CHAPTER 2: Operation Strategy in a Global Environment

A. Circle K: Mission
Satisfy our customers’ immediate needs and wants by providing them with a wide variety of
goods and services at multiple locations.
1.) The public image factor:
public image is the ideas and opinions that the public has about a person or an
organization that may not be what they are really like.
For more than 50 years, Circle K has been one of North America's most popular and
successful operators of convenience stores. The mission is to be the best and most
convenient place to shop, and work. Circle Ks are known around the world for offering
busy consumers a wide variety of quality products and services in a fast, friendly, and
clean environment.

2.) Profitability and Growth factor:

During the next few decades, Circle K grew its retail network through a series of
acquisitions, which were incorporated into the Circle K brand. By 1975, there were 1,000
Circle K stores across the US. In 1979, Circle K entered the international market when a
licensing agreement established the first Circle K stores in Japan.
The company’s growth continued and by 1984 sales had reached $1 billion.  In 1999, a
franchise program was introduced to support operators looking to build a business with a
leading convenience store brand. Now there are more than 6,000 Circle K sites operating
in the US and seven other countries.

3.) Customers factor:

Circle K try to provide customer’s needs and wants for 24 hours services at multiple
location. Loyalty is based on familiarity and trust. Customers view Circle K, with its
bright red logo, as a brand on which they can rely for their convenience needs. Circle K
stores are known worldwide for their quality products and great customer service.
 4.) Environment factor:
While building strong relationships with every stakeholder by providing proactive
disclosure, and ensuring compliance in all activities, Circle K Sunkus will implement
measures to further improve corporate governance, such as by putting in place and
cementing a highly transparent internal control system that encompasses risk and
compliance management systems.
The Internal Control & Environmental Management Office of circle K, which is headed
by a director, was established to coordinate internal control and compliance activities
across the Company and implement concrete measures to reinforce the management
structure.

5.) Philosophy and values:

Circle K’s knowledge of the consumer and their ability to bring their image to the top. At
Circle K, they are committed to building long-term value for our International. Guided by
the philosophy to achieve steady they are building sustainable growth.

B. Critical Success Factors “Microsoft and Compaq”

 focus on one type of business
 globalize
 actively involved in defining and improving the product development process
 recruit and retain the top people in their fields
 understand that speed to market reinforces product quality

1.) Facts and supporting evidence

Microsoft
Microsoft Corporation is a public multinational corporation headquartered in Redmond,
Washington, USA that develops, manufactures, licenses, and supports a wide range of
products and services predominantly related to computing through its various product
divisions.
 The Standards of Business Conduct are an extension of Microsoft’s values and the
foundation for our business tenets. They reflect their collective commitment to ethical
business practices and regulatory compliance, and they provide information about Microsoft
Business Conduct and Compliance Program. At a high level, they summarize, and are
supported by, the principles and policies that govern their global businesses in several
important areas: legal and regulatory compliance; trust and respect of consumers, partners,
and shareholders; asset protection and stewardship; creation of a cooperative and productive
work environment; and commitment to the global community.

Compaq
Compaq Delivers The Power of Transformation - Company Business and Marketing.
Enterprise applications such as ERP, which only recently helped companies optimize their
internal processes, have emerged as the lynchpin of the new integrated value chain.
Communicating selected internal data in real time across the Internet allows enterprises to
participate in collaborative planning and execution, further strengthening relationships with
key business partners and customers. The supply chain has expanded from a limited link
between widget manufacturers and their suppliers to an expansive connection among players
in all industries in the end-to-end value chain.

2.) What happen to Silicon Valley that do not survive

Transmeta Corp. (TMTA) once embodied the Silicon Valley dream. Starting in 1995, the
company raised more than $300 million in a nervy bid to reinvent the market for chips
powering portable computers. Yet Transmeta struggled in recent years, and the grand hopes
officially ended on Nov. 17, when the Santa Clara (Calif.) company agreed to be acquired by
a little-known rival. In the empty lobby of the company's headquarters shortly before the sale
was announced, a note on the reception desk told visitors to call an extension and "ask for
Mary Anne." Incoming and outgoing mail bins on the wall were both empty.
Breakthrough innovation is going on at a handful of large companies and a few small
ones. But there are also legitimate concerns about the Valley's long-term prospects. IBM and
Intel will keep producing important chip advances. Microsoft and Google will race each
 other to come out with cutting-edge Net technologies. And Apple seems likely to produce
more hit products. But unless entrepreneurs and venture capitalists refocus on more
ambitious tech projects—even though they take more time and money to incubate—the
Valley's and the tech industry's contribution to the national economy is likely to wane.

