.9  Standardized product  Economies of scale  Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator Global Strategy
2 - 76© 2011 Pearson Education, Inc. publishing as Prentice Hall Four International Operations Strategies CostReductionConsiderations High Low HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation)  Standardized product  Economies of scale  Cross-cultural learning Examples: Texas Instruments Caterpillar Otis Elevator Global Strategy International Strategy  Import/export or license existing product Examples U.S. Steel Harley Davidson Figure 2.9
2 - 77© 2011 Pearson Education, Inc. publishing as Prentice Hall Four International Operations Strategies CostReductionConsiderations High Low HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation)  Standardized product  Economies of scale  Cross-cultural learning Examples: Texas Instruments Caterpillar Otis Elevator Global Strategy International Strategy  Import/export or license existing product Examples U.S. Steel Harley Davidson Figure 2.9  Use existing domestic model globally  Franchise, joint ventures, subsidiaries Examples Heinz McDonald‘s The Body Shop Hard Rock Cafe Multidomestic Strategy
2 - 78© 2011 Pearson Education, Inc. publishing as Prentice Hall Four International Operations Strategies CostReductionConsiderations High Low HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation)  Standardized product  Economies of scale  Cross-cultural learning Examples: Texas Instruments Caterpillar Otis Elevator Global Strategy International Strategy  Import/export or license existing product Examples U.S. Steel Harley Davidson Multidomestic Strategy  Use existing domestic model globally  Franchise, joint ventures, subsidiaries Examples Heinz The Body Shop McDonald‘s Hard Rock Cafe Figure 2.9
2 - 79© 2011 Pearson Education, Inc. publishing as Prentice Hall Four International Operations Strategies CostReductionConsiderations High Low HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation)  Standardized product  Economies of scale  Cross-cultural learning Examples: Texas Instruments Caterpillar Otis Elevator Global Strategy International Strategy  Import/export or license existing product Examples U.S. Steel Harley Davidson Multidomestic Strategy  Use existing domestic model globally  Franchise, joint ventures, subsidiaries Examples Heinz The Body Shop McDonald‘s Hard Rock Cafe Figure 2.9  Move material, people, ideas across national boundaries  Economies of scale  Cross-cultural learning Examples Coca-Cola Nestlé Transnational Strategy
2 - 80© 2011 Pearson Education, Inc. publishing as Prentice Hall Four International Operations Strategies CostReductionConsiderations High Low HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation)  Standardized product  Economies of scale  Cross-cultural learning Examples: Texas Instruments Caterpillar Otis Elevator Global Strategy Transnational Strategy  Move material, people, ideas across national boundaries  Economies of scale  Cross-cultural learning Examples Coca-Cola Nestlé International Strategy  Import/export or license existing product Examples U.S. Steel Harley Davidson Multidomestic Strategy  Use existing domestic model globally  Franchise, joint ventures, subsidiaries Examples Heinz The Body Shop McDonald‘s Hard Rock Cafe Figure 2.9
2 - 81© 2011 Pearson Education, Inc. publishing as Prentice Hall© 2011 Pearson Education Ranking Corruption Rank Country 2011 CPI Score (out of 10) 1 New Zealand 9.5 2 Demark, Finland 9.4 5 Singapore 9.2 6 Norway 9.0 8 Australia, Switzerland 8.8 10 Canada 8.7 12 Hong Kong 8.4 14 Germany, Japan 8.0 16 UK 7.8 24 USA 7.1 32 Taiwan 6.1 43 South Korea 5.4 60 Malaysia 4.3 75 China 3.6 112 Vietnam 2.9 143 Russia 2.4 Least Corrupt Most Corrupt
2 - 82© 2011 Pearson Education, Inc. publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

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360_ch02

  • 1. 2 - 1© 2011 Pearson Education, Inc. publishing as Prentice Hall 2 Operations Strategy in a Global Environment PowerPoint presentation to accompany Heizer and Render Operations Management, 10e Principles of Operations Management, 8e PowerPoint slides by Jeff Heyl
  • 2. 2 - 2© 2011 Pearson Education, Inc. publishing as Prentice Hall Outline  Global Company Profile: Boeing  A Global View of Operations  Cultural and Ethical Issues  Developing Missions And Strategies  Mission  Strategy
  • 3. 2 - 3© 2011 Pearson Education, Inc. publishing as Prentice Hall Outline – Continued  Achieving Competitive Advantage Through Operations  Competing On Differentiation  Competing On Cost  Competing On Response  Ten Strategic OM Decisions
