CHAPTER 2 : Operation Strategy

Introduction to Operation Strategy

 Operation strategy refers to the set of decisions and actions that shape the long-term
direction and performance of an organization's operations.
 It involves aligning operational capabilities with organizational goals, market
demands, and competitive priorities to achieve strategic objectives.
 Operation strategy encompasses various aspects, including capacity planning, process
design, technology adoption, quality management, and supply chain integration.

Competition Approach

 The competition approach in operation strategy focuses on how organizations

compete in the marketplace and differentiate themselves from rivals.
 Key aspects of the competition approach include:
1. Cost Leadership: Competing based on offering products or services at lower
prices than competitors while maintaining acceptable quality levels.
2. Differentiation: Competing based on unique features, attributes, or value-
added services that distinguish products or services from competitors.
3. Focus/Niche Strategy: Targeting a specific market segment or niche with
specialized products or services tailored to meet the needs of that segment.

Strategic OM Decisions

 Strategic OM decisions involve choices that shape the overall direction and
performance of an organization's operations.
 Key strategic OM decisions include:
1. Capacity Planning: Determining the optimal level of capacity to meet current
and future demand while balancing costs and customer service levels.
2. Process Design: Designing efficient and effective processes that transform
inputs into outputs to achieve desired outcomes in terms of quality, cost, and
flexibility.
3. Technology Adoption: Selecting and implementing appropriate technologies
to automate processes, improve efficiency, and enhance competitiveness.
4. Quality Management: Establishing quality standards, processes, and systems
to ensure products or services meet customer requirements and exceed
expectations.
5. Supply Chain Integration: Collaborating with suppliers, distributors, and other
stakeholders to integrate supply chain activities and optimize performance
across the value chain.

Southwest Airlines Case Study

 Southwest Airlines is a prominent case study in operation strategy, known for its
unique approach to operations management in the airline industry.
 Key features of Southwest Airlines' operation strategy include:
1. Low-Cost Operations: Southwest Airlines focuses on minimizing costs
through efficient operations, simplified processes, and high aircraft utilization
rates.
 2. Point-to-Point Network: Southwest Airlines operates a point-to-point route
network, allowing for shorter flight times, reduced congestion, and faster
turnaround times.
3. High Customer Service: Despite its low-cost focus, Southwest Airlines
emphasizes high-quality customer service, with features like open seating, free
baggage, and friendly staff.
4. Efficient Operations: Southwest Airlines employs efficient boarding
procedures, quick turnaround times, and streamlined processes to minimize
delays and maximize aircraft utilization.
 Southwest Airlines' operation strategy has contributed to its success and
competitiveness in the airline industry, enabling it to achieve consistent profitability
and customer satisfaction.

Conclusion

 Operation strategy plays a crucial role in shaping the competitive position and
performance of organizations in today's dynamic business environment.
 By adopting appropriate competition approaches and making strategic OM decisions,
organizations can optimize their operations, enhance competitiveness, and achieve
long-term success.
 Case studies like Southwest Airlines highlight the importance of effective operation
strategy in driving operational excellence, customer satisfaction, and profitability.

Further Readings: Mission and Strategic

1. Stevenson, J. William's "Operations Management, 14th Edition, McGraw-Hill":

o Discusses the importance of aligning operations strategy with the
organization's mission and strategic objectives.
o Emphasizes the role of operations in supporting the overall business strategy
and achieving competitive advantage.
o Provides examples of how organizations develop mission statements and
strategic goals to guide their operations.
2. Heizer, J., Render, B. & Munson, C.'s "Operations Management: Sustainability
and Supply Chain Management, 13th Edition, Pearson":
o Highlights the strategic importance of operations management in achieving
organizational objectives.
o Discusses how operations strategy aligns with the organization's mission and
vision to drive performance and competitiveness.
o Provides case studies illustrating how companies integrate operations strategy
with their overall business strategy.
3. Slack, N., Brandon-Jones,A. & Johnston, R.'s "Essentials of Operations
Management, 2nd Edition, Pearson":
o Explores the role of operations strategy in defining the organization's purpose
and direction.
o Discusses how operations contribute to achieving strategic objectives, such as
cost leadership, differentiation, and customer focus.
o Provides frameworks for developing mission statements and strategic goals
that guide operations decisions.

Competition Approach
 1. Stevenson, J. William:
o Discusses different competitive approaches, such as cost leadership,
differentiation, and focus/niche strategies.
o Examines how operations strategy supports these competitive priorities
through decisions related to process design, technology adoption, and resource
allocation.
o Provides examples of companies that have successfully implemented different
competitive strategies through their operations.
2. Heizer, J., Render, B. & Munson, C.:
o Explores the relationship between operations strategy and competitive
advantage.
o Discusses how operations can be a source of competitive advantage through
capabilities such as cost efficiency, product quality, and flexibility.
o Provides case studies illustrating how companies use operations to gain a
competitive edge in the marketplace.
3. Slack, N., Brandon-Jones,A. & Johnston, R.:
o Examines the impact of competitive priorities on operations strategy and
decision-making.
o Discusses how operations can contribute to competitive advantage by aligning
with customer needs, market trends, and industry dynamics.
o Provides examples of companies that have successfully aligned their
operations with their chosen competitive approach.

Strategic OM Decisions

1. Stevenson, J. William:
o Covers strategic decisions in capacity planning, process design, technology
selection, and supply chain management.
o Discusses how these decisions impact the organization's ability to achieve its
strategic objectives and compete effectively in the marketplace.
o Provides exercises with answers that allow students to apply strategic OM
concepts to real-world scenarios.
2. Heizer, J., Render, B. & Munson, C.:
o Discusses strategic OM decisions related to product design, process choice,
layout design, and quality management.
o Highlights the importance of aligning these decisions with the organization's
overall strategy to maximize performance and value creation.
o Provides case studies and examples to illustrate the strategic implications of
OM decisions in various industries.
3. Slack, N., Brandon-Jones,A. & Johnston, R.:
o Examines strategic OM decisions across different functional areas, including
supply chain management, quality management, and technology adoption.
o Discusses how these decisions shape the organization's competitive position
and ability to deliver value to customers.
o Provides exercises and case studies that allow students to analyze and evaluate
strategic OM decisions in different contexts.

Note: The notes provided above are synthesized from the respective textbooks on operations
management, focusing on the chapters related to the specified topics. Exercises with answers
are not provided as they are typically found in the textbooks and may vary from edition to
edition.