Introduction

For a company to be considered world class, it must recognize that the ability to compete in
the marketplace depends on developing an operations strategy aligned with the mission of
serving the customer. This chapter describes a company's competitiveness and its relative
position to other firms in both local and global markets. The competitive dimensions of
operations are cost, product quality and reliability, delivery speed, delivery reliability, coping
with demand change, flexibility, and new product introduction speed. Central to the concept
of operations strategy is the notion of operations focus and trade-offs.
The interface between marketing and operations is necessary to provide a business with an
understanding of its markets from both perspectives. Operations strategy must be linked
vertically to the customer and horizontally to other parts of the enterprise. Chapter six
describes the steps for prioritizing competitive dimensions. Operations strategy is also
considered in service firms. An example of Southwest Airlines profiles the fitting of
operational activities to overall strategy, while the example of Wal-Mart profiles ways to
attack the market by using operations. Finally, productivity measures are presented including
partial measures, multifactor measures, and total measures of productivity. These measures
provide benchmarks to indicate how well the company is doing and are used to measure
improvement.
Your objectives
In this chapter you will learn about the following:

Understand the operations function

Understand strategy and operations
Understand how to achieve competitive advantage through operations
Understand strategy development and implementation of OM
Understand application and evaluation of performance objectives of OM in
organisations.

1 What Is Operations Strategy?

Operations strategy is concerned with setting broad policies and plans for using the
resources of a firm to best support its long-term competitive strategy. A firm's operations
strategy is comprehensive through its integration with corporate strategy. The strategy
involves a long-term process that must foster inevitable change. An operations strategy
involves decisions that relate to the design of a process and the infrastructure needed to
6-1

support the process. Process design includes the selection of appropriate technology, siting
the process over time, the role of inventory in the process, and locating the process. The
infrastructure decisions involve the logic associated with the planning and control systems,
quality assurance and control approaches, work payment structures, and organization of the
operations function.
1.1 Operations Competitive Dimensions
Given the choices customers face today, how do they decide which product or service
to buy? Different customers are attracted by different attributes. Some customers are
interested primarily in the cost of a product or service and. correspondingly some
companies attempt to position themselves to offer the lowest prices. The major
competitive dimensions that firm the competitive position of a firm include the following:

Cost or Price: Make the product or deliver the service cheap.

Quality: Make a great product or deliver a great service.
Delivery Speed: Make the product or deliver the service quickly.
Delivery Reliability: Deliver it when promised.
Coping with change in Demand: Change its volume.
Flexibility and New- Product introduction speed: Change it.

1.2 The Notion of Trade-Offs

Central to the concept of operations strategy is the notion of operations focus and
trade-oils. The underlying logic is that an operation cannot excel simultaneously on all
competitive dimensions. Consequently management has to decide which parameters of
performance are critical to the firms success and then concentrate the resources of the
firm on these particular characteristics.
1.3 Order Winners and Qualifiers
An interface between marketing and operations is necessary to provide a business with
an understanding of its markets from both perspectives. Terry Hill, a professor at
Oxford University, has coined the order winner and order qualifier to describe marketing
oriented dimensions that are key to competitive success. An order winner is a criterion
that differentiates the products or services of one firm from another.
Depending on the situation, the order-winning criterion may be the cost of the product
(price), product quality and reliability, or any of the other dimensions developed earlier
An order qualifier is a screening criterion that permits a firm's products to even be
considered as possible candidates for purchase. Professor Hill states that a firm must
requalify the order qualifiers every day it is in business.

ACTIVITY 1
(10 MINS)
How has Franz Colruyt achieved low-cost leadership? List three specific examples and
describe each briefly.

6-2

2 Strategic Fit - Fitting Operational Activities to Strategy

All of the activities that make up of a firms operation relate to one another. Making these
activities efficient means minimizing their total cost. On the other hand, making them
effective means making the combined set of activities support the firms strategy.