C. In introduction phase of product life, why?

a. Company strategies are

1.) best period to increase market share
History has shown that the price of shares and other assets is an important part of the
dynamics of economic activity, and can influence or be an indicator of social mood. An
economy where the stock market is on the rise is considered to be an up-and-coming
economy. In fact, the stock market is often considered the primary indicator of a country's
economic strength and development.
2.) R&D engineering are critical
R&D has always been considered a domain of firms in technologically advanced and
economically developed countries.

b. Production and operation management strategies are:

1.) Product design and development are critical
In business and engineering, new product development (NPD) is the term used to describe
the complete process of bringing a new product or service to market. There are two parallel
paths involved in the NPD process: one involves the idea generation, product design and
detail engineering; the other involves market research and marketing analysis. Companies
typically see new product development as the first stage in generating and commercializing
new products within the overall strategic process of product life cycle management used to
maintain or grow their market share.
2.) Frequent product and process design changes
Process simulation for product and process design is currently being practiced in industry.
The purposes are (1) to optimize the product design by analyzing formability at the product
 design stage, and (2) to reduce the tryout time and cost in process design by predicting the
deformation process in advance during the die design stage.

3.) Over-capacity
Over capacity could cause high cost production.

4.) Short production runs

The law of diminishing marginal returns to a variable factor applies to the short run. [8] It
posits an effect on output of increasing the use of an input while other inputs are kept fixed.
The law is related to a positive slope of the short-run marginal-cost curve

5.) High skilled-labor content

High skilled labor is very important because that is the main worker whom are going to do
the production.

6.) High production costs

High production costs need to be concerned very well. If the production is not effective then
it will costs highly.

7.) Limited number of models

Limited number of models enables the company to be more focus.

8.) Utmost attentions to quality

Very concern of the product quality

9.) Quick elimination of market-revealed design defects.

The defects products have to be eliminated

D. During the Growth Phase of Product Life

a. Company Strategies are 1) practical to change prices or quality image, 2) marketing is critical,
and 3) strengthen is nice; because in the growth stage, the marketing must assure that the target
market gets to know and like your new product. The marketing goal is sustained marketing
growth and increased profits. At this stage, demand increases as more people try the product,
realize a desire for it, and buy it. Others who see the market will want to jump in. So competition
and demand increases in the growth stage.
The marketing goal at this stage is to introduce the product to as many target market members as
possible and to continue branding the product to make it more competitive

b. Production and Operation Management Strategies are 1) forecasting is critical, 2) product and
process reliability, 3) competitive product improvements and options, 4) shift toward product
oriented, and 5) enhance distribution; because the growth stage is a period of rapid revenue
growth.
During the growth stage, the goal is to gain consumer preference and increase sales. Sales
increase as more customers become aware of the product and its benefits and additional market
segments are targeted. Once the product has been proven a success and customers begin asking
for it, sales will increase further as more retailers become interested in carrying it. The marketing
team may expand the distribution at this point.
When competitors enter the market, often during the later part of the growth stage, there may be
price competition and/or increased promotional costs in order to convince consumers that the
firm's product is better than that of the competition.

E. During the Maturity Phase of Product Life

a. Company Strategies are 1) poor time to increase market share, 2) competitive costs become
critical, and 3) poor time to change price, image, and quality because during this stage, you can
expect sales to continue increasing, but at a slower pace than in the growth stage. Part of the
decrease in sales results from more competitors capturing a piece of your product’s market.
Increased competition often demands that you decrease your product’s price in order to retain its
market share. This requires modifying your product to make it more competitive, lowering your
product’s price, providing additional incentives to your resellers, and emphasizing your
product’s distinguishing characteristics through branding.

b. Production and Operation Management Strategies are 1) standardization, 2) less rapid product
changes and more minor annual model changes, 3) optimum capacity, 4) increasing stability of
manufacturing process, 5) lower labor skills, 6) long production run, 7) attention to product
improvement and cost-cutting, and 8) re-examination of necessity of design compromises;
because the maturity stage is the most profitable.
During the maturity stage, the primary goal is to maintain market share and extend the product
life cycle. While sales continue to increase into this stage, they do so at a slower pace. Because
brand awareness is strong, advertising expenditures will be reduced. Competition may result in
decreased market share and/or prices. The competing products may be very similar at this point,
increasing the difficulty of differentiating the product.
The firm places effort into encouraging competitors' customers to switch, increasing usage per
customer, and converting non-users into customers. Sales promotions may be offered to
encourage retailers to give the product more shelf space over competing products.