  • 4. 2 - 4© 2011 Pearson Education, Inc. publishing as Prentice Hall Outline – Continued  Strategy Development and Implementation  Key Success Factors and Core Competencies  Build and Staff the Organization  Integrate OM with Other Activities
  • 5. 2 - 5© 2011 Pearson Education, Inc. publishing as Prentice Hall Outline – Continued  Global Operations Strategy Options  International Strategy  Multidomestic Strategy  Global Strategy  Transnational Strategy
  • 6. 2 - 6© 2011 Pearson Education, Inc. publishing as Prentice Hall Learning Objectives 1. Define mission and strategy 2. Identify and explain three strategic approaches to competitive advantage 3. Identify and define the 10 decisions of operations management When you complete this chapter you should be able to:
  • 7. 2 - 7© 2011 Pearson Education, Inc. publishing as Prentice Hall Learning Objectives 4. Understand the significant key success factors and core competencies 5. Identify and explain four global operations strategy options When you complete this chapter you should be able to:
  • 8. 2 - 8© 2011 Pearson Education, Inc. publishing as Prentice Hall Some Boeing Suppliers (787) 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
  • 9. 2 - 9© 2011 Pearson Education, Inc. publishing as Prentice Hall Some Boeing Suppliers (787) 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
  • 10. 2 - 10© 2011 Pearson Education, Inc. publishing as Prentice Hall Some Boeing Suppliers (787) 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
  • 11. 2 - 11© 2011 Pearson Education, Inc. publishing as Prentice Hall Some Boeing Suppliers (787) Firm Country Component Korean Aviation South Wingtips Korea Saab Sweden Cargo access doors
  • 12. 2 - 12© 2011 Pearson Education, Inc. publishing as Prentice Hall 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. 2 - 13© 2011 Pearson Education, Inc. publishing as Prentice Hall Global Strategies  Volvo – considered a Swedish company but until recently was controlled by an American company, Ford. The current Volvo S40 is built in Belgium and shares its platform with the Mazda 3 built in Japan and the Ford Focus built in Europe.  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
  • 14. 2 - 14© 2011 Pearson Education, Inc. publishing as Prentice Hall 35 – 30 – 25 – 20 – 15 – 10 – 5 – 0 –| | | | | | | | | | | 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 (est*) Year Percent Growth of World Trade Figure 2.1 Collapse of the Berlin Wall
  • 15. 2 - 15© 2011 Pearson Education, Inc. publishing as Prentice Hall Some Multinational Corporations % Sales % Assets Outside Outside Home Home Home % Foreign Company Country Country Country Workforce Citicorp USA 34 46 NA Colgate- USA 72 63 NA Palmolive Dow USA 60 50 NA Chemical Gillette USA 62 53 NA Honda Japan 63 36 NA IBM USA 57 47 51
  • 16. 2 - 16© 2011 Pearson Education, Inc. publishing as Prentice Hall Some Multinational Corporations % Sales % Assets Outside Outside Home Home Home % Foreign Company Country Country Country Workforce ICI Britain 78 50 NA Nestle Switzerland 98 95 97 Philips Netherlands 94 85 82 Electronics Siemens Germany 51 NA 38 Unilever Britain & 95 70 64 Netherlands
  • 17. 2 - 17© 2011 Pearson Education, Inc. publishing as Prentice Hall Reasons to Globalize Reasons to Globalize 1. Reduce costs (labor, taxes, tariffs, etc.) 2. Improve supply chain 3. Provide better goods and services 4. Understand markets 5. Learn to improve operations 6. Attract and retain global talent Tangible Reasons Intangible Reasons
  • 18. 2 - 18© 2011 Pearson Education, Inc. publishing as Prentice Hall Reduce Costs  Foreign locations with lower wage rates can lower direct and indirect costs  Maquiladoras  World Trade Organization (WTO)  North American Free Trade Agreement (NAFTA)  APEC, SEATO, MERCOSUR, CAFTA  European Union (EU)
  • 19. 2 - 19© 2011 Pearson Education, Inc. publishing as Prentice Hall Improve the Supply Chain  Locating facilities closer to unique resources  Auto design to California  Athletic shoe production to China  Perfume manufacturing in France
  • 20. 2 - 20© 2011 Pearson Education, Inc. publishing as Prentice Hall Provide Better Goods and Services  Objective and subjective characteristics of goods and services  On-time deliveries  Cultural variables  Improved customer service
  • 21. 2 - 21© 2011 Pearson Education, Inc. publishing as Prentice Hall Understand Markets  Interacting with foreign customers and suppliers can lead to new opportunities  Cell phone design from Europe  Cell phone fads from Japan  Extend the product life cycle