2.1 A Framework for Operations Strategy in Manufacturing

Operations strategy cannot he designed in a vacuum. It must he linked vertically to the
customer and horizontally to other pails of the enterprise. Figure 6.1 shows these
linkages among customer needs, their performance priorities and requirements for
manufacturing operations, and the operations and related enterprise resource
capabilities to satisfy those needs. Overlying this frame-work is senior management's
strategic vision al the firm. The vision identifies, in general terms, the target market, the
firms product line, and its core enterprise and operations capabilities.
The choice of a target market can be difficult but it must he made. Indeed, it may lead
to turning away business - ruling out a customer segment that would simply be
unprofitable or too hard to serve given the firm's capabilities. An example here is
clothing manufacturers not making half-sizes in their dress lines. Core capabilities (or
competencies) are the skills that differentiate the service or manufacturing firm from its
competitors

6-3

Figure 6.1

ACTIVITY 2
(10 MINS)
Nike is the world's largest athletic brand. Its innovative and broad product line helps drive
sales, however a large majority of those sales are in the footwear business. Most of Nike's
goods are produced overseas in low-cost factories and then imported to the final market.
Nike currently has many of the top U.S. athletes under contract (Michael Jordon, Tiger
Woods, Dwayne Wade) but international sales are still small in emerging markets. However,
many competitors have attempted to copy Nike's business model (high-value branded
products manufactured at low-cost), including Adidas and Reebok, while many retailers have
attempted to pass on the low-cost pressure of retail consumers. Perform a SWOT analysis
for Nike.

6-4

3 Achieving competitive advantage through operations

Firms achieve missions in three conceptual ways:

Differentiation
Cost leadership
Response

This means operations managers are called on to deliver goods and services that are:

Better, or at least different

Cheaper
More response

Each of the three strategies provides an opportunity for operations managers to achieve
competitive advantage. Competitive advantage implies the creation of a system that has a
unique advantage over competitors. The idea is to create customer value in an efficient and
sustainable way. Pure forms of these strategies may exist, but operations managers will
more likely be called on to implement some combination of them. Let us briefly look at how
managers achieve competitive advantage via differentiation, low cost, and response.
3.2 Competing on differentiation
Safeskin Corporation is number one in latex exam gloves because it has differentiated
itself and its products. It did so by producing gloves that were to prevent allergic
reactions about which doctors were complaining. When other glove makers caught up,
Safeskin developed hypoallergenic gloves. Then it added texture to its gloves. Then it
developed a synthetic disposable glove for those allergic to latexalways staying
ahead of the competition. Safeskin's strategy is to develop a reputation for designing
and producing reliable state- of-the-art gloves, thereby differentiating itself.
3.3 Competing on Cost
Southwest Airlines has been a consistent money maker while other U.S. airlines have
lost billions. Southwest has done this by fulfilling a need for low-cost and short-hopflights. Its operations strategy has included use of secondary airports and terminals,
first-come, first-served seating, few fare options, smaller crews flying more hours,
snacks-only or no-meal flights, and no downtown ticket offices.

3.3 Competing on Response

The third strategy option is response. Response is often thought of as flexible
response, but it also refers to reliable and quick response. Indeed, we define response
as including the entire range of values related to timely product development and
delivery, as well as reliable scheduling and flexible performance.
Flexible response may be thought of as the ability to match changes in a marketplace
where design innovations and volumes fluctuate substantially.
Hewlett-Packard is an exceptional example of a tint that has demonstrated flexibility in
both design and volume changes in the volatile world of personal computers. HPs
6-5

products often have a life cycle of months, and volume and cost changes during that
brief life cycle are dramatic. However, HP has been successful at institutionalizing the
ability to change products and volume to respond to dramatic changes in product
design and costs--thus building a sustainable competitive advantage.

4 Strategy Development And Implementation Of OM

A SWOT analysis is a formal review of the internal Strengths and Weakness and the
external Opportunity and Threats. Beginning with SWOT analyses, organizations position
themselves, through their strategy to have a competitive advantage. A firm may have
excellent design skills or great talent at identifying outstanding locations. However, it may
recognize limitations of its manufacturing process or in finding good suppliers. The idea is to
maximize opportunities and minimize threat in the environment while maximizing the
advantages of the organization's strengths and minimizing the weaknesses. Any
preconceived ideas about mission are then revaluated to ensure they are consistent with the
SWOT analysis. Subsequently, it for achieving the mission is developed. This strategy is
continually evaluated against the value provided customers and competitive realities. The
process is shown in Figure 6.2. From this process, key success factors are identified.