F. During the Decline Phase of Product Life

a. Company Strategies is 1) cost control critical to market share because sales always decline in
this stage. If the product has developed brand loyalty, the profitability may be maintained longer.
Unit costs may increase with the declining production volumes and eventually no more profit can
be made. Understanding the decline stage will help to keep the products producing sales longer.
The trick is to lower the marketing efforts while the competitors discontinue theirs.

b. Production and Operation Management Strategies are 1) little product differentiation, 2) cost
minimization, 3) overcapacity in the industry, 4) prune line to eliminate items not returning, 5)
good margin, and 6) reduce capacity; because in the decline stage, demand and competition for
the product decreases. So many businesses discontinue their competitive products or, at least,
their marketing for it. If a company can resist this temptation, it can seek out the last few sales
for its product. Sometimes limited sales will continue for years. The result is that unless the
product is perishable or consumable, few customers still want or need the product. Market
segmentation can find those few customers and to out-market the competitors to get those
customers’ purchases. Market segmentation can also provide extended life to the product by
revealing the last remnants of customers needing the product and by discovering new uses for the
product.

G. Could you please explain why characteristics of High ROI Firms are:

o High product quality because it is the key to profitability and it is essential to compete in
today's business environment. Quality is increasingly becoming customer-driven with
emphasis put on obtaining a product design that builds quality into the product. It leads to
differentiation (and higher value). Not only it enables a company to differentiate its product
from that of rivals, but if the product is reliable, it also lower costs.
o High capacity utilization because it reflects that resources are in high demand, and exerts
inflationary pressures. High Capacity Utilization may also lead to new capital investments,
such as new plants and equipment that promote growth in the future. It measures the extent
to which companies make use of their productive capacity (factories and machinery) and it
acts as an indicator of overall demand in the economy.
o High operating efficiency because it shows that company produces goods at lower cost.
High operating efficiency rating is the ratio of expected to actual productivity. Thus, it
indicates that the company at the same time high machine efficiency and minimum
maintenance. Efficient use of assets may generate more earnings. Operating efficiency can
be measured through operating leverage which involving fixed cost component in the
company's total cost, which means the operating efficiency determines the earning
capabilities of the company.
o Low investment intensity because it indicates that the amount of capital required to
produce a dollar of sales is low.
o Low direct cost per unit because it indicates that relative to the competition the company
has lower direct cost per unit.
H. Could you please explain why: Global Operation Strategy Options are:

 International Strategy because this strategy uses exports and licenses to penetrate the
global arena. Although it is the least advantageous but it is often the easiest, since exports
can require little change in existing operations and licensing agreements often leave much of
the risk to the licensee. With this strategy a firm would have little local responsiveness and
little cost advantage.
 Multidomestic Strategy because it decentralized authority with substantial autonomy at
each business. It maximizes a competitive response for the local market because it can
accommodate local tastes since global integration of the production process is not critical. It
provides local responsiveness needed. With this strategy a firm would have significant local
responsiveness but little cost advantage.
 Global Strategy because it enables the headquarters to coordinate the organization to seek
out standardization and learning between plants, which thus generating economies of scale.
It also enables the company to reduce costs when local responsiveness is low. With this
strategy a firm would have little local responsiveness but significant cost advantage.
 Transnational Strategy because it may exploits the economies of scale and learning as well
as pressure for responsiveness. It recognizes that core competence does not reside in just the
“home” country but can exist anywhere in the organization. With this strategy a firm would
have significant local responsiveness and significant cost advantage.