  • 22. 2 - 22© 2011 Pearson Education, Inc. publishing as Prentice Hall Learn to Improve Operations  Remain open to the free flow of ideas  General Motors partnered with a Japanese auto manufacturer to learn new approaches to production and inventory control  Equipment and layout have been improved using Scandinavian ergonomic competence
  • 23. 2 - 23© 2011 Pearson Education, Inc. publishing as Prentice Hall Attract and Retain Global Talent  Offer better employment opportunities  Better growth opportunities and insulation against unemployment  Relocate unneeded personnel to more prosperous locations
  • 24. 2 - 24© 2011 Pearson Education, Inc. publishing as Prentice Hall 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
  • 25. 2 - 25© 2011 Pearson Education, Inc. publishing as Prentice Hall Companies Want To Consider  National literacy rate  Rate of innovation  Rate of technology change  Number of skilled workers  Political stability  Product liability laws  Export restrictions  Variations in language  Work ethic  Tax rates  Inflation  Availability of raw materials  Interest rates  Population  Number of miles of highway  Phone system
  • 26. 2 - 26© 2011 Pearson Education, Inc. publishing as Prentice Hall Match Product & Parent  Braun Household Appliances  Firestone Tires  Godiva Chocolate  Haagen-Dazs Ice Cream  Jaguar Autos  MGM Movies  Lamborghini Autos  Alpo Petfoods 1. Volkswagen 2. Bridgestone 3. Campbell Soup 4. Tata Motors Limited 5. Proctor and Gamble 6. Nestlé 7. Pillsbury 8. Sony
  • 27. 2 - 27© 2011 Pearson Education, Inc. publishing as Prentice Hall Match Product & Parent  Braun Household Appliances  Firestone Tires  Godiva Chocolate  Haagen-Dazs Ice Cream  Jaguar Autos  MGM Movies  Lamborghini Autos  Alpo Petfoods 1. Volkswagen 2. Bridgestone 3. Campbell Soup 4. Tata Motors Limited 5. Proctor and Gamble 6. Nestlé 7. Pillsbury 8. Sony
  • 28. 2 - 28© 2011 Pearson Education, Inc. publishing as Prentice Hall Match Product & Country  Braun Household Appliances  Firestone Tires  Godiva Chocolate  Haagen-Dazs Ice Cream  Jaguar Autos  MGM Movies  Lamborghini Autos  Alpo Pet Foods 1. Great Britain 2. Germany 3. Japan 4. United States 5. Switzerland 6. India
  • 29. 2 - 29© 2011 Pearson Education, Inc. publishing as Prentice Hall Match Product & Country  Braun Household Appliances  Firestone Tires  Godiva Chocolate  Haagen-Dazs Ice Cream  Jaguar Autos  MGM Movies  Lamborghini Autos  Alpo Pet Foods 1. Great Britain 2. Germany 3. Japan 4. United States 5. Switzerland 6. India
  • 30. 2 - 30© 2011 Pearson Education, Inc. publishing as Prentice Hall Developing Missions and Strategies Mission statements tell an organization where it is going The Strategy tells the organization how to get there
  • 31. 2 - 31© 2011 Pearson Education, Inc. publishing as Prentice Hall Mission  Mission - where are you going?  Organization‘s purpose for being  Answers ‗What do we provide society?‘  Provides boundaries and focus
  • 32. 2 - 32© 2011 Pearson Education, Inc. publishing as Prentice Hall Merck 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. 2 - 33© 2011 Pearson Education, Inc. publishing as Prentice Hall Hard Rock Cafe 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. 2 - 34© 2011 Pearson Education, Inc. publishing as Prentice Hall 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. 2 - 35© 2011 Pearson Education, Inc. publishing as Prentice Hall Benefit to Society Mission Factors Affecting Mission Philosophy and Values Profitability and Growth Environment Customers Public Image
  • 36. 2 - 36© 2011 Pearson Education, Inc. publishing as Prentice Hall Sample Missions Sample Company Mission To manufacture and service an innovative, growing, and profitable worldwide microwave communications business that exceeds our customers‘ expectations. Sample Operations Management Mission To produce products consistent with the company‘s mission as the worldwide low-cost manufacturer. Figure 2.3
  • 37. 2 - 37© 2011 Pearson Education, Inc. publishing as Prentice Hall Sample Missions Figure 2.3 Sample OM Department Missions Product design To design and produce products and services with outstanding quality and inherent customer value. Quality management To attain the exceptional value that is consistent with our company mission and marketing objectives by close attention to design, procurement, production, and field service operations Process design To determine, design, and produce the production process and equipment that will be compatible with low-cost product, high quality, and good quality of work life at economical cost.