Figure 6.2 Strategy Development

DEFINITIONS
Mission: The purpose or rational for an organizations existence.
Strategy: How an organisation expects to achieve its missions and goals.
Key success factors: Activities or factors that are to achieving competitive advantage
Core competencies: A set of skills, talents, and activities in which a firm is particularly strong.
Activity map: A graphical link of competitive advantages, critical success factors (CSFs), and
supporting activities.

6-6

ACTIVITY 3
(10 MINS)
How must an operations strategy integrate with marketing and accounting?

5 Key Success Factors and Core Competencies

Because no firm does everything exceptionally well, a successful strategy requires
determining the firm's ethical success factors and core competencies. Key success factors
(KSFs) are those activities that are necessary for a firm to achieve its goals. Key success
factors can be so significant that a firm must get them right to survive in the industry. A KSF
for McDonald's, for example, is layout. Without a play area, an effective drive-in and an
efficient kitchen, McDonald's cannot be successful. KSFs are often necessary, but not
sufficient for competitive advantage. On the other hand, core competencies are the set of
unique skills, talents, and capabilities that a firm does at a world class standard. They allow
a firm to set itself apart and develop a competitive advantage. Organizations that prosper
identify their core competencies and nurture them. White McDonald's KSFs may include
layout, its core competency may be consistency and quality. Honda Motors's core
competence is gas- powered engines - engines for automobiles, motorcycles, lawn mowers,
generators, snow blowers, and more. The idea is to build KSFs and core competencies that
provide a competitive advantage and support a successful strategy and mission. A core
competence may be a subset of KSFs or a combination of KSFs. The operations manager
begins this inquiry by asking:

"What tasks must be done particularly well for a given strategy to succeed?'
"Which activities will help the OM function provide a competitive advantage?"
'Which elements contain the highest likelihood of failure, and which require additional

Only by identifying and strengthening key success factors and core competencies can an
organization achieve sustainable competitive advantage.
In this text we focus on the 10 OM decisions that typically include the KSFs. Potential KSPs
for marketing. Finance and operations are shown in Figure 6.3. The 10 OM decisions we
develop in this text provide an excellent initial checklist for determining KSFs and identifying
core competencies within the operations function. For instance, the 10 decisions related
KSFs, and core competencies can allow a firm to differentiate its product or service. That
differentiation may be via a core competence of innovation and new products, where the
KSFs are product design and speed to market, as is the case for 3M and Rubbermaid.
Similarly, differentiation may be via quality, where the core competence is institutionalizing
quality, as at Toyota. Differentiation may also be via maintenance, where the KSFs are
product reliability and after-sale service, as is the case at IBM and Canon.

6-7

Figure: 6.3 Implement Strategy by Identifying and Executing Key Success Factors
That Support Core Competences

Whatever the KSFs and core competences, they must be supported by the related activities.
One approach to identifying the activities is an activity map, which links competitive
advantage, KSF's and supporting activities. For example, Figure 6.4 shows how Southwest
Airlines, whose core competence is operations, built a set of integrated activities to support
its low-cost competitive advantage. Notice how the KSFs support operations and in turn arc
supported by other activities. The activities fit together and reinforce each other. And the
better they fit and reinforce each other the more sustainable the competitive advantage.

ACTIVITY 4
(10 MINS)
There are three primary ways to achieve competitive advantage.
Provide an example, not included in the text, of each. Support your choices.

6-8

Figure 6.4: Activity Mapping of Southwest Airlines Low-Cost Competitive Advantage

ACTIVITY 5
(30 MINS)
Your task is to study the case below and answer the questions below:
1. What is the operations strategy of Ryanair, and how does it help to achieve low
costs?
2. How does Flextronics operations strategy help the company to satisfy its customers?
3. What specific operations competencies must Flextronics have in order to make a
success of its strategy?

