Operations And Strategy

WEEK#2
1.6. Some Basic Process Architectures
2. Operations Strategy and Management
2.1 Strategic Positioning and Operational Effectiveness
2.2 The Strategy Hierarchy
2.3 Strategic Fit
2.4 Focused Operations
2.5 Matching Products and Processes
2.6 The Operations Frontier and Trade-Offs
 2. Operations Strategy and Management

• Strategy- Plan to achieve an objective

• Examine the relationship between a firm’s strategy and the design and
management of its operations.
 2.1 Strategic Positioning and Operational Effectiveness:
Operations as a Competitive Advantage

• Organizations may choose to compete in different dimensions (Product

attributes)
– Product leadership/differentiation
– Minimal cost
– Customer responsiveness/service
– Lock-in
• Competitive Product Space
– Representation of the firm’s product portfolio as measured along the four dimensions or
product attributes—product cost, response time, variety, and quality.

• Strategic Positioning
– Those positions that the firm wants to occupy in its competitive product space; it
identifies the product attributes that the firm wants to provide to its customers.

• Operational effectiveness
– Possessing process competencies that support the given strategic position-design
business process & operating policies Eg: Fed Ex
 2.2 The Strategy Hierarchy
A Framework for Designing an Operations Strategy and Structure
Corporate Strategy

Business Unit
Strategy

Desired
Competencies

Operations Resources
Processes Structure 6

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• Corporate Strategy
– Defines businesses in which the corporation will participate and specifies how key corporate
resources will be acquired and allocated to each business.
– Choosing a mix of divisions or product lines to ensure synergy and competitive advantage.
• Business Unit strategy
– Defines the scope of each division or business unit in terms of the attributes of the products that it
will offer and the market segments that it will serve. Strategic positioning.
• Competitive analysis of the industry in which the business unit will compete
• Critical analysis of the unit’s competitive skills and resources
• Functional strategies
– Define the purpose for marketing, operations, and finance—the three main functions in most
organizations:
• Operations strategy
– Configures and develops business processes that best enable a firm to produce and deliver the
products specified by the business strategy, develop process competencies.
The Wal-Mart Strategy and Operations Structure
 2.3 Strategic Fit
Consistency between the strategic position that a firm seeks and the
competencies of its process architecture and managerial policies.

• Process effectiveness is the existence of a strategic fit among three main components of a
firm’s strategy:
– Its strategic position
– Its process architecture
– Its managerial policies

• Strategic fit may be achieved using either of two approaches:

– Market-driven strategy: A firm starts with key competitive priorities and then develops processes to support
them. Eg:- Commodity products-clothing
– Process-driven strategy: A firm starts with a given set of process competencies and then identifies a market
position that is best supported by those processes. Eg:- eBay, Google
Linking the strategic role & process view: Strategic Operational Audit
Existing Desired Measures
Product
Feasible Strategy Gap? Desired Attributes
Business Strategies Business Strategy
P, T, Q, V

Existing Capability Gap? Desired

Capabilities Capabilities

Marketing, …,
Operations Strategy
Financial Strategy

Process
Operational Structure: Desired Oper’l Structure:
Process Gap?
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Competencies 10
Processes & Infrastructure Processes & Infrastructure
C, T, Q, Flex 10
 2.4 Focused Operations
• No single process can perform well on every dimension, there cannot be a process that fits all
strategies.

• Focused Strategy and Focused Processes:

-It is generally easier to design a process that achieves a limited set of objectives than one that must
satisfy many diverse objectives.

• Focused Processes

-One whose products fall within a small region of the competitive product space.
Eg:- Aravind hospital
2.6 The Operations Frontier and Trade-Offs
Focus and the Frontier in the health-care sector
Responsiveness
World-class
Emergency Room

operations
One general frontier
facility
World-class
(non-emergency)
Hospital
Cost efficiency
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 1.6 Some Basic Process Architectures
Process architecture is defined by the types of resources used to
perform the activities and their physical layout in the processing
network.
• Job Shops:
– Uses flexible resources to produce low volumes of highly customized, variety
products.
– Process/Functional layout
– Groups organizational resources by processing activities or “functions” in
“departments.
– Wait times
• Flow Shops:
– Uses specialized resources that perform limited tasks but do so with high precision and
speed
 Classification of processes by process architecture
• Project Job Shop

• Job Shop
• Batch
• Line Flow
Flow Shop
• Continuous Flow
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Group Exercise – complete the following table

Type of Product Specialized Product Machine Labor Variable

Process Volume Equipment Variety Setup Skills Cost
Frequency
Job Shop

Batch

Flow Shop

Characteristics of Processes:
Job Shop vs. Batch vs. Flow Shop
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 2.5 Matching Process Choice with Strategy:
Product-Process Matrix
Process
Flexibility
High JOB SHOP
Jumbled Flow.
Process segments
loosely linked.

y
(Commercial Printer,

sts nit
Architecture firm)

Co ortu
pp
Disconnected Line BATCH
Flow/Jumbled Flow
but a dominant flow
O
(Heavy Equipment,
exists.
Auto Repari)

LINE FLOWS
Connected Line
Flow (assembly line) (Auto Assembly,

te
Car lubrication shop)

sts ock
Co f-p
-o
Continuous, automated,
CONTINUOUS

ut
rigid line flow.

O
Process segments tightly FLOW
linked.
Low (Oil Refinery)

Low High Product

Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall High Standardization Low Standardization
Commodity Products Few Major Products Many Products One of a kind Variety 16
High volume Low Volume
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 Classification of Processes by Positioning Strategy
• Functional Focus: Product 1
A B

Product 2
C D
= resource pool (e.g., X-ray dept, billing)

Product 1
A D B
• Product Focus:
Product 2
C B A

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 Classification of Processes: by Customer Interface

• Make to Stock

• Make to Order

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 In Class Discussion Questions
• Textbook 1.3
• Textbook 2.4