  • 38. 2 - 38© 2011 Pearson Education, Inc. publishing as Prentice Hall Sample Missions Figure 2.3 Sample OM Department Missions Location To locate, design, and build efficient and economical facilities that will yield high value to the company, its employees, and the community. Layout design To achieve, through skill, imagination, and resourcefulness in layout and work methods, production effectiveness and efficiency while supporting a high quality of work life. Human resources To provide a good quality of work life, with well-designed, safe, rewarding jobs, stable employment, and equitable pay, in exchange for outstanding individual contribution from employees at all levels.
  • 39. 2 - 39© 2011 Pearson Education, Inc. publishing as Prentice Hall Sample Missions Figure 2.3 Sample OM Department Missions Supply-chain management To collaborate with suppliers to develop innovative products from stable, effective, and efficient sources of supply. Inventory To achieve low investment in inventory consistent with high customer service levels and high facility utilization. Scheduling To achieve high levels of throughput and timely customer delivery through effective scheduling. Maintenance To achieve high utilization of facilities and equipment by effective preventive maintenance and prompt repair of facilities and equipment.
  • 40. 2 - 40© 2011 Pearson Education, Inc. publishing as Prentice Hall Strategic Process Marketing Operations Finance/ Accounting Functional Area Missions Organization‘s Mission
  • 41. 2 - 41© 2011 Pearson Education, Inc. publishing as Prentice Hall Strategy  Action plan to achieve mission  Functional areas have strategies  Strategies exploit opportunities and strengths, neutralize threats, and avoid weaknesses
  • 42. 2 - 42© 2011 Pearson Education, Inc. publishing as Prentice Hall Strategies for Competitive Advantage  Differentiation – better, or at least different  Cost leadership – cheaper  Response – rapid response
  • 43. 2 - 43© 2011 Pearson Education, Inc. publishing as Prentice Hall Competing on Differentiation Uniqueness can go beyond both the physical characteristics and service attributes to encompass everything that impacts customer‘s perception of value  Safeskin gloves – leading edge products  Walt Disney Magic Kingdom – experience differentiation  Hard Rock Cafe – dining experience
  • 44. 2 - 44© 2011 Pearson Education, Inc. publishing as Prentice Hall 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  Wal-Mart – small overhead, shrinkage, distribution costs  Franz Colruyt – no bags, low light, no music, doors on freezers
  • 45. 2 - 45© 2011 Pearson Education, Inc. publishing as Prentice Hall Competing on Response  Flexibility is matching market changes in design innovation and volumes  A way of life at Hewlett-Packard  Reliability is meeting schedules  German machine industry  Timeliness is quickness in design, production, and delivery  Johnson Electric, Pizza Hut, Motorola
  • 46. 2 - 46© 2011 Pearson Education, Inc. publishing as Prentice Hall OM’s Contribution to Strategy Product Quality Process Location Layout Human resource Supply chain Inventory Scheduling Maintenance DIFFERENTIATION Innovative design … Safeskin‘s innovative gloves Broad product line … Fidelity Security‘s mutual funds After-sales service … Caterpillar‘s heavy equipment service Experience … Hard Rock Café‘s dining experience COST LEADERSHIP Low overhead … Franz-Colruyt‘s warehouse-type stores Effective capacity use … Southwest Airline‘s aircraft utilization Inventory management … Wal Mart‘s sophisticated distribution system RESPONSE Flexibility … Hewlett-Packard‘s response to volatile world market Reliability … FedEx‘s ―absolutely, positively, on time‖ Quickness … Pizza Hut‘s 5-minute guarantee at lunchtime Figure 2.4 10 Operations Competitive Decisions Approach Example Advantage Response (faster) Cost leadership (cheaper) Differentiation (better)
  • 47. 2 - 47© 2011 Pearson Education, Inc. publishing as Prentice Hall 10 Strategic OM Decisions 1. Goods and service design 2. Quality 3. Process and capacity design 4. Location selection 5. Layout design 6. Human resources and job design 7. Supply-chain management 8. Inventory 9. Scheduling 10. Maintenance