6-9

Case Study - Two operations strategies: Flextronics and Ryanair

The two most important attributes of any operations strategy are first that it aligns operations
activities with the strategy of the whole organization, and second that it gives clear guidance.
Here are two examples of very different businesses and very different strategies which
nonetheless meet both criteria.
Ryanair is today Europe's largest low-cost airline (LCAs) and whatever else can be said
about its strategy, it does not suffer from any lack of clarity. It has grown by offering low-cost
basic services and has devised an operations strategy which is in line with its market
position. The efficiency of the airline's operations supports its low-cost market position.
Turnaround time at airports is kept to a minimum. This is achieved partly because there are
no meals to be loaded onto the aircraft and partly through improved employee productivity.
All the aircraft in the fleet are identical, giving savings through standardization of parts,
maintenance and servicing. It also means large orders to a single aircraft supplier and
therefore the opportunity to negotiate prices down. Also, because the company often uses
secondary airports landing and service fees are much lower. Finally, the cost of selling its
services is reduced where possible.
Ryanair has developed its own low-cost Internet booking service. In addition, the day-to-day
experiences of the company's operations managers can also modify and refine these
strategic decisions. For example, Ryanair changed its baggage handling contractors at
Stansted airport in the UK after problems with misdirecting customers' luggage. The
company's policy on customer service is also clear. We patterned Ryanair after Southwest
Airlines, the most consistently profitable airline in the US says Michael O'Leary, Ryanair's
Chief Executive. 'Southwest founder Herb Kelleher created a formula for success that works
by flying only one type of airplane - the 737, using smaller airports, providing no-frills service
on-board, selling tickets directly In customers and offering passengers the lowest fares in the
market. We have adapted his model for our marketplace and are now setting the low-fare
standard for Europe. Our customer service, says O'Leary, his about the most well defined in
the world. We guarantee to give you the lowest air fare. You get a safe flight. You get a
normally on-time flight. That's the package. We don't, and won't, give you anything more. Are
6-10

we going to say sorry for our lack of customer service? Absolutely not. if a plane is
cancelled, will we put you up in a hotel overnight? Absolutely not, if a plane is delayed, will
we give you a voucher fora restaurant? Absolutely not.

Flextronics is a global company based in Singapore that lies behind such well-known brand
names as Nokia and Dell, which are increasingly using electronic manufacturing services
(EMS) companies, such as Flextronics, which specialize in providing the outsourced design,
engineering, manufacturing and logistics operations for the big brand names. It is amongst
the biggest of those EMS suppliers that offer the broadest worldwide capabilities, from
design to end-to-end vertically integrated global supply chain services. Flextronics'
operations strategy must balance their customers' need for low costs (electronic goods are
often sold in a fiercely competitive market) with their need for responsive and flexible service
(electronics markets can also be volatile). The company achieves this in number of ways.
First, it has an extensive network of design, manufacturing and logistics facilities in the
world's major electronics markets, giving them significant scale and the flexibility to move
activities to the most appropriate location to serve customers. Second. Flextronics offers
vertical integration capabilities that simplify global product development and supply
processes moving a product from its initial design through volume production, test.
distribution and into post-sales service, responsively and efficiently. Finally. Flextronics has
developed integrated industrial parks to exploit fully the advantages of their global, largescale. high-volume capabilities. Positioned in low-cost regions, yet close to all major world
markets. Flextronics industrial parks can significantly reduce the cost of production.
Locations include Gdansk in Poland. Hungary, Guadalajara in Mexico. Sorocaba in Brazil.
Chennai in India and Shanghai in China, Flextronics own suppliers are encouraged to locate
within these parks, from which products can be produced on-site and shipped directly from
the industrial park to customers, greatly reducing freight costs of incoming components and
outgoing products. Products not produced on-site can be obtained from Flextronics network
of regional manufacturing facilities located near the industrial parks. Using this strategy,
Flextronics says it can provide cost-effective delivery of finished products within 1-2 days of
orders.