I. Could you please give appropriate explanation of:

1. Mission and strategy

Mission is the organization’s purpose – what it will contribute to the society. It
provides boundaries and focus for organizations and the concept around which the firm
can rally. It states the rationale for the organization’s existence. Strategy is an
organization’s plan to achieve the mission. It exploits opportunities and strengths,
neutralize threats, and avoid weaknesses.
2. Three strategic approaches to competitive advantage

The three strategic approaches to competitive advantage are differentiation, cost

leadership, and response.
Differentiation is concerned with providing uniqueness. It should be thought of as going
beyond the physical characteristics and service attributes to encompass everything about
the product or service that influences the value that the customers derive from it.
Cost leadership entails achieving maximum value as defined by the customers.
However, it does not imply low value or low quality.
Response means including the entire range of values related to timely product
development and delivery, as well as reliable scheduling and flexible performance. It is
often thought of as flexible, reliable, and quick response.

3. Ten decisions of operations management

The ten decisions of OM that supports mission and implement strategies are:

1. Goods and service design: It deals with much of the transformation process. Costs,
quality, and human resource decisions are often determined by design processes.

2. Quality: It deals with the customer’s quality expectations should be determined and
policies and procedures established to identify and achieve that quality.

3. Process and capacity design: It deals with the process options that are available for
product and services. It commits management to specific technology, quality, human
resource use, and maintenance.

4. Location selection: It deals with facility location decisions that may determine the
firm’s ultimate success. Errors made at this point may overwhelm other efficiencies.
5. Layout design: It deals with material flows, capacity needs, personnel levels,
technology decisions, and inventory requirements.

6. Human resources and job design: It deals with people as an integral and expensive
part of the total system design.

7. Supply-chain management: It deals with what is to be made and what is to be

purchased. It considers quality, delivery, and innovation at a satisfactory price.

8. Inventory: It deals with considering customer satisfaction, suppliers, production

schedules, and human resource planning to optimize production.

9. Scheduling: It deals with developing feasible and efficient schedules of production;

and determining and controlling the demands on human resources and facilities.

10. Maintenance: It deals with deciding desired levels of reliability and stability, and
systems that must be established to maintain it.

4. Four global operations strategy options

The four global strategy options are international strategy, multi domestic strategy,
global strategy, and transnational strategy.
International strategy is the strategy that uses exports and licenses to penetrate the
global arena.
Multi domestic strategy is the strategy that decentralized authority with substantial
autonomy at each business.
Global strategy is the strategy that coordinates the organization to seek out
standardization and learning between plants. Transnational strategy is the strategy that
transgresses material, people, and ideas through national boundaries.
4. Cases
Chapter 6. Managing Quality

Dimension of Quality for Goods

Would you please explain about the following components:
- Operation
- Reliability and durability
- Conformance
- Serviceability
- Appearance
- Perceived quality

EC Environmental Standard (ISO 14000)

Would you please explain the roles of following Core Elements:
- Environmental management
The environmental management sets a standard of good systematic approach to
pollution prevention through the minimization of ecological impact of products and
activities.
- Auditing
The auditing from ISO 14000 helps to reduce the need for multiple audits.
- Performance evaluation
ISO 14000 sets the standard to evaluate performance of a company for all industries.
- Labeling
Meeting ISO 14000 would give a positive image and reduce exposure to liability of a
company
- Life cycle assessment
ISO 14000 sets the compliance with regulatory requirement and opportunities for
competitive advantage.

Concept of TQM
- Continuous improvement
Total Quality Management is all about a never-ending process of continuous
improvement that covers all aspects such as people, equipment, suppliers, materials,
and procedures. The basis of the philosophy is that every aspect of an operation can
be improved. The end goal of TQM is perfection. The continuity of improvements
depends very much in the hand of an operation manager.
- Employee empowerment
Employee empowerment means involving employees in every step of the production
process. Techniques for building employee empowerment include:
1. Building communication networks that include employees
2. Developing open, supportive supervisors
3. Moving responsibility from both managers and staffs to production employees
4. Building high-morale organization
5. Creating such formal organization structures as teams and quality circles
- Benchmarking
Benchmarking involves selecting a demonstrated standard of products, services,
costs, or practices that represent the very best performance for processes or activities
very similar to your own.
The steps for developing benchmarks are:
1. Determine what to benchmark
2. Form a benchmark team
3. Identify benchmarking partners
4. Collect and analyze benchmarking information
5. Take action to match or exceed the benchmark
- Just-in-time
The philosophy behind just-in-time (JIT) is one of continuing improvement and
enforced problem solving. JIT systems are designed to produce or deliver goods just
as they are needed. JIT is related to quality in three ways.
1. JIT cuts the cost of quality
2. JIT improves quality
3. Better quality means less inventory and a better, easier-to-employ JIT systems
- Knowledge of tools
Knowledge tools of TQM are used to empower employees and implement TQM as a
continuing effort, everyone on the organization must be trained in the techniques of
TQM. Several kinds of TQM tools will be described further below.