  • 48. 2 - 48© 2011 Pearson Education, Inc. publishing as Prentice Hall Goods and Services and the 10 OM Decisions Operations Decisions Goods Services Goods and service design Product is usually tangible Product is not tangible Quality Many objective standards Many subjective standards Process and capacity design Customers not involved Customer may be directly involved Capacity must match demand Table 2.1
  • 49. 2 - 49© 2011 Pearson Education, Inc. publishing as Prentice Hall Goods and Services and the 10 OM Decisions Operations Decisions Goods Services Location selection Near raw materials and labor Near customers Layout design Production efficiency Enhances product and production Human resources and job design Technical skills, consistent labor standards, output based wages Interact with customers, labor standards vary Table 2.1
  • 50. 2 - 50© 2011 Pearson Education, Inc. publishing as Prentice Hall Goods and Services and the 10 OM Decisions Operations Decisions Goods Services Supply chain Relationship critical to final product Important, but may not be critical Inventory Raw materials, work-in-process, and finished goods may be held Cannot be stored Scheduling Level schedules possible Meet immediate customer demand Table 2.1
  • 51. 2 - 51© 2011 Pearson Education, Inc. publishing as Prentice Hall Goods and Services and the 10 OM Decisions Operations Decisions Goods Services Maintenance Often preventive and takes place at production site Often ―repair‖ and takes place at customer‘s site Table 2.1
  • 52. 2 - 52© 2011 Pearson Education, Inc. publishing as Prentice Hall Managing Global Service Operations  Capacity planning  Location planning  Facilities design and layout  Scheduling Requires a different perspective on:
  • 53. 2 - 53© 2011 Pearson Education, Inc. publishing as Prentice Hall Process Design Low Moderate High Volume High Moderate Low VarietyofProducts Process-focused JOB SHOPS (Print shop, emergency room, machine shop, fine-dining restaurant) Repetitive (modular) focus ASSEMBLY LINE (Cars, appliances, TVs, fast-food restaurants) Product focused CONTINUOUS (Steel, beer, paper, bread, institutional kitchen) Mass Customization Customization at high Volume (Dell Computer‘s PC, cafeteria)
  • 54. 2 - 54© 2011 Pearson Education, Inc. publishing as Prentice Hall Operations Strategies of Two Drug Companies Brand Name Drugs, Inc. Generic Drug Corp. Competitive Advantage Product Differentiation Low Cost Product Selection and Design Heavy R&D investment; extensive labs; focus on development in a broad range of drug categories Low R&D investment; focus on development of generic drugs Quality Major priority, exceed regulatory requirements Meets regulatory requirements on a country by country basis Table 2.2
  • 55. 2 - 55© 2011 Pearson Education, Inc. publishing as Prentice Hall Operations Strategies of Two Drug Companies Brand Name Drugs, Inc. Generic Drug Corp. Competitive Advantage Product Differentiation Low Cost Process Product and modular process; long production runs in specialized facilities; build capacity ahead of demand Process focused; general processes; ―job shop‖ approach, short- run production; focus on high utilization Location Still located in the city where it was founded Recently moved to low- tax, low-labor-cost environment Table 2.2
  • 56. 2 - 56© 2011 Pearson Education, Inc. publishing as Prentice Hall Operations Strategies of Two Drug Companies Brand Name Drugs, Inc. Generic Drug Corp. Competitive Advantage Product Differentiation Low Cost Scheduling Centralized production planning Many short-run products complicate scheduling Layout Layout supports automated product- focused production Layout supports process-focused ―job shop‖ practices Table 2.2
  • 57. 2 - 57© 2011 Pearson Education, Inc. publishing as Prentice Hall Operations Strategies of Two Drug Companies Brand Name Drugs, Inc. Generic Drug Corp. Competitive Advantage Product Differentiation Low Cost Human Resources Hire the best; nationwide searches Very experienced top executives; other personnel paid below industry average Supply Chain Long-term supplier relationships Tends to purchase competitively to find bargains Table 2.2