6-11

6 Application And Evaluation Of Performance Objectives Of OM In Organisations.

6. 1 Evaluation of performance objectives of operations management within
Toyota
Introduction
Toyota was founded in 1937 by Kiichiro Toyoda in 1937 and is headquartered in Aichi,
Nagoya and in Tokyo.
Slowly Toyota Motor Corporation became the largest and the most successful
automobile manufacturer in Japan. Today It is the worlds largest automobile
manufacturer overtaking Chrysler and Ford and neck to neck with General Motors. As
per Fortune Magazine, Toyota is the worlds 5th largest publicly traded company. As a
comparison. General Motors is 9th largest!
In 2009. Toyotas employee base numbered upwards of 350,000 across the world.
Quite large as compared to the second largest General Motors, with its employee base
of 250,000.
Amongst of the bouquet of its offering. Toyota offers, cars, pickups, minivans, and
SUV5 along with industrial automobiles such as forklifts and heavy trucks. Its brands
such as Camry. Corolla, 4Runner, Land Cruiser, Sienna, the luxury Lexus line, the
Scion brand, and a full-sized pickup truck, the V.8 Tundra are virtually household
names.
Toyota also holds a majority holding stake in Daihatsu Motors, and minority
shareholdings in Fuji Heavy Industries Isuzu Motors, as well as Yamaha Motors. Toyota
Motor Corporation today has 522 subsidiaries.
Toyota also offers consumer financial services through Toyota Financial Services and
also creates robots. Toyota Industries and Finance divisions form the bulk of the Toyota
Group, one of the largest conglomerates in the world.
Toyota became big thanks to its awareness of the increased competition in recent
times. Toyotas ability to offer quality products to its brand loyal consumers has been the
cornerstone of its success.
Toyota has developed many strategies to ensure not only this goal is reached once, but
it reached over and over again. In pursuit of this ambition, Toyota has created excellent
quality and management systems
"Quality is a "predictable degree of uniformity and dependability, at low cost and suited
to the marker.
6.2 Identification of performance operations objectives of Toyota and
effectiveness of operations in meeting strategic objectives
One of the performance operations objectives of Toyota is to produce quality vehicles
acceptable all over the world. A Toyota culture has been developed where the senior
executives set specific quality outcome of a vehicle and direct their report directors to
implement and the outcome will be used in their bonuses determination. The reports
received will then be used by the vice presidents of Toyota to develop plans, set targets
and implementation. The executives will care of nothing as long as set results are
6-12

achieved. The developed plan will then be used by operational managers to produce
the vehicles.
The quality of a vehicle is not simply the conformation to the laid down specifications
but it includes other parameters. These include basic performance facts such as
whether the vehicle can perform its primary function, any extra features that is fitted,
how well the vehicle will be used without technical failures, the life span of the vehicle
before being written off, the ability to service, the beauty and comfort as well as
customer perception of its quality). The sum of all these indicators being of good
standards will give a suggestion of a good quality product from Toyota. Thus we can
confirm that this performance objective on quality will enable the company achieve the
strategic objective of producing quality vehicles.
Second performance operations objective of Toyota is on cost of producing a vehicle.
Toyota uses cost benefit analysis in production operation. The managers will analyze
the cost of using a line of production and if it meets the company requirements, the
option is used. However if it does not meet the cost requirements, the option would be
dropped and other options are considered iteratively. This process continues until the
cost effective way of producing certain product is achieved. Thus the strategic objective
of Toyota of producing low priced vehicles is achieved through this performance
operation objective. Therefore it is the responsibility of Toyota managers to ensure that
all their production processes is within the cost budget and failure will mean that they
will continue pursuing alternatives to the point of meeting set cost limits.
Speed is another operation performance objective that encompasses the time taken
from production to delivery of a Toyota product to a customer. The shorter the time
taken indicates high speed performance at the company. The speed will refer to the
duration it takes for obtain quotation, the time taken for a customer to receive the
product, the number of times at which deliveries can be made to customers, the time
taken in production and the duration of developing a new product for the market. The
overall speed will ensure that a lot of deliveries as well as high production. This is very
important in ensuring that the strategic objective of increased volume of production and
sales is achieved by the company.
The fourth operation performance objective is the dependability. This refers to the
ability to stick to set out schedule of operation. This is to mean that a product will be
developed within a standard required procedure without deviation to ensure its quality
is maintained as well as speed. The dependability will also include the delivery
objective on whether the Toyota product is delivered in required quality and on time
while keeping the price low. This performance objective will support the overall strategic
objective increasing customer confidence on Toyota products.
The other performance objective of Toyota is flexibility. This will come in form of range
and response flexibility. The range flexibility is a situation where Toyota is able to meet
a diversified range of requirements in a product. The response flexibility of a company
is its ability to change as soon as possible in situations which demand so. There have
been additional flexibility requirements that go well in ensuring strategic objectives of
the company are achieved. These include the ability to deal with raw materials of
different qualities, output of diverse quality, changed products, altered delivery times,
different production quantity, diverse production blend and ability to adjust to different
input mix in production. These are usually the unforeseen situations that a company
may undergo. Therefore a company being flexible enough will adjust accordingly in any
6-13

scenario. This is an important performance objective of Toyota that ensures that all its
strategic objectives are achieved.