Benchmarking
- Determine what to benchmark
Determining what to benchmark is the first step in benchmarking. This involves
selecting a demonstrated standard of products, services, costs, or practices that
represent the very best performance or activities very similar to your own.

- Form a benchmark team

After deciding what to benchmark, a company needs to form a benchmark team. A
benchmark team should consist of people who are specialized in their field which is
related to the benchmark’s topic.

- Identify benchmarking partners

A company may look for any other company, with the same field, as a benchmark
partner.

- Collect and analyze benchmarking partners

The company, with the benchmark team, should gather and analyze the data from its
benchmarking partner. A company should benchmark with top companies. This
would bring a company a faster step to improve.

- Collect and analyze benchmarking information

Information and data of the benchmark are then used as a basis to make improvement.

- Take action to match or exceed the benchmark

Action based on the data and reevaluation would need to be done in the perfect time.
This would make it more effective.
Would you explain the following 7 tools of TQM
- Tools for generating ideas
1. Check sheets
Check sheet is any kind of form that is designed for recording data. In many
cases, the recording is done so the patterns are easily seen while the data are being
taken care. Check sheets help analysts find the facts or patterns that may aid
subsequent analysis.
For example tally diagrams.

2. Scatter diagrams
A scatter diagrams is a graph of the value of one variable with another. Scatter
diagrams show the relationship between two measurements. If the pattern is
random, the items are unrelated.
12.00

10.00

8.00

6.00

4.00

2.00

-
- 50,000,000,000 100,000,000,000 150,000,000,000

3. Cause-and-effect diagrams
Cause-and-effect diagram (also known as Ishikawa diagram or fish bone chart) is
a tool that identifies process elements (causes) that may affect an outcome.
 Cause and effect diagram (http://pdca.files.wordpress.com/2006/05/ishika.gif)

- Tools to organize the data

1. Pareto charts
Pareto chart is a type of chart that contains both bars and a line graph, where
individual values are represented in descending order by bars, and the cumulative
total is represented by the line (http://en.wikipedia.org/wiki/Pareto_chart). They
are based on the work of Vilfredo Pareto’s work, a nineteenth-century economist.
Joseph M Juran popularized Pareto’s work when he suggested that 80% of a
firm’s problems are caused by only 20% of the causes.

Pareto Chart Diagram

(http://upload.wikimedia.org/wikipedia/commons/thumb/8/8a/Pareto.PNG/384px-
Pareto.PNG)
 2. Flowcharts
Charts explaining processes or systems using annotated boxes and interconnected
lines.

Flow Chart Diagrams (http://t0.gstatic.com/images)

- Tools for identifying problems

1. Histogram
Histograms show the range of values of a measurement and the frequency with
which each value occurs. They show the most frequently occurring readings as
well as the variation in the measurements.

2. Statistical process control chart

A statistical process control chart is a chart with time on the horizontal axis for
plotting values of a statistic.

Statistical Process Control Chart (http://t1.gstatic.com/images)

References:

http://pdca.files.wordpress.com/2006/05/ishika.gif
http://upload.wikimedia.org/wikipedia/commons/thumb/8/8a/Pareto.PNG/384px-Pareto.PNG
http://t0.gstatic.com/images
http://t1.gstatic.com/images
http://www.answers.com/topic/the-circle-k-company
http://www.businessweek.com/magazine/content/09_02/b4115028730216_page_5.htm
http://www.circlek.com/CircleK/AboutUs/History.htm
http://www.circlek.com/CircleK/Application/CKInternationalFranchiseBrochure.pdf
http://www.circleksunkus.jp/english/ci/governance/
http://en.wikipedia.org/wiki/Microsoft
http://en.wikipedia.org/wiki/New_product_development
http://en.wikipedia.org/wiki/Pareto_chart
http://www.microsoft.com/about/legal/en/us/Compliance/Buscond/Default.aspx
http://www.unctad.org/sections/meetings/docs/zedtwitz_paper_en.pdf