  • 58. 2 - 58© 2011 Pearson Education, Inc. publishing as Prentice Hall Operations Strategies of Two Drug Companies Brand Name Drugs, Inc. Generic Drug Corp. Competitive Advantage Product Differentiation Low Cost Inventory High finished goods inventory to ensure all demands are met Process focus drives up work-in-process inventory; finished goods inventory tends to be low Maintenance Highly trained staff; extensive parts inventory Highly trained staff to meet changing demand Table 2.2
  • 59. 2 - 59© 2011 Pearson Education, Inc. publishing as Prentice Hall Issues In Operations Strategy  Resources view  Value Chain analysis  Porter‘s Five Forces model  Operating in a system with many external factors  Constant change
  • 60. 2 - 60© 2011 Pearson Education, Inc. publishing as Prentice Hall Product Life Cycle Best period to increase market share R&D engineering is critical Practical to change price or quality image Strengthen niche Poor time to change image, price, or quality Competitive costs become critical Defend market position Cost control critical Introduction Growth Maturity Decline CompanyStrategy/Issues Figure 2.5 Internet search engines Sales Drive-through restaurants CD-ROMs Analog TVs iPods Boeing 787 LCD & plasma TVs Twitter Avatars Xbox 360
  • 61. 2 - 61© 2011 Pearson Education, Inc. publishing as Prentice Hall Product Life Cycle Product design and development critical Frequent product and process design changes Short production runs High production costs Limited models Attention to quality Introduction Growth Maturity Decline OMStrategy/Issues Forecasting critical Product and process reliability Competitive product improvements and options Increase capacity Shift toward product focus Enhance distribution Standardization Fewer product changes, more minor changes Optimum capacity Increasing stability of process Long production runs Product improvement and cost cutting Little product differentiation Cost minimization Overcapacity in the industry Prune line to eliminate items not returning good margin Reduce capacity Figure 2.5
  • 62. 2 - 62© 2011 Pearson Education, Inc. publishing as Prentice Hall Strategy Analysis SWOT Analysis Internal Strengths Internal Weaknesses External Opportunities External Threats Mission
  • 63. 2 - 63© 2011 Pearson Education, Inc. publishing as Prentice Hall Strategy Development Process Determine the Corporate Mission State the reason for the firm‘s existence and identify the value it wishes to create. Form a Strategy Build a competitive advantage, such as low price, design, or volume flexibility, quality, quick delivery, dependability, after- sale service, broad product lines. Analyze the Environment Identify the strengths, weaknesses, opportunities, and threats. Understand the environment, customers, industry, and competitors. Figure 2.6
  • 64. 2 - 64© 2011 Pearson Education, Inc. publishing as Prentice Hall Strategy Development and Implementation  Identify key success factors  Build and staff the organization  Integrate OM with other activities The operations manager’s job is to implement an OM strategy, provide competitive advantage, and increase productivity
  • 65. 2 - 65© 2011 Pearson Education, Inc. publishing as Prentice Hall Key Success Factors Production/Operations Figure 2.7 Marketing Service Distribution Promotion Channels of distribution Product positioning (image, functions) Finance/Accounting Leverage Cost of capital Working capital Receivables Payables Financial control Lines of credit Decisions Sample Options Chapter Product Quality Process Location Layout Human resource Supply chain Inventory Schedule Maintenance Customized, or standardized Define customer expectations and how to achieve them Facility size, technology, capacity Near supplier or near customer Work cells or assembly line Specialized or enriched jobs Single or multiple suppliers When to reorder, how much to keep on hand Stable or fluctuating production rate Repair as required or preventive maintenance 5 6, S6 7, S7 8 9 10 11, S11 12, 14, 16 13, 15 17 Support a Core Competence and Implement Strategy by Identifying and Executing the Key Success Factors in the Functional Areas
  • 66. 2 - 66© 2011 Pearson Education, Inc. publishing as Prentice Hall Courteous, but Limited Passenger Service Standardized Fleet of Boeing 737 Aircraft Competitive Advantage: Low Cost Lean, Productive Employees Short Haul, Point-to- Point Routes, Often to Secondary Airports High Aircraft Utilization Frequent, Reliable Schedules Figure 2.8 Activity Mapping at Southwest Airlines