QUICK QUIZZ
1. Operations managers, who usually use quantitative approaches, are not really
concerned with ethical decision-making. True or False
2. Many operations management decisions can be described as tradeoffs.True or False
3. Operations Management activities will be less important in the future because many
firms are becoming service-oriented operations rather than goods producing
operations. True or False
4. Which of the following is a recent trend in business?
A. pollution control
B. total quality management
C. supply chain management
D. competition from foreign manufacturers
E. technological change
5. Dealing with the fact that certain aspects of any management situation are more
important than others is called:
A. analysis of trade offs
B. sensitivity analysis
C. recognition of priorities
D. analysis of variance
E. decision table analysis
6. Provide an example of an organization that achieves competitive advantage through
experience differentiation.
7. What is SWOT analysis? List its four elements and describe its purpose.
8. What is the difference between a firm's mission and its strategy?
9. What is the difference between goods and services in terms of their location
selection?
10. Define core competencies.

ANSWERS TO QUICK QUIZZ

1. False
2. True
6-14

3.
4.
5.
6.

False
C
C
Disney and Hard Rock Caf are good examples. Competing on experience
differentiation implies providing uniqueness to your service offering through
immersion of the consumer into the service, with visual or sound elements to turn the
service into an experience.
7. The four elements of SWOT are strengths, weaknesses, opportunities, and threats.
Its purpose is to maximize opportunities and minimize threats in the environment,
while maximizing the advantages of the organization's strengths and minimizing the
weaknesses.
8. A firm's mission is its purpose or rationale for an organization's existence, whereas a
firm's strategy is how it expects to achieve its mission and goals.
9. Manufacturers of goods may need to be located close to raw materials, or labour
force. Services, on the other hand, typically are located close to the customer.
10. A set of skills, talents, and activities that a firm does particularly well.
ANSWERS TO ACTIVITIES
1. Among these are no shopping bags, dim lighting, no voice mail, conversion of older
buildings, Spartan offices.
2. Strengths- Innovative products, athletes under contract. Weakness- Much of revenue
is from footwear, eroding market share could cost Nike its profitability. OpportunitiesSales can be increased in emerging markets using well-known athletes, broad
product line can be expanded into high profit sectors (jewelry, sunglasses, golf, etc)
Threats- International business makes Nike vulnerable to currency changes, low-cost
pressure from retailers can decrease profit per item, competition could erode existing
market share. Athletes personal lives could weaken Nike's reputation.
3. The integration of OM with marketing and accounting is pervasive. You might want to
cite examples such as developing new products. (Marketing must help with the
design, the forecast and target costs; accounting must ensure adequate cash for
development and the necessary capital equipment.) Similarly, new technology or new
processes emanating from operations must meet the approval of marketing and the
capital constraints imposed by the accounting department.
4. The text focuses on three conceptual strategiescost leadership, differentiation and
response. Cost leadership by Wal-Martvia low overhead, vicious cost reduction in
the supply chain; Differentiation, certainly any premium productall fine dining
restaurants, up-scale autosLexus, etc.; Response, your local pizza delivery
service, FedEx, etc.
5. 5,1 What is the operations strategy of Ryanair, and how does it help to achieve low
costs?
Ryanair, the low cost airline is an example of an operation that has placed itself at an
extreme trade-off position by sacrificing service functionality for low cost. They also
credit Southwest Airlines as the original, and still the best of these focused airlines.
Southwest Airlines is the only airline that has been consistently profitable every year
for over thirty years. It is also now one of the largest airlines in the world by value.
Yet, back in 1971, it was upstart three-jet airline operating out of Dallas. Texas (still its
headquarters). The strategy of the company has been consistent since it was
founded, to get its passengers to their destinations when they want to get there, on
time, at the lowest possible fares and make sure that they have a good time doing it
Its success in achieving this is down to clever management, a relaxed and employee6-15

centred corporate style and, what was then a unique way of organizing its operations.
For over thirty years it has introduced a series of cost saving innovations. Unlike
most airlines it provided simple snacks (originally only peanuts) instead of full meals.
This not only reduced costs but also reduced turn round time at airports. Because
there are no meals there is less mess to clear up and also less time is needed to
prepare the galley and load up the aircraft with supplies. Passengers were sold
tickets without a seat allocation (simpler and faster) and expected to seat themselves
(faster). Originally, boarding passes were plastic and reusable and the company was
one of the first to use electronic tickets. It was also early in its adoption of the internet
to sell tickets directly to passengers. Although most airlines at the time used a range
of different aircraft for different purposes. Southwest has consistently stuck with
Boeing 737s since it started. This significantly reduces maintenance costs, reduces
the number of spare parts needed and makes it easier for pilots to fly any aircraft
Southwest's employee involvement practices are designed to empower employees to
take responsibility for maintaining high efficiency and high quaky of service with profit
sharing plans for almost all employees and innovative stock options plans for its
pilots. The result has been what some claim to be the most productive work force in
the airline industry.
5.2 How does Flextronics' operations strategy help the company to satisfy its
customers?
The first paint to note is that the market for electronic manufacturing services is
extremely competitive. Volumes are high but margins are wafer thin. Therefore, any
company that is to compete in this market must be sufficiently flexible to take on
whatever its brand name customers require it to do, as well as provide fast
responsive service and (above all) low costs. If Flextronics operations can do all
these things then, it will satisfy its customers and win more business. Unfortunately,
product flexibility, fast response and low costs are often seen as being conflicting
objectives. There are clear trade-offs between all three. Flextronics' operations
strategy is essentially about how to (at least partially) overcome these trade-offs. This
short case deals particularly with trade-off between fast response and low costs.
Flextronics has chosen to tackle this through its location strategy. Its industrial parks
are set up in relatively low cost locations that are as close as possible to its
customers' sites. Very often though, the problem with locating in low cost areas is
that, because communications are poor, the delivery of products to customers, and
the delivery of supplies from suppliers, may not be as responsive as they should
ideally be. This is where the industrial parks strategy comes in. By developing these
sites and the associated infrastructure, suppliers can locate along side the
Flextronics plants. This allows the company to keep its costs down while still being
relatively responsive.
5.3 What specific operations competencies must Flextronics have in order to make a
success of its strategy?
Being able to develop industrial parks is a skill more commonly associated with
construction companies and real estate developers than electronics manufacturers.
Yet, because of its strategy, these are competencies that must have been developed
by Flextronics. Hence, to make its strategy work, Flextronics must be skilled at most
of the following:
Identifying suitable sites for industrial parks.
Quickly and efficiently acquiring the land.
6-16

Quickly building facilities to a high standard.

Starting up production without too many learning curve inefficiencies.
Persuading suppliers to locate in the park
Helping suppliers to ramp-up their own operations efficiently and effectively.
Integrating the activities of their own and their suppliers' processes to respond
effectively to customers' orders.

CHAPTER ROUNDUP

Operations provide an increase in both the challenges and opportunities for

operations managers.
Although the task is challenging, operations managers can still improve productivity.
They can build and manage OM functions that contribute in a significant way to
competitiveness.
Organizations can identify their strengths and weaknesses, then develop effective
missions and strategies that account for these strengths and weaknesses and
complement the opportunities and threats in the environment.
If this procedure is performed well, the organization can have competitive advantage
through some combination of product differentiation, low cost, and response.
Organisations must realise that there are trade-off decision to be made as resources
are limited.
In The case of Toyota cited, a continued research should be done on an ongoing
process to ensure that flexibility of the company is achieved at all times.

REFERENCES
1. Operations Management by Nigel Slack, Publisher : Prentice Hall
2. Operations Management by Schroeder, Contemporary Concepts and Cases
Publisher : McGraw Hill
3. Operations Management by Lee J. Krajewski, Publisher : Prentice Hall
4. Operations Management by Russell,& Benard W. Taylor, Creating Value Along the
Supply Chain 7th edition , John Wiley and Sons
5. Evaluation of strategic objectives of operations management within toyota
https://www.academia.edu/9504253/Evaluation_of_strategic_objectives_of_operation
s_management_within_toyota_ukessays.com_essays_accounting_evaluation-ofstrategic-objectives-of-operations-management-_within-toyota-accounting-essay

6-17