  • 67. 2 - 67© 2011 Pearson Education, Inc. publishing as Prentice Hall Activity Mapping at Southwest Airlines Courteous, but Limited Passenger Service Standardized Fleet of Boeing 737 Aircraft Competitive Advantage: Low Cost Lean, Productive Employees Short Haul, Point-to- Point Routes, Often to Secondary Airports High Aircraft Utilization Frequent, Reliable Schedules Figure 2.8 Automated ticketing machines No seat assignments No baggage transfers No meals (peanuts)
  • 68. 2 - 68© 2011 Pearson Education, Inc. publishing as Prentice Hall Activity Mapping at Southwest Airlines Courteous, but Limited Passenger Service Standardized Fleet of Boeing 737 Aircraft Competitive Advantage: Low Cost Lean, Productive Employees Short Haul, Point-to- Point Routes, Often to Secondary Airports High Aircraft Utilization Frequent, Reliable Schedules Figure 2.8 No meals (peanuts) Lower gate costs at secondary airports High number of flights reduces employee idle time between flights
  • 69. 2 - 69© 2011 Pearson Education, Inc. publishing as Prentice Hall Activity Mapping at Southwest Airlines Courteous, but Limited Passenger Service Standardized Fleet of Boeing 737 Aircraft Competitive Advantage: Low Cost Lean, Productive Employees Short Haul, Point-to- Point Routes, Often to Secondary Airports High Aircraft Utilization Frequent, Reliable Schedules Figure 2.8 High number of flights reduces employee idle time between flights Saturate a city with flights, lowering administrative costs (advertising, HR, etc.) per passenger for that city Pilot training required on only one type of aircraft Reduced maintenance inventory required because of only one type of aircraft
  • 70. 2 - 70© 2011 Pearson Education, Inc. publishing as Prentice Hall Activity Mapping at Southwest Airlines Courteous, but Limited Passenger Service Standardized Fleet of Boeing 737 Aircraft Competitive Advantage: Low Cost Lean, Productive Employees Short Haul, Point-to- Point Routes, Often to Secondary Airports High Aircraft Utilization Frequent, Reliable Schedules Figure 2.8 Pilot training required on only one type of aircraft Reduced maintenance inventory required because of only one type of aircraft Excellent supplier relations with Boeing has aided financing
  • 71. 2 - 71© 2011 Pearson Education, Inc. publishing as Prentice Hall Activity Mapping at Southwest Airlines Courteous, but Limited Passenger Service Standardized Fleet of Boeing 737 Aircraft Competitive Advantage: Low Cost Lean, Productive Employees Short Haul, Point-to- Point Routes, Often to Secondary Airports High Aircraft Utilization Frequent, Reliable Schedules Figure 2.8 Reduced maintenance inventory required because of only one type of aircraft Flexible employees and standard planes aid scheduling Maintenance personnel trained only one type of aircraft 20-minute gate turnarounds Flexible union contracts
  • 72. 2 - 72© 2011 Pearson Education, Inc. publishing as Prentice Hall Activity Mapping at Southwest Airlines Courteous, but Limited Passenger Service Standardized Fleet of Boeing 737 Aircraft Competitive Advantage: Low Cost Lean, Productive Employees Short Haul, Point-to- Point Routes, Often to Secondary Airports High Aircraft Utilization Frequent, Reliable Schedules Figure 2.8 Automated ticketing machines Empowered employees High employee compensation Hire for attitude, then train High level of stock ownership High number of flights reduces employee idle time between flights
  • 73. 2 - 73© 2011 Pearson Education, Inc. publishing as Prentice Hall Four International Operations Strategies CostReductionConsiderations High Low HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation) Figure 2.9  Import/export or license existing product Examples U.S. Steel Harley Davidson International Strategy
  • 74. 2 - 74© 2011 Pearson Education, Inc. publishing as Prentice Hall Four International Operations Strategies CostReductionConsiderations High Low HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation) International Strategy  Import/export or license existing product Examples U.S. Steel Harley Davidson Figure 2.9
  • 75. 2 - 75© 2011 Pearson Education, Inc. publishing as Prentice Hall Four International Operations Strategies CostReductionConsiderations High Low HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation) International Strategy  Import/export or license existing product Examples U.S. Steel Harley Davidson Figure 2.9  Standardized product  Economies of scale  Cross-cultural learning Examples Texas Instruments Caterpillar Otis Elevator Global Strategy
  • 76. 2 - 76© 2011 Pearson Education, Inc. publishing as Prentice Hall Four International Operations Strategies CostReductionConsiderations High Low HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation)  Standardized product  Economies of scale  Cross-cultural learning Examples: Texas Instruments Caterpillar Otis Elevator Global Strategy International Strategy  Import/export or license existing product Examples U.S. Steel Harley Davidson Figure 2.9
  • 77. 2 - 77© 2011 Pearson Education, Inc. publishing as Prentice Hall Four International Operations Strategies CostReductionConsiderations High Low HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation)  Standardized product  Economies of scale  Cross-cultural learning Examples: Texas Instruments Caterpillar Otis Elevator Global Strategy International Strategy  Import/export or license existing product Examples U.S. Steel Harley Davidson Figure 2.9  Use existing domestic model globally  Franchise, joint ventures, subsidiaries Examples Heinz McDonald‘s The Body Shop Hard Rock Cafe Multidomestic Strategy
  • 78. 2 - 78© 2011 Pearson Education, Inc. publishing as Prentice Hall Four International Operations Strategies CostReductionConsiderations High Low HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation)  Standardized product  Economies of scale  Cross-cultural learning Examples: Texas Instruments Caterpillar Otis Elevator Global Strategy International Strategy  Import/export or license existing product Examples U.S. Steel Harley Davidson Multidomestic Strategy  Use existing domestic model globally  Franchise, joint ventures, subsidiaries Examples Heinz The Body Shop McDonald‘s Hard Rock Cafe Figure 2.9
  • 79. 2 - 79© 2011 Pearson Education, Inc. publishing as Prentice Hall Four International Operations Strategies CostReductionConsiderations High Low HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation)  Standardized product  Economies of scale  Cross-cultural learning Examples: Texas Instruments Caterpillar Otis Elevator Global Strategy International Strategy  Import/export or license existing product Examples U.S. Steel Harley Davidson Multidomestic Strategy  Use existing domestic model globally  Franchise, joint ventures, subsidiaries Examples Heinz The Body Shop McDonald‘s Hard Rock Cafe Figure 2.9  Move material, people, ideas across national boundaries  Economies of scale  Cross-cultural learning Examples Coca-Cola Nestlé Transnational Strategy
  • 80. 2 - 80© 2011 Pearson Education, Inc. publishing as Prentice Hall Four International Operations Strategies CostReductionConsiderations High Low HighLow Local Responsiveness Considerations (Quick Response and/or Differentiation)  Standardized product  Economies of scale  Cross-cultural learning Examples: Texas Instruments Caterpillar Otis Elevator Global Strategy Transnational Strategy  Move material, people, ideas across national boundaries  Economies of scale  Cross-cultural learning Examples Coca-Cola Nestlé International Strategy  Import/export or license existing product Examples U.S. Steel Harley Davidson Multidomestic Strategy  Use existing domestic model globally  Franchise, joint ventures, subsidiaries Examples Heinz The Body Shop McDonald‘s Hard Rock Cafe Figure 2.9
  • 81. 2 - 81© 2011 Pearson Education, Inc. publishing as Prentice Hall© 2011 Pearson Education Ranking Corruption Rank Country 2011 CPI Score (out of 10) 1 New Zealand 9.5 2 Demark, Finland 9.4 5 Singapore 9.2 6 Norway 9.0 8 Australia, Switzerland 8.8 10 Canada 8.7 12 Hong Kong 8.4 14 Germany, Japan 8.0 16 UK 7.8 24 USA 7.1 32 Taiwan 6.1 43 South Korea 5.4 60 Malaysia 4.3 75 China 3.6 112 Vietnam 2.9 143 Russia 2.4 Least Corrupt Most Corrupt
  • 82. 2 - 82© 2011 Pearson Education, Inc. publishing as Prentice Hall All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.